ABA Convention: Retailers Balance Price vs. Specialty Merchandising

SCOTTSDALE, Ariz. — Retailers are striking a balance between price-driven and specialty merchandise as a still-challenging economy and shifting consumer preferences impact shopper buying behavior.

That was the consensus of a panel focusing on this topic at the American Bakers Association Convention here. The talk was largely about the baking segment, but the story line could have applied to many other categories in an economy that’s only slowly rebounding.

At Sam’s Club, business customers view certain buying decisions as simple price moves, said Shawn Baldwin, senior vice president, fresh and freezer cooler.

“Our business-owner customers tell us certain items are price only,” he said. “For example, take the hot dog bun. We’ve tried about 30 times to do gourmet hot dog buns, but nobody wants one at Sam’s. We may try again, but for now we just need to have the right price on items that are price driven.”

Contrast that with the feedback from another retailer panelist about the bread category. Stew Leonard Jr., president and chief executive officer, Stew Leonard’s, said that despite the impact of the economy, specialty is overtaking basics in bread.

“Consumers are looking for something a little more unique and different,” he said. “We have pan breads, but we don’t see a lot of growth there.”

What is performing for the retailer, however, is specialty breads that benefit from  “show and sell, making it in front of the customer, smoke and aroma, and store employees who understand bread. There’s nothing like nice, crusty, hot pieces of bread.”

Another panelist, Todd Hale, senior vice president, Consumer and Shopper Insights, Nielsen, said retailers of all stripes are impacted by the polarization of consumers in this economy. The wealthiest one-fifth of consumers have exited the recession, while the rest have not, he explained.

A big challenge for retailers and suppliers is to “figure out how to turn a commodity into a premium offering,” he added.

“How do you reinvent the sandwich? How do you reinvent the breakfast meal occasion for your products? How do you get around the challenges and innovate with something different and make things new and improved?” he asked.

One bright spot for retailers is in tweaking package sizes to make products more accessible to customers. Sam’s Club’s research found that members were avoiding certain baked goods purchases because pack sizes were too big. So the operator revamped sizes to good response.

“We took 12-packs of muffins, and switched them so you can get two six-packs,” Baldwin said. And you can get the two that you want. So a downward trend started going in the other direction for us. Pack size optimization enabled us to be more relevant in relating to what the customer was asking for.”

Stew’s Leonard’s found that size reductions boosted sales in pies.

“We went to half-pies this year, including apple, blueberry and cherry,” Leonard said. “I was concerned we’d kill our pie business, but it went up.”

Another executive who discussed new opportunities was Robert Hill, president and CEO, Acosta Sales and Marketing, who spoke during a different session at the convention.

He said the attitude of some shoppers is improving despite continued challenges in this difficult economy. He advised the industry to rethink how it thinks about shoppers and connects with them.

“We need to remember there’s a difference between the consumer and the shopper,” he said. “Only 35% of consumers are really doing the shopping. So how do we understand the shoppers and their paths to purchase? That’s a key element.”