Jon Hauptman, a partner for Willard Bishop, Barrington, Ill., recently walked into a Roche Bros. store in New England and spotted high-end gas grills for sale with a sign offering free delivery, assembly and setup.
“They are providing a service that is unique. It's a great idea because there is a lot of assembly to a grill. They've made it easy for somebody to make a purchasing decision by removing one or two big barriers,” Hauptman told SN in citing examples of how supermarkets can win the battle for general merchandise dollars at a time when many supermarkets are experiencing a big erosion in GM sales to alternative retailers like supercenters, warehouse clubs and dollar stores.
Roche Bros. could not be reached for comment. However, Imperial Distributors, Auburn, Mass., which supplies grills and other GM products to Roche Bros., confirmed the policy and the fact that Roche Bros. sells a lot of grills.
While Roche Bros. may not be the first retailer that comes to consumers' minds when thinking about purchasing a $500 Weber gas grill, the offer of extra service represents real value, said Al Jones, senior vice president, procurement and marketing, Imperial Distributors, who also noted that Weber grills are sold with a minimum advertised price so competitors can't undercut the price, at least in ads.
Wegmans Food Markets, Rochester, N.Y., honored earlier this year by the International Housewares Association with a 2009 Global Innovator Award, also illustrates how far food retailers will go to compete with other retail channels for GM.
Wegmans is currently promoting its “Backyard Getaways” patio furniture offering in a slick brochure with some furniture sets priced just above $1,000 on its website and in its fliers. The outdoor living items are being sold at discounts of 20% and 50% off, plus additional discounts are taken with a coupon. A Cayman Cove seven-piece set, for example, which includes four chairs, two swivel chairs and a 76-by-39-inch table, is regularly priced at $989.99. With 20% off, the price falls to $779.99. Take another $100 off with a Wegman coupon and the final price comes down to $679.99.
Wegman's 2009 Outdoor Living Catalog subtly conveys the idea that it is affordable to invest in outdoor furniture this summer in lieu of a vacation. Wegmans calls it a “backyard stay-cation.”
In marketing through a catalog, Wegmans can offer a broader selection and go as upscale as it wants, said Jones. “There is only upside [to Wegman's strategy],” he said. “They don't have to stock a lot of merchandise and have it in every store. They are offering consumers something that isn't available at other places and the merchandise plays into Wegman's [higher income] demographics.”
Wegmans is expected to open its first stores in high-income Boston suburbs by 2011, and provide serious competition to retailers like Roche Bros.
David McConnell, president and chief executive officer of the Colorado Springs-based Global Market Development Center, who will host the organization's GM Marketing Conference, May 29-June 2, in Grapevine, Texas, acknowledged the recession has made for a particularly tough marketing environment for GM sales at supermarkets.
“The success of the dollar channel in Family Dollar and Dollar General in this economy validates that consumers of all economic means are looking at value and price points when they do their shopping. The key to competing with these operators is for supermarkets to offer not only price/value product assortment but to offer price/value product of good quality.
“Consumers are shopping to save money but they're still discerning in the way they shop. They want to give their families the best possible quality product even as they look to spend less than they have in the past. Too often in the past the supermarket business has offered consumers products in certain categories such as toys and seasonal that has been of marginal quality and they just can't afford to do that today.”
According to McConnell, overall GM categories are tracking down in dollar sales by about 5% with units being down at an even higher rate of 6.5% over the last 12 months. He pointed to only a few bright spots. Batteries are tracking stronger than the combined categories. Health and wellness-related categories such as water filtration devices are tracking on the positive side for both dollars and units in supermarkets.
The recession has resulted in a double whammy on supermarket GM category sales, said Jim Wisner, president of Wisner Marketing Group, Libertyville, Ill. Food retailers are losing on two fronts.
“Of all categories, GM tanked because that is the most discretionary of categories in the store. From a price standpoint, food retailers tend to be less competitive than other channels, which has further driven business away. Supermarkets are losing share because the economy is driving people to buy less, and the second effect is that supermarkets are losing to other channels.”
GM categories have traditionally been positioned as convenience purchases in supermarkets. But a major change in consumers' concept of convenience these days is “being able to buy everything, everywhere, as opposed to being able to buy it where I most frequently shop,” explained Wisner. The recession has shifted consumers' GM purchasing habits from impulse to planned purchases when needed, and shoppers are going to retailers with the lowest prices when they absolutely need necessary goods.
What happens when the recession ends and things get back to normal is anybody's guess.
McConnell expects those higher-income shoppers who are patronizing dollar stores to return to more convenient supermarkets when the recession ends. But he does expect a residual effect as a result of the recession on consumer purchasing behavior.
“I do think a residual effect of the change in consumer buying habits will be a consumer much more educated on what ‘value’ looks like to them. It won't be just price but will be competitively priced goods that offer value and a relatively high level of quality.”
Wisner expects a modest recovery that should result in supermarket retailers rethinking their involvement with core GM categories. “In most cases it means you are going to be trading significantly higher sales dollars for modestly significant lower gross margin rates. The object of the game is to generate more gross margin dollars in total and to preclude and preempt customers from making trips to other channels that take not only that purchase but take other purchases with them,” said Wisner.