The supermarket industry's key to succeeding against supercenters is to pick battle areas very carefully, according to a group of consultants and observers interviewed by SN.
That means supermarkets, rather than reacting to each supercenter move, need to create a vision of how they will compete, according to these executives. Among the tools in supermarket arsenals are increasing micromerchandising, stressing convenience, pursuing customer loyalty programs, pricing competitively on a menu of items and remodeling stores based on local conditions.
Supermarket executives express a great deal of concern about the supercenter threat. More than 55% of respondents to a survey conducted by SN during the Food Marketing Institute's Chicago convention identified supercenters as the alternative retail format that will prove itself the greatest threat to their business over the next five years. Nearly 66% said they currently competed with a Wal-Mart or Kmart supercenter.
Moreover, 44% of the respondents were extremely concerned and 46% were moderately concerned about competing with supercenters for the public's share of stomach.
More than 50% of the respondents to SN's survey identified themselves as chain retailers. Nearly 30% were independent retailers, with brokers, wholesalers and cooperatives rounding it out.
"Supercenters are not all-conquering monsters. They are going to remain a viable format, particularly in rural areas because of Wal-Mart's strategic skills, but they are not going to dominate the industry," said David Rogers, president of DSR Marketing Systems, Deerfield, Ill.
The strategies that can be applied depend upon an operator's capital resources. Retailers with deep pockets should consider remodeling, upgrading or expanding stores, although localized merchandising or micromerchandising is something that a retailer of any size can accomplish. Competitive pricing is also an effective tactic for some, Rogers noted.
"If you're a major chain, you really have to turn [health and beauty care] into a price war. If you're an independent, you may as well give up and have them as a convenience item," he said. But "the average Wal-Mart has the health and beauty aids about a half-mile from the grocery. That's something that could be exploited."
Retailers need to look closely at their buying tactics in the HBA and general merchandise categories, then enlist their vendors to help them fashion buying and marketing strategies, said Tom Rubel, a managing partner with Management Horizons, the consulting division of Price Waterhouse, Columbus, Ohio.
"There's really no way the traditional supermarket can compete directly," he said. "Pick your fight by category. It may be that you let them take you on price on health and beauty aids. Try to amplify the categories you're best at." Moreover, supermarkets need to recognize their core shoppers. Since supercenters usually attract young families, supermarkets might decide to target other socioeconomic groups, such as senior citizens.
"You don't have to be all things to all people. Try to focus in on exactly what kind of consumers you want to do business with," Rubel advised.
Sidney Doolittle, a partner at McMillan/Doolittle, Chicago, suggested that supermarkets use some sort of frequent shopper program to generate loyalty.
"Today they need to work harder at programs to lock in their really loyal customers," he said. "Later on, that network of customers can be used to improve the merchandising of the store using micromerchandising where the needs of the different neighborhoods are very different. Supermarket chains have not been as good at merchandising to the neighborhoods as they need to be."