Spartan Embraces Data to Segment Stores

JON SPRINGER

GRAND RAPIDS, Mich. — Customer segmentation is more than just a business tactic at Spartan Stores.

For Spartan's corporate stores and independent customers, tailoring a more relevant offering has been a matter of survival in a landscape transformed by warring supercenters Meijer and Wal-Mart and strong national players like Kroger, said Alan Hartline, senior vice president of merchandising, in a recent interview with SN. And for Spartan itself, customer segmentation — referred to at Spartan as a “consumer-centric” approach — has been a blueprint for the wholesaler-retailer's successful turnaround.

“It's been an evolution here at Spartan in terms of utilizing category management and syndicated data, and understanding the consumer,” said Hartline, who joined Spartan from Kroger shortly after Craig Sturken became Spartan's chief executive officer in 2003.

“If you go back four years ago, Spartan had more of a wholesale mentality, where you made money more on the buy than on the sell,” he said. “We proliferated our warehouse, and our stores, with a multitude of products that probably were not relevant to the customer.”

Spartan's approach today is based on strict adherence to category management and a faith in demographic data that's shifted Spartan from an internal-looking organization to one that serves Spartan best by meeting the needs of others, Hartline said. It manifests itself in three consumer “clusters,” which range from the “Cluster 1” presentations at its service- and quality-oriented D&W Food Center locations to “Cluster 3” stores that would compete with Save-a-Lot and Wal-Mart on price.

But because each corporate or independent store Spartan services has unique needs, the company maintains a database with more than 4,000 planograms, Hartline said. Glen's Markets, a Spartan banner with stores in northern Michigan, operates stores in all three clusters.

“Glen's is a unique set of stores. Some in Traverse City appeal to a more touristy crowd and a real high demographic, whereas if you look at Harrison, Mich., the average income there is just over $30,000,” Hartline explained. “So you may see 12 feet of canned meats and Dinty Moore in Harrison, whereas in Traverse City you'll see 8 feet of that. It's about optimizing the linear shelving within a store and then, within a section, having the relevant offer for the demographic.”

Spartan employs 19 category managers who work with vendors, manufacturers and brokers to define which cluster a given store should fall into, and create planograms, Hartline said. They rely on syndicated data to drive assortment decisions.

EDITING SELECTIONS

The changes have appeared on store shelves often in the form of edited selections, Hartline explained. This allows Spartan to build on its private-label selections and, in some cases, to make dramatic changes, particularly within the high-tier D&W stores acquired last year.

“We continue to refine the offer at D&W to have fewer national-brand, middle-of-the-road items,” he said. “Instead of needing four brands of pasta sauce that are arguably redundant — they don't bring new customers to the category but just trade customers between them — maybe we'll carry two and introduce more specialty-oriented sauces to evolve the offer. We're testing some of that right now.

“Not all categories at Spartan are clustered, and some probably won't ever be, like bleach. But if you think about wine, olive oil, coffee, crackers — you'll see a significant difference in terms of the offer,” Hart-line continued. “When it makes sense for the category, we'll cluster it.”

Spartan at the same time has made additional efforts to solution-sell, Hartline added. This can also serve a clustering strategy: For example, the same pasta sauce can be on sale at all stores but cross-merchandised with wine at a Cluster 1 store and pasta at a Cluster 3 store.

Spartan's new approach calls for more centralized control at corporate stores, where store managers are charged with executing the plan from headquarters and taking care of customers and store-based operations issues, Hartline said. Independent customers of Spartan are under no obligation to use its programs, he added, but many are today.

“We've helped lead [independents] in an environment where they can't afford to have the same infrastructure they once had,” he said. “Many of them have to be leaner and meaner and rely on their wholesaler for some of the strategy.

“Four years ago they might have looked at what we did and did just the opposite,” Hartline laughed, “but as we've evolved as an organization, they've seen the success we've had.”

Embracing data — including looking critically at its own sales figures — helped spark the internal changes at Spartan, Hartline said.

“One of the things we've learned from looking at syndicated data was about what competitors were selling that we weren't. There were some top-selling items in some categories that consumers were seeking out that we didn't even have,” he said. “That's because we were relying only on wholesaler data.

“We had items that ranked high only because they were always on sale and we were giving it away. If 80% of the volume on an item was done on promotion, but it did well, we kept it. But an item that sold well when it wasn't on sale? That's what we didn't sell.”