The food industry is obsessed with figuring out consumers. Some have taken that mission to the extreme by saying retail channels don’t matter anymore because the consumer doesn’t recognize channels.
Try telling that to leading retailers in those channels. They understand how their sectors remain viable and distinct with different models and needs, even as they recognize some blurring of the lines.
All this became clear at the recent Executive Conference of the Grocery Manufacturers Association/Food Products Association in West Virginia. In separate educational sessions, three retail chains — a drug store, a convenience store and a supermarket — outlined their current needs from suppliers, and their requests differed by channel.
C-store giant 7-Eleven is seeking a regular flow of innovative, new products, particularly those with a regional or local angle, according to Joseph DePinto, president and chief executive officer of the Dallas-based company. That’s a departure from the typical request of supermarket executives, who often ask suppliers to stop sending so many new products because shelves are getting crowded. 7-Eleven’s goal is to have the latest convenience-oriented products for time-pressed consumers. But how will its stores, far smaller than supermarkets, handle the shelf-crowding factor?
“Products not being sold are being narrowed and deleted,” DePinto said, outlining a systematic approach that many supermarkets can learn from. “So we’ve got the shelf space. We’re open to anything new that makes sense.”
Now let’s change channels, if you will. Walgreen Co., Deerfield, Ill., is asking suppliers to help with a challenge unique to drug stores. “Our customers often come to us looking for just one item,” said David Bernauer, chairman. “So for us, being in-stock is more important than for any other channel of distribution. Vendors need to help us stay in-stock and recognize that our space is tight and our cost of distribution is higher than other channels.” A great way for suppliers to help is by reducing package sizes, which supports lower costs and better in-stock rates, he said.
On the supermarket side, Tampa, Fla.-based Sweetbay Supermarkets is urging suppliers to support the retailer’s efforts in segmentation of stores, said Shelley Broader, president and CEO. This type of initiative is gaining popularity among supermarkets, which are hoping to avoid the perception of sameness across chains. Sweetbay benefits from being part of Delhaize America, because its sister retailer Food Lion has built an expertise with segmentation.
“There may be clusters of 20 or 30 stores that can be unique, maybe by 10% or 15%,” Broader told vendors, giving the example of Hispanic-oriented assortments. “We haven’t yet built together the systems that will allow us to sustain that. We have to figure out how to do mass customization.”
Underlying the comments of Broader and the other executives is the understanding that retail channels are alive and relevant and a major factor in the competitive landscape.
Consider this point from Broader: “As we get further down this segmentation road, if we’re not able to customize for shoppers, then you’ll see the drug store industry, or the health food industry, or someone else come in and meet those needs.”
It seems consumers relate to channels even if they don’t realize it.