Supermarket news consumer segmentation may 2010
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The document discusses 10 types of modern grocery shoppers and how retailers can meet their needs. It focuses on "The Indulgent Shopper", who is willing to splurge without paying attention to price or using coupons. Traditionally, indulgent shoppers shop at stores like Costco and Whole Foods rather than traditional supermarkets. However, supermarkets have an opportunity to attract these free-spending customers if they can provide an upscale in-store experience and get indulgent shoppers away from membership-only stores.
![The New Value Shopper
THE NEW VALUE shopper is less likely to stock up, will drive farther to find a deal, is less picky about
brands and more fussy over price.
Traits: Comes from varied income strata and age groups; retains some frugal habits learned in
recession; seeks deals selectively.
Habitat: Increasingly likely to be spotted in hard-discount chains like Aldi or WinCo, or traditional
supermarkets like Kroger that had committed to improved everyday pricing before the recession.
Beyond that, observers note, their demographics hardly matter anymore.
[It] is startling to know how little demographics matter, according to the 2010 How America Shops
Megatrends study from WSL Strategic Retail. The rich are not as different from everyone else, at least
emotionally; and overall, the young have become as conservative in their attitudes toward shopping and
their willingness to spend as older shoppers.
The WSL Report, based on survey data, indicated that as many as one-third of shoppers with incomes
more than $150,000 per year are cutting spending and avoiding places where they are tempted to
overspend. And that more than half of all ages and income groups feel that the recession will be around
for another two years at least, and that it may take them two years after that to recover their financial
stability.
Those facts support the notion that value shopping is a trend that will be around for a while and that it's
an opportunity for food retailers serving shoppers of all economic strata. At a recent event for the
opening of the Martin's banner at a former Ukrop's site in Richmond, Va., stores, Jim Scanlon, a regional
vice president for Martin's, said the ability to better serve value-seeking shoppers even among the
upscale-leaning group that typically shopped at Ukrop's, would be a major benefit of the switch.
More and more people are watching their dollars and being careful with their spending, so having the
ability to do double coupons that enhance people's ability to save money is critical, he said. That's what
it's all about right now, no matter what your income level.
A trend toward more frequent visits and smaller shopping baskets has been reported by food retailers at
the discount level all the way up to high-end players. At the same time, higher-income shoppers are
drifting into channels where they hadn't previously shopped. The latter phenomenon bears watching,
noted Burt P. Flickinger III, managing director of Strategic Resource Group, New York.](https://image.slidesharecdn.com/supermarketnewsconsumersegmentationmay2010-100511130136-phpapp01/85/Supermarket-news-consumer-segmentation-may-2010-2-320.jpg)
![According to Jonathan Ziegler, an analyst with PUPS Investment Management Co., Santa Barbara, Calif.,
a conventional store that offers ethnic merchandise may not fit the needs of all ethnic shoppers. To many
Hispanics, a store like Gigante was too Anglicized for them, he explained.
To some degree it depends on how long a shopper has been in this country. Second- or third-generation
ethnic shoppers are more likely to go to a conventional supermarket for ethnic foods if the supermarket
in their area stocks merchandise to appeal to that segment.
With Hispanics becoming the majority population in California, most supermarkets carry large ethnic
selections as a way to broaden their appeal, Ziegler noted.
Some large traditional chains that have opened formats specifically targeting Hispanic consumers include
Lakeland, Fla.-based Publix Super Markets, which has opened four Sabor locations in Florida. The stores
include bilingual ads and product information, and an expanded selection that includes a larger variety of
Caribbean, and Central and South American products. Hispanic products are integrated throughout the
store.
Many smaller mom-and-pop ethnic stores, or smaller supermarket chains with an ethnic orientation, are
able to survive adjacent to larger conventional supermarkets because the owners of the smaller stores
have bonded with the neighborhoods, Ziegler said.
They carry items a supermarket chain won't carry, or they drill down to offer more basics. They go for
more authenticity, and they have a greater understanding of the unique products preferred by the ethnic
group because the owner is generally closer to his own roots than anyone at the supermarket, regardless
of whether the supermarket has hired nationals from that ethnic group to run its stores.
I'm not sure how many store managers are as in touch with the ethnic groups in their communities the
way the owners of the mom-and-pop stores are. It's just a more personal touch.
The smaller operators can exist side-by-side with the chains because they are not mutually exclusive,
Ziegler pointed out. The chains probably get good ideas from those ethnic stores to determine their own
product mix.
According to a study of ethnic consumers by a CPG company, Hispanic mothers are focused on food
quality and value, with an overriding interest in serving whole foods and made-from-scratch meals for
their families.
For some companies, Hispanic marketing is viewed as just a line item within a brand or company budget,
the study said, with a misguided approach of taking the English version [of a marketing effort] and
running it through the Google translator.
