The problem is all too familiar. After years of building up perimeter departments, supermarkets were left with weakened Center Stores. More than a few retailers wondered whether this department was relevant anymore. Did it have a future?
Center Store became known as an area in the middle of the store that sat by itself, an island that didn't interact with other aisles. It had a predictable one-stop-shop assortment of packaged goods that tried to fill every need for every customer.
If that's the definition of Center Store, than we don't have to worry about whether it has a future. It's not worth worrying about.
Fortunately, there's a newer, emerging Center Store that has more relevance. A recent Information Resources Inc. report provides the most updated look at this department and describes how retailers are reclaiming the territory. The report, which was outlined in an SN news article on Oct. 22, is titled “Center Store Revival: Retailers and Manufacturers Stage a Comeback.”
So is Center Store really on the comeback trail? It seems so, but first a reality check. For all the ills of Center Store, it still represents 46% of combined packaged goods/fresh foods retail sales, according to IRI. That compares to less than 10% of retail sales for fresh produce and prepared foods combined. So let's remember that Center Store still represents a huge chunk of the business, even in weakened form.
IRI's data shows that the rate of grocery share loss has slowed considerably in the past year, amounting to an important shift in the trend. What is driving this change? Retailers are embracing strategies including health and wellness, private label and local assortments, IRI said. Suppliers are targeting product and packaging innovation and merchandising innovation.
Here's compelling proof that Center Store is driving growth for innovative retailers. “Among the top ten grocers — most of whom have stepped up fresh food offerings — Center Store sales grew 4% last year, more than twice the total industry Center Store growth rate,” IRI said.
Still, Center Store as a whole is likely to continue a gradual decline in percentage of total store sales, even as some of its categories will soar because they are aligned with important consumer trends, IRI notes. Maybe it's time to stop focusing on how Center Store is doing as a whole, because so much of the action lies within key categories, which today include growth drivers ranging from beverages with functional benefits to convenient, on-the-go healthy snacks.
IRI finds threats to Center Store from unexpected quarters. The report points to a potential challenge from newly emerging small-format retailers such as Tesco Fresh & Easy, which is about to launch in the U.S. market. The Tesco pre-opening buzz is all about fresh and prepared foods, but it's also expected to mount a limited assortment of grocery categories, which makes Tesco a Center Store competitor as well.
Undoubtedly one of the biggest problems with Center Store is its name. This department is now being integrated into the rest of the retail operation through cross-merchandising and other means. Rather than the center, maybe it should be seen as the pivot or interactive department. Those who stare too hard at the center could lose their peripheral vision.