FORGING FRIENDSHIPS

JULIE GALLAGHER

The center of the store is not the first place one might expect to get emotional. Still, a growing number of grocers are learning that these aisles present some of the greatest opportunities for forging meaningful bonds with consumers.

The shelf stability and fixed pricing of items merchandised in the section lend themselves well to the key initiatives outlined in the following pages.

Whether geared toward enhancing the quality of one's life, evoking memories of a childhood spent in a distant homeland or simply ensuring that the price they see is always the one they'll get, these value-added features and customized product mixes have the capacity to strengthen customer loyalty, while building incremental sales and significantly impacting retailers' bottom lines.

Grocers interested in appealing to the health consciousness of a growing number of shoppers, for instance, are doing so with shelf-level nutritional rating systems.

Supermarkets are also demystifying the insular world of wine through cross-merchandising programs that match varietals with food pairings and recipes for complementary dishes.

Retailers that are ready to embark on the next level of ethnic marketing will customize Hispanic product mixes to the nationalities most heavily represented by their local demographic.

Technology will also continue to play a pivotal role. And as the price of electronic shelf labels hit an all-time low, now is a good time for grocers to re-explore the technology.

Retailers should also take another look at their collaborative relationships with trading partners. Those who work toward building them can increase the value of customized products and services.

INITIATIVE 1:

Power Shoppers With Nutritional Insight

Whether it's aging baby boomers hoping to stay fit, young families working to provide their kids with the best possible diet, or the ever-growing base of consumers who manage chronic conditions like diabetes, food allergies and high blood pressure, shoppers have more questions about nutrition than ever before.

“Today, 54% of Americans 16 and older say that informative, easy-to-read nutrition labels have a strong influence on their decision to purchase a food product,” said Peter Rose, a partner at the Los Angeles-based research consultancy Yankelovich Inc. “Last year, that number was 45%.”

For retailers, this is the latest indication that offering shoppers the tools they need to make good nutritional decisions is no longer just a service — it has become a competitive advantage.

Supermarket chains have begun offering those tools in a variety of ways, from providing self-service brochures and Internet kiosks to hosting field trips for children and store tours for adults. In one of the industry's most ambitious examples, Hannaford Bros. worked with a group of dietitians for more than two years to implement its new “Guiding Stars” nutritional rating system. More than 27,000 different products were reviewed by the chain in a rigorous process that involved crediting points for vitamin, mineral and dietary fiber content, and debiting points for trans fats, saturated fats, cholesterol, sugars and sodium. What emerged this September was an easy-to-use shelf-tag system where 23% of Hannaford's SKUs are ranked with one to three stars for “good,” “better” or “best” nutritional value. Customer response, so far, has been overwhelmingly positive.

“Guiding Stars is doing great,” said Caren Epstein, spokeswoman for the Portland, Maine-based retailer. “Customers are letting us know via phone, email, snail mail and in-store how favorably they view it.”

Food Lion, Salisbury, N.C., is so impressed with the program that it's considering using it in its stores.

“Guiding Stars” may be popular partly due to its simplicity as well as its unobtrusiveness. Rose noted that, while consumers are hungry for information, they still resist being told what to do, and lately seem to view expert advice as another tool they can use to make their own decisions.

Dietitians, meanwhile, have praised the program for its assessments, arguing that other retailers should play a more active role in consumer education.

“Marketing can be insidious, and many people still don't realize that a product can be a healthier version of a food, and still not be healthy for you,” said Cathy Nonas, spokeswoman for the American Dietetic Association.
— MATTHEW ENIS

INITIATIVE 2:

Pairing Food and Wine

Retailers are taking a new approach to wine sales with programs that help consumers decide which varietal goes best with their meal.

“There's nothing more frustrating than searching an endless aisle trying to figure out what type of wine will accompany a dinner,” said Maria Brous, spokeswoman of Publix Super Markets, Lakeland, Fla.

To help shoppers gain confidence, Publix recently introduced a new shelf signage program in the wine department. Pictures of meat or fish are posted underneath complementary wines along with descriptions of body and flavor.

“Learning more about wine can be quite overwhelming,” Publix writes on its website. “But with a little help, it can be as easy to enjoy as opening a vintage bottle of cabernet.”

Efforts like these are part of a growing retail effort to demystify wine, said Tom Pirko, president of Bevmark, Santa Ynez, Calif.

The time is right for such programs due to the growing popularity of wine.

Many consumers seek wine as an accompaniment to their meals, but often do not because of confusion about the many different brands, varietals and price points.

“The easiest way to make a wine sale is to anchor it with the right foods,” Pirko said.

Another way Publix is doing so is with a new quarterly magazine called Publix Grape. It includes information and articles on tasting, pairing and storing wines.

Kroger Co., Cincinnati, also targets wine. It offers an online wine-pairing tool on its website. Users activate the guide by choosing their main dish and spice. The selector then recommends a wine for the food and spice selected.

“There is no one right or ‘perfect’ wine choice when pairing food and wine,” the website acknowledges. “The goal should be to enhance the dining experience.”

This advice helps consumers feel less intimidated about walking into a wine department.

“I'm a [wine] professional, and I walk into a store and I'm mystified when I see 50 to 100 different types of red wines,” Pirko said.

It's best to have an experienced wine professional on hand to answer questions and conduct samplings, Pirko said. But there are alternatives, such as wine-pairing information posted on shelf signs, on websites and in recipe pamphlets.

A&P, Montvale, N.J., cross-merchandises certain varietals next to the foods they complement, such as red wines in the beef department and white wines near the fish counter.
— CAROL ANGRISANI

INITIATIVE 3:

Re-Evaluating Electronic Shelf Labels

Although the efficiencies they facilitate are quite compelling, for many retailers the cost of implementing electronic shelf labels have long been too prohibitive to justify the investment.

