BREAKING THE MOLD

MARK HAMSTRA

CHARLOTTE, N.C. -- Supermarkets may be getting easier to shop.

Food Lion and Marsh Supermarkets have unveiled radical new store designs that eschew traditional thinking about supermarket layout.

Rather than building stores in which ease of operation is the primary driving force, Marsh, Indianapolis, and Food Lion, Salisbury, N.C., have crafted boxes that prioritize the shopping experience.

Food Lion, owned by Delhaize Group, Brussels, Belgium, last month unveiled its first Bloom, A Food Lion Market here, a new retail brand that emphasizes prepared foods, convenience items and technological innovations designed to speed the shopping process. Although Bloom is very different from the new Marsh prototype stores, both represent a radical rethinking of the way products are positioned in the store.

Marsh has opened two prototype "new lifestyle" stores near Indianapolis this year that also create a unique shopping experience for consumers. They feature a double-racetrack design that groups products in individual rooms around the perimeter of the stores. Each section houses products according to how Marsh believes consumers think about them, rather than where they are used to finding them in traditional supermarkets.

The bakery area of Marsh's prototypes, for example, includes not only the scratch bakery but also baked goods prepared by vendors, baking mixes and baking ingredients.

"What's really impressive about the Marsh store is that it's the first store in the U.S. that was really designed with the consumer as the central figure, as opposed to how all stores have been designed for the past 50 years, which is with logistics as the central driver," said Neil Stern, senior partner, McMillan Doolittle, Chicago. "It sounds sort of simplistic, but the changes are pretty profound."

The changes have implications for not only how the consumer shops the store, but how the store is managed operationally, how the store works with direct-store-delivery vendors, how category management is handled and potentially how supermarket companies themselves are managed, Stern said.

It also remains to be seen, he pointed out, whether consumers will adjust to the new formats.

"We've trained consumers for a long period of time that this is not how you shop," he said. "Even though it's logical to the consumer, you still have to retrain them."

Stern said his own observations at the Marsh prototype indicated that consumers appeared to be easily adapting to the new layout.

In an interview with SN shortly after the first of the new stores opened, Jodi Marsh, spokeswoman, Marsh, said customers seemed to either go directly to the produce area in the center of the store, then fan out into the various departments along the perimeter, or else they shopped their way through the outer perimeter first, making a circuit of the "outer loop" of the store before shopping the central produce area.

The average shopper was spending slightly more time in the store than in a typical Marsh store, she said.

The Speed of Bloom

At Bloom, everything is geared toward getting the customer in and out quickly. At the entrance to the store is a branded convenience section, called Table Top Circle, which allows customers to fulfill "grab-and-go" shopping trips for high-frequency items like milk, eggs, beer and soda. It also includes take-and-eat and take-and-heat meal solutions.

Like the Marsh prototypes, although to a lesser degree, Bloom also groups its center store categories into what it calls "universes." Products are placed together based on how they are eaten rather than how they are typically shopped. Breakfast items like pancake mixes, syrups, and dry cereal and toaster pastries are found together on the same aisle. Likewise, beverages are grouped according to flavor and type of beverage as opposed to being grouped by brand, which is how they are typically displayed in supermarkets for more efficient direct-store delivery.

"We had a lot of conversations beforehand with our vendors and with our delivery people, and we worked this out with them," said Jeff Lowrance, spokesman, Food Lion.

Observers said they expect to see more stores follow in the path of Bloom and Marsh in designing stores that focus less on efficient DSD operations and more on category adjacencies.

"Stores used to keep the DSD aisle intact so drivers could just get in and out without going all over the store," said Paul Weitzel, vice president, Willard Bishop Consulting, Barrington, Ill. "But I think with categories being moved around, and category blurring, and with the trend toward snacking and immediate consumption and grab-and-go, I think that will blur the categories even further, and as that happens, you will see less of a DSD-operation mind-set around some of these aisles. Some retailers will begin to design the stores based on the consumer rather than on operations."

He noted, however, that while some operators might be focusing on making stores easier to shop for their customers, others are doing even more to make the stores efficient to operate.

"I think you will see it moving in both directions," he said. "I think you'll see the discounters pushing operations more to get the labor costs down and striving for efficient replenishment, and I think other retailers might go the other way."

The changes Food Lion and Marsh have made in their new stores also have implications for category management and for the way the stores overall are managed.

"It certainly has fairly profound implications for the way you have to run the store," said Stern of McMillan Doolittle. "People who manage their departments now have to monitor activities in eight or nine different places.

"Before, if the bakery manager just had 36 feet in one aisle, now they suddenly have to understand everything that's a baked good," he said. "The bakery manager is now looking at products brought in from scratch, products from DSD vendors and products you can mix."

He said such changes at the store level, if more widely implemented, eventually could change the way whole companies are organized.

