FIXING CENTER STORE REQUIRES CONSENSUS ON WHAT'S BROKEN

David Orgel

SN's new survey on Center Store performance indicates there's reason for optimism in the grocery section of the store, but only to a point.

The most encouraging news is that retailers are actively pursuing non-price strategies as they battle to plug market share leakage. That means supermarkets are getting the message that it will take more than just price to revive the grocery aisles. This and other findings are detailed in a story by Center Store editor Lucia Moses that begins on Page 42.

What are the non-price strategies retailers are pursuing? According to the survey, retailers are favoring technology, private label and ethnic marketing as prime tools in their arsenals. Technology efforts include aisle optimization, stockkeeping rationalization and price optimization. The ethnic push centers on growing product variety. Private-label directions involve natural/organics, value-tier, ethnic and specialty. Retailers are even stepping up their community ties to build bridges to shoppers.

The survey results indicate retailers have come to the realization -- albeit late -- that they are facing a wider array of alternative formats than previously thought. One respondent said retailers need to do a better job of identifying the most dangerous such competitors earlier.

However, the most troubling aspect of the findings involves trade relations. The results underscore that one of Center Store's chief problems is participants can't agree on the chief problems. In plain English, that means retailers and suppliers remain far apart on what ails Center Store. That's a recipe for disaster.

For instance, asked what is the biggest challenge in managing shelf-stable categories, retailers and suppliers were far apart in their outlooks. Retailers were much more likely than suppliers to cite space limitations (58% vs. 33%). More manufacturers than retailers pointed to the problem of slotting fees (24% vs. 5%), which suppliers said takes the focus away from innovation.

Moreover, while retailer respondents said they are de-emphasizing price merchandising, manufacturers contended stores haven't gone far enough in that effort. Suppliers said stores need to shine the spotlight more on service and differentiation, and less on price.

There's also disagreement on the best approaches to attracting shoppers back to Center Store. While retailers and manufacturers both favor cross merchandising as a chief weapon, retailers cite advertising and in-store signage as primary tools while manufacturers give more weight to sampling and cooking demonstrations.

Given the gulf in opinions, it's not surprising that respondents have varied expectations of Center Store performance this year. About 72% of retailers anticipate sales gains, compared to 55% of suppliers. Wholesalers have a more sour view, with 75% saying sales would be flat or down.

So if trading partners see Center Store so differently, how can they pursue solutions together? The answer is they can't. Not without a lot of trouble, that is.

There's no time like the present to bring partners into alignment to attack the Center Store challenge.