FMI annual convention
CHICAGO -- Supermarket operators are anticipating better results on the same-store sales front this year.
Same-store sales last year failed to match the year-before figures, but retailers are optimistic that the situation will change this year, according to data compiled by the Food Marketing Institute and presented at last week's State of the Food Industry: Speaks 96 session at FMI's annual convention here. According to Michael Sansolo, FMI's group vice president of education and industry relations, same-store sales, including inflation, rose 2.9% in 1995, compared with increases of 3.3% in 1994, 1.9% in 1993, 1% in 1992 and 0.3% in 1991. However, with food-at-home inflation of 3.3% factored out, Sansolo said, real sales fell 0.4% last year, compared with a gain of 0.4% in 1994; a drop of 0.5% in 1993; a gain of 0.3% in 1992, and a drop of 2.2% in 1991. "It's worth noting," Sansolo added, "that the cost of food away from home increased last year at a lower rate than food at home -- 2.3%, compared with 3.3% -- for the third straight year, which might be due to the ongoing competitive battles among fast-food outlets and could impact supermarkets trying to win back some of those meals." Sansolo said a survey of industry executives indicated that 79.4% said they expect same-store sales to grow this year at a median rate of 3.5%, "which is a pretty bold projection, given the mixed economic outlook and the near certainty that competition will only increase." However, there is some hard data to support their optimism, he said. He noted that the average consumer transaction increased to $19.40 in current dollars and $13.04 in real dollars, compared with $17.93 and $12.44, respectively, in 1994. A lot more work remains to be done to build average transaction figures, he added. "Although transaction size may have increased in 1995, after adjusting for inflation, we're still more than 15 cents below the average transaction of 1991.
"The challenge is how to get one more item in the shopper's cart, or two or three. The impact would be staggering -- billions of dollars in sales and millions in profits." Noting another positive development, Sansolo said net profit reached a nine-year high in 1995 at 1.14%
According to Sansolo, there are also clear indications "that industry efforts to improve efficiency are starting to bear fruit," with sales per labor hour up to $74.87, compared with $73.91 in 1994, and sales per square foot at $6.23, holding close to the $6.37 reported in 1994. He also said inventory levels as a percentage of assets have declined to 23.85% in 1995, compared with 24.91% in 1994 and 31.66% in 1985 -- "more proof that we are cutting unnecessary costs and increasing our selling efficiency," Sansolo pointed out. Although FMI surveys found that retailers and wholesalers are actively pursuing Efficient Consumer Response strategies, "it would be premature to declare victory in the campaign to re-engineer the industry," Sansolo said. "One year does not a trend make. "Many of these key measures are still below the levels of the early 1990s, when the industry was battling a severe recession. "But we are making progress. And more important, the industry has recognized that real, sustained growth requires more than re-engineering, cost-cutting and restructuring. "We have to satisfy the 'C' in ECR. Remember that the foremost goal expressed by industry leaders today is sales growth." According to Sansolo, FMI research indicates that 61.4% of retailers said they are starting to embrace ECR, and 75.8% said they believe ECR is essential to properly tailoring their product mix. "We did uncover some soft spots, however," Sansolo said. "Knowledge of category management is still lagging, and the percentage of retailers who say they understand category management is only 50% -- significantly lower than the 76% who say it's essential. "In fact, at FMI category management seminars, we frequently find people with the title of category manager who aren't sure how their job is different from a buyer's."
An additional problem, he added, is that only 19.6% of retailers said they are entering formal alliances with vendors. "Maybe the term 'formal' partly explains the low number, since it implies some kind of contractual relationship," Sansolo said. "But the hard truth remains that a large part of the success of category management depends on alliances. We can't expect category sales to grow unless distributors and suppliers are working together. And it goes without saying that alliances must bring equal benefits to all parties." Turning his attention to shopper concerns, Sansolo cited several statistics from FMI's 1996 Consumer Trends survey, including the following:
The number of respondents who cited crime as the leading social issue fell to 15% from 19% a year ago, "but it's still far above the low levels of the early 1990s," he said. "Consumers remain very concerned about their personal safety outside our stores, and the lack of performance here must be addressed," Sansolo said. He also noted that, in separate surveys, FMI's research found a huge gap in how executives rate crime as a problem -- 5.1 on a scale of 1 to 7, where 7 is of least concern -- while 69% of customers expressed concerns about their personal safety.
Shoppers are feeling more positive about the future, with 48% saying they believe their personal circumstances will improve, compared with 40% a year ago.
Nevertheless, 45% of shoppers said they tend to economize by taking advantage of specials, coupons and other opportunities. "No doubt this group accounts for a larger percentage of our sales, but it also generates the lowest profits," Sansolo said. "Perhaps we need to focus more on the 55% who value more than price -- including convenience, variety and upscale products -- when they shop."
The demand for convenience was apparent in other survey findings, with 84% of respondents saying it is important to have a wide selection of nonfoods; 52% who said they like in-store pharmacies; 50% who like to use debit cards and 48% who like credit cards, and 43% who said it's important for their supermarket to offer ready-to-eat takeout foods. "But the news is not all good," Sansolo said. "Unbelievably, the gap between what consumers want and what they feel they get is especially large in low prices (a 20-point gap), but that is probably more a problem of perception, given the continued low rate of inflation. "We also need to give more attention to special requests, where the gap was 18 points, and the front-end, where the gap was 10 points." Citing a separate survey, Sansolo said industry executives rated traditional supermarkets as the toughest competitor (2.3 on a scale of 1 to 7, with 7 being the least formidable), compared with 2.7 for supercenters, 4.1 for restaurants, 4.3 for category killers, 5.0 for convenience stores, 5.1 for drug stores and 6.8 for shopping at home.
Average Change in the Consumer Price Index for Food (U.S.) [chart]
1991
All Food 2.9%
Food at Home 2.6%
Food Away from Home 3.4%
1992
All Food 1.2%
Food at Home 0.7%
Food Away from Home 2.0%
1993
All Food 2.2%
Food at Home 2.4%
Food Away from Home 1.8%
1994
All Food 2.4%
Food at Home 2.9%
Food Away from Home 1.7%
1995
All Food 2.8%
Food at Home 3.3%
Food Away from Home 2.3%
Source: U.S. Department of Labor, Bureau of Labor Statistics
Median Sales Increase -- Identical Stores [chart]
1991
Current Dollars 0.3%
Real Dollars -2.2%
1992
Current Dollars 1.0%
Real Dollars 0.3%
1993
Current Dollars 1.9%
Real Dollars -0.5%
1994
Current Dollars 3.3%
Real Dollars 0.4%
1995
Current Dollars 2.9%
Real Dollars -0.4%
Source: Food Marketing Institute, The Food Marketing Industry Speaks, 1996
Median average sale per customer transaction
1991
Current Dollars $17.92
Real Dollars $13.20
1992
Current Dollars $17.90
Real Dollars $13.08
1993
Current Dollars $18.17
Real Dollars $12.93
1994
Current Dollars $17.93
Real Dollars $12.44
1995
Current Dollars $19.40
Real Dollars $13.04
Source: Food Marketing Institute, The Food Marketing Industry Speaks, 1996
Opinions of Supermarket Percentage who agree or strongly