"Marsh and Food Lion are sort of opening up Pandora's Box," he said. "I don't think all the implications have been thought through, vs. the obviously noble goal to begin with, which is to improve the experience for the consumer."

Although the first Bloom store, at 38,000 square feet, was built from the ground up, the next four will be conversions of existing Food Lion stores in the Charlotte market as the company executes a marketwide remodeling effort.

Food Lion will test various configurations and different technologies as it rolls the Bloom brand out to additional locations, said Robert Canipe, vice president, business strategy, Food Lion.

"This will give us another option as we go through and do our remodels," he told SN during a recent store tour. "In some locations, a traditional Food Lion will be appropriate; in others, it will be a Bloom."

The Technology Factor

Both Bloom and Marsh's lifestyle stores also feature extensive use of technology on the sales floor.

Marsh has five kiosks spread through the store where customers can swipe their My Marsh frequent-shopper cards to obtain discounts on products and peruse recipes. The stores also feature large digital advertising screens in the stores and on the outside above the front doors.

At Bloom, customers can use handheld scanners to tally their own grocery bill while they shop. In addition, the first Bloom store includes eight information kiosks, which include both a traditional store map and an electronic product and category locator. Other features include a wine department kiosk that allows customers to research wines, look up food pairings and even plan parties by entering the number of guests and their drinking preferences -- from teetotalers to "party animals."

In the produce department, three electronic produce scales allow customers to weigh their order and print out a sticker with a UPC code. A recipe kiosk for meat and seafood provides a selection of recipes developed in partnership with the company's vendors.

All the technologies were developed to be as user-friendly as possible.

"We found that customers don't want to mine through lots of information," said Susie McIntosh-Hinson, concept creator, information technology, during a tour of the Food Lion store last month.

She pointed out that the technologies were designed into the store to be unobtrusive, so that "the customer will leave without even seeing the technology," she said. "It all blends in."

Prepared Foods

Bloom and the Marsh prototypes are also similar in their emphasis on prepared foods.

In the delicatessen area of the Marsh prototypes, which is visible through floor-to-ceiling windows at the front of the store, customers can select from a variety of freshly prepared sandwiches, salads and entrees, in addition to fresh sushi and a salad bar. Take-and-heat items include hot wings, macaroni and cheese, quiche and ribs.

In the meat department, located across the store from the deli, a reach-in cooler offers a selection of 16 different take-and-heat meals bearing the "Good to Go" brand. The dinners come with the vegetables pre-cut and instructions for preparation.

Meals include oven-ready beef eye of round with potatoes, onions and carrots; and savory garlic hickory pork loin roast, with potatoes, carrots and celery. Fool Proof Gourmet Products, Grapevine, Texas, developed the meal programs with Marsh's chefs. Mark Pierce, president, Fool Proof, said he developed 30 items that can be rotated through the Good to Go program.

Food Lion's first Bloom store, meanwhile, includes a Boston Market offering the restaurant's typical hot entrees, such as meat loaf and rotisserie chicken, as well as items developed exclusively for the restaurant chain's partnership with Food Lion, including fried chicken and chicken tenders. Another five to six exclusive items were scheduled to debut this month.

Bloom is a franchise owner for the Boston Market unit, meaning it staffs the stores itself and pays a royalty fee to the Golden, Colo.-based chain, but the two companies have worked together closely on training and menu development.

"We've been working with them to learn what products are ideal for supermarkets to offer to take home," said Darrell Sapp, concept creator, category, merchandising and pricing, Food Lion. "We're working with their kitchens to see if they can make it simple enough to offer in the supermarket."

In addition, Bloom features an eight-foot reach-in cooler located adjacent to Table Top Circle that offers Boston Market-brand take-and-heat prepared food. Inside Table Top, several feet of shelf space are dedicated to take-and-eat and take-and-heat prepared-dinner items and other meal solutions. Examples include chicken marsala, rice pilaf, soups, salads, sandwiches and fully cooked meats.

Sapp said Food Lion's customer research indicated that consumers seek a range of options when shopping for prepared foods, from fully cooked dinners to partially prepared foods and pre-portioned ingredients.

"When it comes to meal solutions, consumers don't always want it the same," he said.

Both Bloom and the new Marsh prototypes position produce toward the physical center of the store, but while at Marsh the produce department serves as the central theme of the store, at Bloom the produce is located directly behind the Table Top Circle convenience area to capitalize on consumers' tendency to seek out produce when making quick, fill-in trips.

The 2,000-square-foot produce department at Bloom has been enhanced and expanded in accord with Food Lion's new remodeling scheme, which it rolled out last year in the Raleigh, N.C., market.

"Improving the sensory experience in fresh is now the price of entry in the supermarket business," said Cathy Green, senior vice president, fresh merchandising, distribution and quality assurance, Food Lion. "We've tried to improve our value statement with consumers."

