Nearly everyone is selling groceries these days. That forces supermarkets to distinguish their stores from grocery aisles in mass-merchandise, club and even drugstores. Supermarkets are looking to packaged goods marketers for help to improve customer service, targeted marketing and merchandising.
Grocers are using consumer data to differentiate their stores and compete beyond price. Data — much of it collected or analyzed by CPGs — is the foundation for five steps supermarkets follow to differentiate themselves, according to Cannondale Associates’ annual Category Management Benchmarking Study.
Retailers are creating niches by identifying shopper problems; conducting deeper research and analysis; translating data into action; executing shopper-friendly programs in-store; and monitoring performance of new products and marketing programs in real time.
The shopper-centered approach, dubbed “consumer marketing at retail” (CMAR), expands category management beyond a single product category and shifts management focus to consumers, not categories. Cannondale introduced the term in 2002; since then, many retailers and CPGs have adopted CMAR’s whole-store approach. Supermarkets that build a niche around their distinct assets insulate themselves from competition — especially on the basis of pricing. Over the next 10 years, the strategy will foster more customized research (based more on shopper data, less on syndicated data) and promotions tailored by shopper segment and by retail chain, Cannondale concludes.
CPGs cite Safeway Stores, HEB and Kroger as the best supermarket practitioners of customer-driven marketing, per Cannondale’s survey. But they still pale next to Wal-Mart, cited by 67% of respondents as a top retailer (Safeway was mentioned by 38% of participants, HEB by 33% and Kroger by 29%). Wal-Mart’s ranking rose dramatically from 2002; Cannondale credits the mass merchandiser’s willingness to test new aisles and sections, such as baby-product and dollar-store sections within Wal-Mart stores. But only 43% of retailers and 48% of manufacturers rate such store-within-a-store departments as very/extremely important. Grocers need to keep abreast of this shopper-driven trend and others, or lose ground to mass-merch and club stores, Cannondale warns.
Mix and match
Product mix and private label also are key to grocers’ distinction. More than two-thirds of retailers (69%) rate targeted products and assortment as very/extremely important, but only 29% feel they’ve done enough, per Cannondale.
Private label is a $50 billion business in the U.S. with high growth potential, because consumers are quite receptive to private label but penetration is still relatively low.
Private label accounts for 19% of total U.S. food-store sales, up 1% to 2% each year, according to TNS Worldpanel, London, which tracks private-label sales worldwide through its 230,000-household panel.
Seventy-seven percent of U.S. retailers say private label is very/extremely important, compared to 46% of CPGs, per Cannondale. Grocers scored even higher: 88% ranked it very important, compare to 82% of mass-merchandisers and 62% of drugstores.
Eighty percent of retailers see their store-brand strategy and store-brand share of overall product mix as very/extremely important, but only 42% are happy with their store-brand strategy, and 53% with store brands’ share of product mix.
Sixty-five percent of retailers consider store brands’ share of promotion to be very/extremely important. Only 47% are happy with the share of promotional support their store brands are getting now, and 43% are happy with store brands’ depth of promotion, Cannondale reports.
Meanwhile, grocers are still worried about product clutter. Consumers suffer a “claustrophobia of abundance” when they have too much choice, says Yankelovich Partners President J. Walker Smith. “Research shows that less choice actually results in more purchases, and greater satisfaction.” Savvy retailers use consumer data to set a merchandise mix that distinguishes their stores (see sidebar). It’s a service for shoppers, an incremental boost for grocers, and a partnership opportunity for CPGs willing to do account-specific (even store-specific) consumer research to help retailers pinpoint the best merchandise mix.
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