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DOWN, BUT NOT OUT

When it comes to the most expensive grocery products, consumers immediately think of paper products, soft drinks, canned produce, laundry products, household cleaners, pet food/supplies, aluminum/plastic, canned meats, snack foods and breakfast foods, according to an SN survey.That's why many shoppers are turning to mass merchandisers and warehouse/club stores for these items.When asked which grocery

When it comes to the most expensive grocery products, consumers immediately think of paper products, soft drinks, canned produce, laundry products, household cleaners, pet food/supplies, aluminum/plastic, canned meats, snack foods and breakfast foods, according to an SN survey.

That's why many shoppers are turning to mass merchandisers and warehouse/club stores for these items.

When asked which grocery items they previously bought at supermarkets, but are now getting at alternate formats, respondents cited all of the aforementioned items. The survey, a nationwide telephone poll of 1,000 male and female consumers, was conducted for SN by America's Research Group, Charleston, S.C.

As for how long they've been purchasing these products at alternate formats, 14% said within the last year; 30% said within the last two years; 50% said for more than two years; and 6% said within the last three months.

Seven percent of shoppers polled said they're going to mass/club stores more than a year ago. Most (64%), though, said their shopping habits have remained the same as a year ago, while 10% said they are shopping at supermarkets less than they did a year ago.

Of the respondents who said they're shopping at supermarkets less than they were a year ago, 28% said it was to save money.

Consequently, these shoppers are going to other retail outlets because they feel it's cheaper. The majority (60%) cited price as the reason they choose alternate outlets to buy the Center Store items.

Overall, price is a determining factor on where consumers shop and what products they buy, according to the survey. Sixty-three percent of shoppers said price drives most of their decisions at the supermarket; while 23% said quality. But package size also plays a role, as 33% said larger sizes make them shop mass over supermarkets. A smaller percentage (7%) said convenience was most important. The remainder cited either brand or display.

One reason they prefer larger sizes is that the bigger sizes enable them to shop less frequently. When asked how often they shop for these grocery items at alternate formats, the majority (56%) said once a month. Of the rest, 23% said once every two months, and 18% said once a week. The rest said every two weeks or less.

The best way for supermarkets to win back these customers is by lowering their prices, the survey revealed. When asked what supermarkets would need to do for them to buy these products at the supermarket again, 60% said lower prices. The remainder cited either larger sizes (29%), increased variety, more promotions and convenient locations.

But several consultants SN interviewed said supermarkets can recoup their customers without focusing entirely on price.

"Grocers are now thinking about total store management; how they can build total store equity," said John Carlson, senior consultant, Cannondale Associates, Wilton, Conn. "They shouldn't think just about how they can win back the paper product consumer, but the consumer, period."

To do so, they need to differentiate their store from warehouses. In-store bakeries and home-meal replacement programs can help supermarkets set their stores apart from warehouses. He cited H.E. Butt Grocery Co., San Antonio, and Albertson's, Boise, Idaho, as being leaders in this area.

Stronger cross promotions are another strategy. Retailers can tie in not only with other Center Store products, but also with products from perimeter departments.

"I saw one chain that cross merchandised bananas in the cereal aisle," Carlson told SN.

And while most consumers have the perception that mass and club stores are cheaper, the alternate formats don't save them much money, according to one consultant. Better use of price-comparison programs get help get this point across, he said.

"Consumers may perceive that warehouses are less expensive, but they're really not -- and they're a lot less convenient," said Paul Kelly, president, Silvermine Consulting Group, Westport, Conn.

As for what's not working, bulk sections, which many chains have developed to compete against warehouse outlets, aren't as successful as initially expected, Kelly said.

"The bulk sections haven't worked," Kelly said. "Consumers spend about $17 to $20 a supermarket visit. Many don't want to load up their small carts with large and expensive bulk items, like six cases of Coke or four cases of toilet paper.

"They prefer to go to warehouses because they're in a different mindset. They have larger carts and plan on spending more money."

Rather than developing bulk sections, retailers should instead run more promotions that match their consumers' lifestyles, said retailers. To do so, they can make better use of their frequent-shopper programs.

"They've got to get into the consumers head. If they see a consumer's beverage consumption falling off, they should target that consumer more directly, perhaps promoting six or 24 packs of soda," he said. "This can be more effective than endcap displays."

Retailers also need to emphasize the convenience of supermarket shopping, stressing the one-stop shopping concept.

"There are some consumers who prefer [mass and club stores] because they feel, 'OK, now I've got my larder.' But the majority don't want to store all those large packs in their houses. And most don't enjoy the warehouse experience," he said.

David Parkes, president, Andover Consulting, Westport, Conn., which works mostly with manufacturers, said tying in loyalty programs with sampling promotions can encourage repeat visits.

Using loyalty programs, which enable the retailer to tap into consumer shopping habits, retailers can find out if a consumer is buying less of paper products, for example. The store then can try to win back that consumer by changing his or her perception of the product, perhaps through direct-mail samples.

Wakefern Food Corp, Elizabeth, N.J.; Safeway, Pleasanton, Calif.; and Stop & Shop Cos., Quincy, Mass., are among the retailers that use loyalty programs in this way, Parkes said.

Even meal-solution centers can get consumers to buy more Center Store products like paper products and soda, said John Bissell, managing partner, Gundersen Partners, Bloomfield Hills, Mich.

"They need to provide consumers with an incentive to go to their stores," he said.

Albertson's and Rochester, N.Y.-based Wegmans Food Markets' highly successful meal-solution centers build customer loyalty because they get customers into the store on a regular basis.

"If they get into the habit of going to Albertson's for all the provisions of a meal while they're in the store, they'll pick up paper products and detergents, rather than go to the warehouse," he said.

Nearly all of the consultants SN polled agreed price isn't the only way to compete with alternate outlets. Bissell of Gundersen Partners, for instance, stressed that customer service and variety can be more important than price points.

"Supermarkets are recognizing that they have to market themselves as a pleasant place to shop. They have to provide consumers with a legitimate reason why they should go into their store," he said. "That's where the battle can be won."

The Victims

Paper products and soft drinks led the list of the Top 10 Center Store items consumers are looking for at mass merchandisers and club stores.

Name the Top 10 grocery items you used to purchase at the supermarket, but now buy at mass merchandisers and/or club stores.

1. Paper Products

2. Soft Drinks

3. Canned Produce

4. Laundry Products

5. Household Cleaning

6. Petfood/Supplies

7. Aluminum/Plastic

8. Canned Meats

9. Snack Foods

10. Breakfast Foods

It Saves Money

The reason consumers are turning to other retail outlets for these products is simple: it's cheaper. Larger package sizes also play an important role.

Frequent Shoppers

Consumer supermarket shopping habits have stayed basically the same over the last year, though a small percentage have switched to mass merchandisers and club stores.

Switching

Of the consumers who are shopping at supermarkets less than they were a year ago,

14% said it's because they're now shopping at mass merchandisers and club stores.

The Price Is Right

While package size is also important, price is the determining factor for consumers who choose to shop at mass merchandisers and club stores rather than their supermarket for certain grocery products.