BRANDED RETAILING IN SUPERMARKETS POINTS TO A NEW WAY

David Merrefield

What took root in the supermarket parking lot as a fuel and convenience offer is now migrating inside the store.

What is it? It's the growing imperative to expand somehow the traditional product selection of a supermarket to something larger -- something that will enhance supermarkets' competitive positioning against other channels of trade.

One of the first examples of this happened in recent years when it started to occur to supermarket operators that, in many instances, the parking lot afforded ample space that might be put to better use. So many, including some innovative independents, tried out putting gasoline stations there.

That worked out, and lately some have tried moving a few high-velocity stockkeeping units to the parking-lot outpost to enhance the convenience offer. This is an outgrowth of the front-end convenience stores that several supermarket chains tried many years ago, and that many mass retailers run now.

The idea of spreading out from food-only sales is gaining traction and is finding different expression, such as through the in-store addition of a small version of a separate and branded retail store.

One of the most recent examples of this is cited in a news article in this week's SN. It seems that Kroger Co. and RadioShack are teaming up to add a 2,200-square-foot RadioShack store inside a Kroger in Raleigh, N.C. (Page 33). The RadioShack, to open in April, is to go near the supermarket's frozen-food section, and it will have a separate entrance.

A RadioShack representative told SN the store-within-a-Kroger concept is a one-of-a-kind proposition, and that the concept will be rolled out no further.

Nonetheless, the concept of bringing an unrelated retailing brand into the supermarket is one that is gaining at a rapid pace. As has been reported in SN on many occasions, other brands finding a home in supermarkets include Toys "R" Us, Office Depot and, of course, food-related brands such as Dunkin' Donuts. (See Page 48 for more on the last.)

The reason supermarkets are tinkering with bringing branded outlets into the store has much to do with competitive positioning, as mentioned. As one observer, quoted in the RadioShack news article, told SN: "As the supermarket industry struggles, as it has been, with the growth and impact of Wal-Mart going into the food business [with] its supercenters, the more traditional supermarket retailer wants to create uniqueness and a point of difference so consumers come back more often. [Branded retailers] give people a reason to go back to [the supermarket] more often."

More than that, it's possible that if consumer electronics, toys, office supplies or the like takes off as a branded department, it could eventually be captured and further developed by the supermarket chain itself.

After all, it was in 1987 that Wal-Mart partnered with Cullum Cos., Dallas, to open the first Hypermart USA. It wasn't long before Wal-Mart learned what it needed from Cullum and evolved the supercenter concept. That could be a two-way street.