Supermarkets Need Multi-Focused Positioning: A&P

JAMES TENSER

ATLANTA — Supermarkets planning to survive the present economic downturn would be wise to avoid middle-market positioning, said an A&P executive in an address here.

“There's been a big shift among retailers to get out of the middle,” said G. Robert James, vice president, strategy and insights, A&P. “One-size-fits-all doesn't really fit anywhere in the industry.”

James made his remarks in a keynote address at the Category Management Association conference, in which he focused on the effects of economic change on the evolving grocery channel.

He discussed the present shift away from the mass-market mentality that once had supermarkets defining their target customers as “everybody,” in favor of a multi-focused positioning that he believes is more likely to survive through tough economic times.

“We are seeing more and more companies getting into more diverse formats,” he said, and added that A&P has stayed away from the middle largely by differentiating most of its 450 stores into three differentiated types. These include:

A&P also adds a fourth format, its handful of high-end “gourmet” stores operated in New York City as Food Emporium.

The focus on positioning is gaining importance, said James, as his company sees itself serving “more different kinds” of shoppers.

“We're seeing more ethnic diversity. Our stores must reflect a different kind of feel for what they buy and how they shop. It makes us have to really rethink how we go after it on a store-by-store basis.”

One important way to approach store-level differentiation is through cultivating a local focus, James said.

“We know from study that companies in our industry that have a more regional or local focus tend to have better profitability.” In part this is due to their shorter supply chains, he added.

Much of the balance of James' talk was a review of present economic challenges and their influence on shopper behavior.

“A lot of experts say we're not quite yet in a recession,” he said. “The reality is, we are in a recession when most people say we are.”

Financial challenges are leading shoppers to several behaviors that he termed “archetypical.” Hyper-cocooning, reflecting a very strong focus on protecting the home, has led to increases in sales of home security systems, he said. Sales of home security safes increased by more than 50% in a recent period. “We've got to do things and sell products that make people feel safe.”

Another behavioral response, hoarding, is signaled by the finding that more consumers have been shopping heavily on the beginning and middle of each month, he said. This is a form of “stocking up” behavior by shoppers who worry about the continuity of their incomes and who “want to make sure they have some things just in case.”

Finally, James said, many shoppers are economizing, using various strategies. “They are looking for the deal and buying off the ad.” He cited recent findings from Nielsen research that indicate pronounced behavioral shifts in response to the down economy: 49% are reducing spending; 41% eat out less; 25% use more coupons; and 23% choose less expensive grocery brands.

About the last statistic: “That may mean trouble for you in the manufacturing world with regard to private label. Manufacturers will have to figure out how to deal with it, because it's only going to get more intense.”

James also forecast “a fair amount of market consolidation” and suggested that Supervalu “changed the landscape” with its acquisition of Albertsons in 2006.

Consolidation is also taking a toll on smaller retailers, he said. “About 1,200 bodegas closed in New York in the past two years. Why? They can't buy as efficiently, and their costs of doing business are increasing.”