Traditionally, each label has fallen into the $6 to $8 range, and since each stockkeeping unit requires its own tag, these projects command a pretty hefty sum.

But recently introduced ESLs — selling for as low as $3.50 — have the potential to change that, said Mike Griswold, research director for AMR Research, Boston.

“It's a lot like what retailers have been waiting for with RFID,” Griswold said. “We're getting a lot closer to where the return on investment is easier to justify.”

Still, retailers must build a convincing business case before proceeding with these implementations.

Robert Garf, also a research director at AMR, urges retailers to take a closer look at the standard time and labor costs required to manually change approximately 2,200 prices each week. Printing and paper costs must also be figured into the equation.

After it installed about 11,500 ESLs from StoreNext Retail Technologies, Lindo's Market in Bermuda saved the 18 hours of labor each week that it had previously dedicated to changing paper price labels.

“Now, with the ESLs, one person might spend five minutes a day reviewing the price changes,” said Zach Moniz, Lindo's IT manager.

Grocers also must consider the costs that go into verifying the accuracy of prices that are manually changed.

“Despite these efforts, price discrepancies between paper-based labels and point-of-sale scans occur, causing extra work, inaccurate charges and customer distrust,” said Garf in an AMR report. “Take a look at time requirements and the rate of under/overcharges.”

Prior to Lindo's ESL implementation, customer complaints about price discrepancies were relatively common. But now since the ESLs are linked to, and automatically updated by, the store's POS price file, disparities have been eliminated.

“The bottom line is customer service,” Moniz told SN earlier this year. “Now we're able to say confidently that the shelf price equals the register price.”

Griswold attributed technology advancements to the declining cost of ESLs.

“Five years ago these tags cost over $8, over the last several years they've gone down to $5 and now there is pressure to get them down below $5,” Griswold said. “Five years ago we didn't have the maturity of radio frequency and the wireless capabilities that RF facilitates.”

In September, W5 Networks, San Diego, Calif., introduced ESLs starting at $3.50.

“The price is primarily a result of the technology that's inside the label,” said Richard White, chief executive officer, W5 Networks. “It's mostly comprised of a radio and display driver that are integrated circuits.”

Griswold is a bit skeptical.

“The $3.50 price point could be deceiving,” he said. “I'm not sure how many ESLs a retailer would have to buy to get that price.”

White urges potential clients to consider ESL's potential to complement price optimization software.

“Supermarkets have minimum price change amounts,” he said. “If the difference is too small they won't expend the resources to change it, but if the cost of doing so is zero then they will make the changes.”
— J.G.

INITIATIVE 4:

The Next Level of Ethnic Marketing

Comprising the nation's largest minority group, Hispanics possess substantial buying power.

Many retailers have efforts underway to reach the powerful group. But now they need to do more in terms of tailoring their stores to the specific Hispanic subsets that exist in their operating areas.

“Not all Hispanics are Mexicans,” said Maria Gomez, president of Diversity Brands, Nashville, Tenn.

There are burgeoning populations from South America and other regions. Retailers that don't recognize these different segments risk alienating Hispanic shoppers.

South Americans, for instance, typically don't eat spicy foods the way Mexicans do, Gomez said.

Likewise, not all South Americans can be treated the same. Some Colombians frequently eat black beans, while those in other parts of the country don't, she said.

Many retailers roll out bilingual signage and convince themselves that they're successfully marketing to Hispanics. But a truly customized assortment is necessary, Gomez related.

“There's an emotional tie of finding a product that reminds you of your country [of birth],” she said. “Once you appeal to our emotions, we're 100% loyal.”
— C.A.

INITIATIVE 5:

Increase Value of Customization

As long as retail channels continue to blur, supermarket-driven requests for customized products and services will proliferate. Still, only 33% of these products and 50% of customized services effectively create value in the form of category growth and cost efficiencies for retailers, according to the Grocery Manufacturers Association-commissioned study “Creating Value Through Customization, Winning Through Shelf-Centered Collaboration.”

Twenty-six manufacturers and eight retailers including Giant Eagle, Meijer, Publix Super Markets and Target Brands participated in the study performed by Booz Allen Hamilton, McLean, Va.

It advises retailers and manufacturers to take a more collaborative approach when planning these projects.

“When developing these opportunities, trading partners must think ‘shelf-forward’ and ‘shelf-back’ at the same time,” said Richard Kauffeld, partner at Booz Allen Hamilton. “Shelf-forward means asking, ‘How am I increasing the consumer response or growing sales?’” Shelf-back metrics focus on a more efficient supply chain.

The study also advises retailers to work with manufacturers to weed out losing programs, focus resources on the most promising opportunities, measure compliance proactively and learn from their mistakes.

Ninety-two percent of customized display units that were created with a high level of retailer/manufacturer collaboration led to benefits for both retailers and manufacturers, while only 55% of display unit projects executed through low levels of collaboration, created value for trading partners.

Collaboration becomes even more important as customized projects become more specialized.

“Customized requests grew substantially with the emergence of club and dollar channels, and evolved for other reasons,” Kauffeld said. “Some are focused on differentiation in an individual channel, others are aimed at eliciting consumer response and some focus on supply chain efficiencies.”

The most popular product requests are for customized display units, unique package sizes, products that are bundled in and exclusive product formulations, Kauffeld explained.

When it comes to custom services, the leading requests are for unique inventory management or collaborative planning services, premixed pallets and the labor required to get products to the store and on the shelf.
— J.G.