SUPERMARKETS TOLD TO LOOK OUTSIDE THE BOX FOR GROWTH

ELLIOT ZWIEBACH

INDIAN WELLS, Calif. - Supermarket operators need to develop tie-in programs with other businesses to balance the loss of incremental sales to a host of other retail outlets offering grocery items, Richard George, professor of food marketing in the Haub School of Business at St. Joseph's University, said here.

Citing the amount of food items sold by Amazon.com, Omaha Steaks, Home Shopping Network and video stores, George said, "Those sales may seem as small as a paper cut, but a paper cut can hurt."

And sales at alternative channels can add up, he added, noting that food sales at IKEA in 2006 amounted to $850 million, or 4.5% of total sales of $18 billion.

Rather than lick them, George suggested supermarkets join them, noting that some supermarkets are putting displays in home centers featuring products TV chef Emeril Lagasse used in key recipes the night before, "which are usually high-margin items," he noted; or selling non-perishables at a Staples or Office Max; or providing prepared meals to newsstands in office buildings to catch workers as they head home in the evening.

"You need to go to every office building and find an outlet where you can sell prepared foods for dinner, maybe once a week. You would certainly prefer they come into your stores and shop on their way home, but they could very easily stop at other places to shop if you don't provide the service where they work," he said.

George also said supermarkets could tie in with hardware stores, "where, if customers buy a barbecue, they get a coupon for beef at your store. And gyms sell food, so figure out how you can partner with them to provide some service. Or work with local schools or day-care centers or retirement homes to provide food.

"Many companies don't want to deal with food, but they want to grow their business to differentiate themselves. So instead of putting all its eggs in one basket, supermarkets must begin to look at eating occasions - whenever hunger and convenience collide - as opportunities to provide the food part of the equation to get additional customers and retain your share of stomach."

Paul Straniero, a retired Kellogg's executive who is now an adjunct professor of marketing at Western Michigan University's Haworth College of Business, said consumer packaged goods companies "chase any channel that sells food, and it's up to the retail industry to fight back to get that business by extending its brands, reaching into the community and leveraging its expertise.

"Supermarkets can extend their brand by creating events that bring people to the store, leasing space to other brands, like ACE Hardware or Radio Shack, or by adding banks and kiosk programs that draw customers," Straniero said. "Or they can reach into the community through fund-raising programs, like selling gift cards to organizations at a slight discount and letting those groups resell them for a profit, or getting involved in corporate programs where top employees get special discounts at your store or issuing credit to local organizations that makes it easy for them to shop and get billed at the end of the month."

Like George, Straniero also suggested supermarkets look for incremental selling opportunities by soliciting business from day-care centers, elder-care centers or school feeding programs "so they make the purchases from you instead of going to a club store."

He said supermarkets should leverage their expertise by developing loyalty programs, offering catering services and allowing consumers who order online to pick up their orders when they pick up their children at school.

Emile Breaux, senior vice president of sales and marketing for Associated Grocers, Baton Rouge, La., urged retailers to pursue competitive strategies to keep sales away from alternative outlets, including promoting prepared foods, broadening in-store variety or using theme promotions "to drive excitement beyond the weekly ads."