She said having a stronger emphasis on perishables, which includes a section of organic products, is part of the store's overall focus on offering healthful solutions for consumers.

"We are really committed to finding solutions to not only what's for dinner, but in a fresh, healthful way," she said.

In accordance with that theme, the first Bloom store also features a pharmacy -- one of only a handful that Food Lion operates -- where the pharmacist will be called upon to be much more active in the store's operations than Food Lion's pharmacists usually are, according to John Bednarz, director of pharmacy, Food Lion.

"We've integrated our pharmacy people into the store a lot more," he said, saying that the pharmacy manager will be involved in store meetings and other functions in an effort to take more of a whole-health approach.

The Bloom pharmacy also will leverage technology, he said. Customers will be able to take blood pressure readings and compile other health statistics through in-store technology and will be able to monitor that through the Internet or through in-store kiosks. In addition, customers can be notified through their handheld scanners when prescriptions they have dropped off at the pharmacy have been filled.

Lifestyles Elsewhere

Analysts said the degree to which Food Lion and Marsh have gone in redesigning their stores exceeds anything that's being done by the major conventional operators, although Kroger, Cincinnati, and Safeway, Pleasanton, Calif., also have been rolling out new prototypes that highlight fresh and prepared foods.

In Europe, however, operators have been much more aggressive in experimenting with new concepts along these lines.

Stern said Ahold first opened a "lifestyle" store in its headquarters market of Zaandam, Netherlands, several years ago, and British chains like Tesco have been experimenting with similar formats.

"In the U.S. we tend to place the emphasis on quantity and number of new stores," Stern said. "If you are winning, you are opening new stores. It becomes a little bit of a numbers game. In Europe, they can't open vast numbers of stores, so they really have to pay a little more attention to each store they are opening."

He said Loblaw Cos., Toronto, also has been innovative in its efforts at innovation in store design, developing more lifestyle sections as opposed to straight gondola runs.

Perry Caicco, analyst, CIBC World Markets, Toronto, said the similarity he sees between the Marsh and Bloom stores and those of Loblaw and other Canadian operators involve the increased emphasis on fresh foods.

"In Canada, what most of the leading grocery stores have done is taken their traditional stores and largely converted them to what we call a fresh-box store," he said. "They have 40% to 50% of space given over to perishables, with the whole side of the store walled off."

He said the increased emphasis on perishables, combined with the decreased space for dry groceries, has made the shelf space more valuable and allowed supermarket operators to charge higher slotting fees while lowering prices on dry groceries for consumers.

"Once you get the right mix, with people buying high-margin perishables, then you can afford to drop prices on all those other groceries," he said.

Weitzel of Bishop Consulting predicts more and more U.S. operators will rethink their traditional product grouping and store designs.

"I think you'll begin to see more lifestyle merchandising rather than just category by category," he said. "I think it's the right thing to do for certain retailers. The trick will be, can they make the store easier to shop, or will it be easier to shop in some aisles and harder to shop in others? If they can figure it out, it will be a big win for consumers."

The Bloom Price Message

CHARLOTTE, N.C. -- The new Bloom, A Food Lion Market, here has a lot of things most Food Lion stores do not have, such as handheld scanners and Boston Market prepared foods.

One of the typical Food Lion characteristics it does not have, however, is an overt low-price massage.

"All we need to say is that it's 'A Food Lion Market,' and we own price," said Mike Haaf, senior vice president of sales, marketing and business strategy, Food Lion, Salisbury, N.C., in reference to Food Lion's reputation as a low-price operator.

Robert Canipe, vice president of business strategy, said the price message in the Bloom stores will be conveyed through the use of shelf tags and on endcaps, which will be used as single-item displays bearing a single price point.

The idea is to minimize clutter in the stores and keep the message as simple as possible. The signs and color schemes are meant to be nearly invisible, allowing shoppers to focus their attention on the products.

Prices will be consistent with those offered at nearby Food Lion stores, the executives said.

"It's the genius of the 'and,"' said Canipe, referring to Food Lion's association with the Bloom banner. "That's why we leverage the Food Lion brand. It communicates price."

Although the Bloom stores will use the same pricing strategy as Food Lion, the strategy will not always be appropriate for the same markets. The first Bloom, on the northern outskirts of Charlotte, is located near a university in an area of middle-income consumers.

"We're not going for the upscale market," said Robin Johnson, concept creator, marketing. "That's why we kept the Food Lion name."

She said Bloom would be most appropriate for urban and suburban markets, rather than the small, rural areas where Food Lion's 1,200 stores are often located.

Among the four additional test stores planned for Bloom, "each is in a different competitive landscape," Johnson said, allowing the company to observe how consumers use the stores under different market conditions.