KALAMAZOO, Mich. -- Beware of the "black hole" in retail identity -- it's the space that has consumed thousands of mid-level independent supermarkets, according to Ron Marshall.
Marshall, president and chief executive officer of Nash Finch Co., the Minneapolis-based wholesaler, spoke last week at the 34th annual Food Marketing Conference at Western Michigan University here. The conference theme was "Keeping the Focus on the Consumer."
He told the conference that industry consolidation and a deflationary grocery economy have put the squeeze on any retail operation without a strong consumer-leadership position.
And, in a bid to better understand customer demands, he said Nash Finch has developed a pilot store in Iowa City, Iowa, in which it has tested some new consumer-service concepts, which are now ready to be spread through the wholesaler's store network.
"It shouldn't be a surprise to anyone, at least not anyone in the room today, that the food business is not a growth business -- and hasn't been one for quite a while. Anybody waiting for the next great blast of inflation to save us is, I think, going to be sorely disappointed," Marshall said.
Instead, he said, retailers must define themselves through "ests," such as "hottest." Specifically, leading retailers must identify and fill a consumer-demand niche.
He cited apparel retailer Gap Stores as possessing the "hottest" merchandise; Nordstrom as the "easiest," with its high service level; and Wal-Mart Stores as the "lowest" on costs.
"You've got to stand for something," Marshall asserted. "The people who do stand for something are successful. The guys who don't choose end up in the 'black hole.' "
To Marshall, that hole is the middle ground between niche leaders. And he presented statistics to bolster his outlook that it has already swallowed many food retailers.
He said some 24,000 independent supermarkets have disappeared during the past five years, a number subtracted from the national total of more than 150,000 stores five years ago. In the space of 10 years, independent grocers have lost more than 20% of market share while chain stores have increased their share by 11%. And, adjusted for square footage, that figure might more accurately be 25% to 30%.
In 1995, the 10 largest chains owned about 35% of the market. "Today, if you give effect to the mergers and consolidations [currently proposed], that number is now well over 60%," he said.
"Stores that do $40,000 to $50,000 a week are the big losers," said Marshall. "The chill that creates is profound, and we need to be prepared."
Nash Finch has prepared by focusing strategic attention on truly and deeply understanding customers, he said. "We service over 2,100 stores nationally. Our customer base reflects a very broad and deep understanding of independent retail buying trends."
Nash Finch's research has found three key customer concerns that can guide independents toward success, Marshall said.
Time Poverty: Customers generally have more to spend, but less time to shop.
Lifestyle Orientation: Customers demand retail experiences that support their individuality.
High Expectations: Customers demand low cost and high service levels.
Marshall said retailers have two to three chances each week to build a relationship with customers -- and to cater to the fact that customers are raising the bar on cost, service and cleanliness.
Indeed, of the key factors vital to customer retention, Marshall noted that only two involved cost. The rest were about service and store conditions.
Advertisements are invitations, Marshall said, and making sure the store lives up to the invitation is now as important as making the invitation appealing.
What retailers offer in look, feel and pricing is no longer an extra. Instead, customers think in terms of disqualifiers. If the store looks dirty, if the merchandise mix doesn't sparkle, if the store isn't easily navigated, the shopper quickly disqualifies it and moves on to another retailer -- and does it quickly.
"Customers today are spoiled, and they should be. They understand the shopping experience doesn't have to be painful," Marshall said. "You should know, within five minutes [of entering a store] everything that store is about. It's how you cross merchandise, creating the right adjacencies in the store."
Nash Finch has been using an Iowa City store as a customer-focus laboratory and as a pilot for the corporation's store of the future.
Marshall said the pilot store, developed with consultants Senn-Delaney, has already validated itself. The concept is now in its "transfer" phase to other retailers.
Among service offerings tested successfully at the store is a children's play area staffed by store employees. Ceiling-mounted television monitors throughout the store present a view of the play area, reassuring parents that all is well.
"Mom gets a pager too, so if something happens, if her child becomes afraid, she can be paged," Marshall said.
Concerning products, Nash Finch is striving for major changes, such as by providing clear, focused and unambiguous private-label programs.
From a total of eight private labels, Nash Finch intends to slim to three: "Our Family," the primary label, is targeted to sell at a price point of 15% to 20% below national brands. The wholesaler will also be offering "IGA" labels to support affiliated independents and "Fame," described by Marshall as "a brand where you're facing a [price-driven] Sav-a-Lot."
But goods don't move themselves, and Nash Finch has determined to create a service culture throughout its operations.
"This is not just something that you train the trainers on," he said. "This is something the vice president of retail operations and the chief executive [must] go out and demonstrate on a day-by-day basis. A service culture is ingraining it into the DNA of the company."
Nash Finch's service-as-a-culture emphasis includes greeting and listening to customers and also asking how to fulfill further needs, escorting customers to the product they need and even touching the product to make sure of a complete sale cycle.
Nash Finch has a top line of $4.2 billion in annual sales, most in its wholesale operations. Nearly a quarter of its business -- 25% -- is military (commissary, catering and shipboard-related), while 18% derives from its 90 corporately owned stores. Those stores are concentrated in the Upper Midwest.
Marshall arrived at Nash Finch nearly a year ago and has been engaged in a battle against slumping numbers. The wholesaler ended its most recent fiscal year with a 4.2% decline in sales and a loss of $61.6 million.