Both factors may contribute to retailers’ optimistic sales projections in the face of higher costs and strained consumer budgets.
More than one-quarter of retailers (26.1%) polled by SN expect Center Store sales to increase between 2% and 3.9% this year vs. last.
An increase of between 0.1% and 1.9%, and a rise of between 4% and 9.9%, tied as the second most popular responses; both were chosen by 17.4% of retailer respondents. More than one in 10 retailers (11.6%) expect sales to remain the same.
Manufacturers are less optimistic.
More than one in five (23.8%) forecast that Center Store sales in supermarkets will drop between 2% and 3.9% in 2008 compared with 2007. The same percentage (23.8%) believe that sales will remain the same, while 14.3% estimate sales will increase to between 0.1% and 1.9%, and 14.3% project that the increase will fall between 2% and 3.9%.
Both retailers and manufacturers agree that alternative channels (drug stores, c-stores, club formats, natural retailers) pose the biggest threat to future Center Store sales in supermarkets.
More than one-third of retailers (37.7%) chose members of the channel, followed by Wal-Mart (33.3%), other (13%), perimeter departments (7.3%) and dining out (4.3%). Respondents who chose “other” noted the economic crisis and the higher cost of goods.
“There are so many options for the consumer, and they’re exploring all of them, particularly considering the current economic environment,” said one retailer.
“Six to eight Wal-Mart supercenters are set to open in our marketplace this year,” said another respondent. “The biggest erosion is taking place in the following departments: baby, pet food, paper, household and HBC/GM.”
Close to four in 10 manufacturers (38.1%) consider alternative channels the biggest threat to future Center Store sales, followed by Wal-Mart (33.3%), perimeter departments (19%) and other (4.8%). No manufacturer respondents chose dining out, and those who chose other also mentioned the economy and the cost of goods.
When it comes to the most effective ways of fighting those competitors for Center Store sales, 27.5% of retailer respondents chose value-added offerings (clubs, loyalty cards, targeted offers, educational programs), 26.1% picked private label, 21.7% said assortment, 17.4% said price and 2.9% chose other. Respondents who chose other mentioned reduced out-of-stocks and greater variety.
“Everybody sells beans, but the secret is in the immediate gratification of the customer,” said one respondent. “What will I offer that the store across the road doesn’t, for the same price?”
Their trading partners, meanwhile, placed the greatest emphasis on assortment (28.6%), followed by private label (23.8%), value-added offerings (19%), price (14.3%) and other (9.5%).