Attractive signage and large floor space are two obvious components of many effective destination departments.
Retailers typically focus on such visual, tangible aspects when devising destinations.
But top industry analysts surveyed by SN point out that it is the behind-the-scenes homework -- taking the time to understand consumers' needs -- that may be the most important investment retailers can make to build successful destinations.
Well-researched, skillfully built and creatively marketed destinations can yield substantial customer loyalty, incremental purchasing and a better bottom line, they said.
SN asked these leading consultants for their insights about what retailers should do to develop productive destinations:
General Merchandise Distributors Council
The benefit of a destination is that you become known for something to your customers. For the store-within-a-store, you would use different fixturing to get a special look. The destination department does not necessarily have to have those kinds of physical distinctions -- it could even be in the aisle. What's important is that you promote it, identify it, and provide the right mix of products with as many stockkeeping units as you can to make a statement that this is the place to go for the category.
It allows you to organize your marketing efforts to reach the best spenders from your customer base. You need to determine which segment will come to your store for that category. Any nonfood categories could be destinations. The typical criterion is that the customer group you want to attract has to want it. There's a lot of discussion about whole health. Putting all the natural products together may well be a trend for destinations. It must provide you with good return on investment and adequate margins.
Will supermarkets continue to turn nonfood departments into destinations? God, I hope so!
Saatchi & Saatchi Collaborative Marketing
Destination departments are a different dimension of consumer needs. The challenge is for the retailer to think of the whole [category] as a product, then think "How can I package it and communicate it?" Destinations should help retailers fill shoppers' needs in a better way. There is a deeper opportunity to do category marketing instead of just category management. If you start from the consumer standpoint -- why has there been so much cross shopping going on? -- there is a tremendous opportunity here to apply classical marketing techniques to destinations to attract customers.
I think [destinations] bubbled up because of cross shopping. Aggressive retailing -- like pet superstores -- identified a consumer need. That's really the whole cause of category killers. Supermarket retailers recognized that -- then the battle began. Laundry detergent is a category that is a major battleground. Many retailers have also put together a baby needs destination. Diapers are not a big money-maker for anybody, but they can attract young mothers into the store who will buy more because they need other things for the family. There are many opportunities for more creativity like that.
Supermarkets have much more sophisticated databases now. They can use their loyalty-card data to identify what their customers are not buying. What are their areas of erosion? That's really a good way to create a destination. If they use that data and put a plan together, retailers can win.
There's been a drive to what I call retail differentiation. It's not just "where can I make my mark?" It's now also about finding solutions for customers. When it's barbecue season, instead of "Oh, there's the barbecue sauce aisle, then there's the meat counter," destinations are about customizing consumer solutions.
A big benefit is that you identify customer loyalty. You get customers who will [in effect] say "I go to that store for the express purpose of buying that group of products AND I may drive by other stores that sell some of the same products because they don't have the same selection."
Retailers have used displays -- for example, within the skin care aisle -- to put some of the boutique-y brands together to create what you can think of as a ministore-within-a-store. The destination department is different. It's used to create attention and to generate incremental purchases.
Photo and greeting cards are probably the most obvious categories, because there's a regimen associated with them. Floral is another good category. There are fewer and fewer independent florists out there. Why? Because they're being put out of business by supermarkets who can out-supply and out-price them.
Whole health is also an interesting area. Drug stores use it in different ways -- putting diabetes devices and other [medical] appliances together with natural supplements. But whole health [also means] buying that right kind of produce. So if I'm a supermarket, and I'm losing the whole health customers to the drug stores, then maybe I add those health appliances. Then the supermarket wins by default.
As a consumer, I can define more opportunity to satiate those needs by going to a supermarket. For any destination, the most important criteria are price, variety and whether you can create a noticeably different shopping experience for the consumer.
One of the crying needs of the industry is to define those categories that will work as destinations. Supermarkets -- and really maybe all retailers -- need to focus on what it is that the consumers are looking for."