A NEW RESOLVE

David Merrefield

New Year's Day is upon us and, as usual, many people will make a resolution for 1996. And, as usual, most resolutions will be forgotten before the first workday of the year.

But there's one resolution the industry should both make and keep in mind this year: The resolve should be to keep an eye on the continuing phenomenon of trade-channel blurring; or, to be more specific, the increasing propensity of shoppers to buy products traditionally sold in supermarkets at many alternative locations.

It's a fundamental change that has been in the making for several years now, but that doesn't diminish its potential to ultimately change the way supermarkets do business -- and to do so before the next century begins. How to react to impending change is what we should ponder as 1996 proceeds.

Indeed, the pondering is well under way, as you can see by reading the front-page news feature in this issue. The feature is based on interviews with a number of retail and wholesale executives. Each was asked to cite what challenges lay ahead for 1996; several cited the alternate-format challenge.

Here's a paraphrase of Gary Hirsch, chairman and chief executive officer of Penn Traffic Co., as quoted in the news feature: "There's always new competition emerging; it always captures a segment of the market and as new forms emerge, the older forms go away."

And, of course, new competition need not arrive in the form of a new format such as a supercenter. It can also arrive -- and has been arriving for a while now -- in the form of expanded grocery lines in mass, drug, membership and other channels. Al Flaten, president and CEO of Nash Finch Co., observed as much in the news feature: "The biggest challenge is from larger retailers and mass merchandisers getting into full lines of grocery product."

The fact of line expansions was underscored lately in an issue of Competitive Edge, a newsletter published by Willard Bishop Consulting. Bill Bishop's newsletter points out that alternative-channel competition is particularly insidious because it involves "fun" money. That's because categories most often purchased at mass merchandisers, for instance, include soda, snacks, juice and so on. "Many consumers [feel free] to purchase snacks, cookies and soft drinks at mass because the purchases will not come from their 'supermarket budgets,' which may not allow for such 'fun' items." The same pertains to other alternative channels.

The good news is this suggests that consumer purchases made from alternative sources are largely impulsive in nature and fueled by a "treasure hunt" mentality. That means a supermarket fight-back strategy based on convenience, value pricing and a full product line -- with a particular emphasis on perishables -- can pay off in 1996 when it comes to competition from mass, drug and membership.

The trick will be to protect and win back business now, while supermarkets still possess the huge strength of high shopper counts and frequent shopper returns.