The study also said some companies make the primary mistake of waiting for consumers to assimilate,
rather than actively finding ways to connect meaningfully with them now.](https://image.slidesharecdn.com/supermarketnewsconsumersegmentationmay2010-100511130136-phpapp01/85/Supermarket-news-consumer-segmentation-may-2010-17-320.jpg)
![Supermarkets who hope to attract the list makers must get them into the stores to expose them to the
store's pricing or product offerings, Hoopes noted. For example, Kroger has been able to gain not only
the trust of these shoptimizers but also to retain their business over the last year with good pricing.
The first thing a retailer needs to know is, what categories are important to this shopper. The list maker
listens to all ads, looks for all coupons, pays attention to in-store displays, and he's looking for price
reductions. He has his ears and eyes open all the time.
Bill Bishop, principal at Willard Bishop, Barrington, Ill., said planners and list makers are the most rapidly
growing consumer segment. Making a shopping list is the behavior that's most universal in terms of its
benefits, he told SN. If you are well off, it's a smart thing to do; and if you're struggling financially, it has
a high return.
But the real significance of this group for me, which is not always obvious, is that retailers have to find
ways to influence decision-making before the shopping trip by moving beyond tools like print ads that
they rely on heavily now. That means, to a large degree, moving to the Web � and this planning and
list-making behavior plays very naturally into the spreading popularity of the Web.
In fact, several retailers make it easy to make a shopping list, including Festival Foods in Wisconsin,
whose website keeps track of previous purchases to help formulate future shopping trips, and Giant
Foods of Carlisle [an Ahold division], whose website allows you to put together a personal shopping list to
help you keep track of what you need.
Jonathan Ziegler, an industry analyst with PUPS Investment Management Co., Santa Barbara, Calif., said
list makers are very organized and very anal and when they run out of something, they write it down on
their shopping list immediately.
They may make a list because they're on a budget and they believe the list will help them spend no more
than their budget permits, though it's doubtful that ends up being the case.
Items are usually added to the list for one of three reasons, he said: the household runs out of an item;
someone sees an ad on TV for something they want to try; or coupons for particular items fall into
someone's hands.
List makers are apt to follow their lists pretty closely, Ziegler added, but if the market is doing its job,
then point-of-purchase programs tie-in displays, in-store sampling, multiple-buy offers, promotions or
other inducements are likely to prompt even list makers to beef up their market basket and buy more
than what was on their list.
Those additional purchases round out a store's sales, Ziegler said. Someday, he suggested, shopping lists
could be delivered by consumers via cell phones to the supermarkets so the stores will know what kinds
of items to stock because the more the supermarket knows about planned purchases, the more
prepared it can be.](https://image.slidesharecdn.com/supermarketnewsconsumersegmentationmay2010-100511130136-phpapp01/85/Supermarket-news-consumer-segmentation-may-2010-21-320.jpg)
Supermarket news consumer segmentation may 2010
- 1. Supermarket News - Consumer Focus May 10, 2010 12:00 PM SN examines 10 common varieties of the modern grocery shopper and how retailers can meet their needs The modern grocery shopper has evolved considerably, under recent social and economic pressures, and the competitive set of food-retailing venues needs to evolve as well. With limited-assortment stores providing a new model for convenience, and chains like Trader Joe's raising the bar on the in-store experience, traditional supermarkets have to do more than ever to compete for the attention of the consumers of 2010 and beyond. If your store is recognizably similar to what it was 25 years ago, I think you are in trouble, said John Rand, director of retail insight at Cambridge, Mass.-based Management Ventures Inc., a division of Kantar Retail. Getting closer to today's shopper is the first step in rethinking the modern grocery store. In the following stories, SN identifies 10 types of consumers who have become prominent in today's grocery-shopping environment. The New Value Shopper: Those seeking the best deals can come from all income strata these days. The Techno Consumer: Increasingly, shoppers can find just about everything they need in cyberspace. The Health and Wellness Shopper: Consumers are taking charge of their own well-being. The Underserved Consumer: An increased focus on nutrition has helped put a spotlight on food deserts. The Indulgent Shopper: Who cares if it�s not on sale? The trick is getting these free-spenders away from Whole Foods and Costco. The Convenience Shopper: Small formats are just part of the solution to expediting the food-shopping experience. The Channel Surfer: More retail choices make it easier for consumers to cherry-pick based on specific needs. The Ethnic Shopper: Authenticity and strong community bonds are key to attracting these consumers. The Green Shopper: What have you done for the Earth lately? Green consumers want to know. The List Maker: Supermarkets must work hard to influence the buying decisions of these careful planners.
- 2. The New Value Shopper THE NEW VALUE shopper is less likely to stock up, will drive farther to find a deal, is less picky about brands and more fussy over price. Traits: Comes from varied income strata and age groups; retains some frugal habits learned in recession; seeks deals selectively. Habitat: Increasingly likely to be spotted in hard-discount chains like Aldi or WinCo, or traditional supermarkets like Kroger that had committed to improved everyday pricing before the recession. Beyond that, observers note, their demographics hardly matter anymore. [It] is startling to know how little demographics matter, according to the 2010 How America Shops Megatrends study from WSL Strategic Retail. The rich are not as different from everyone else, at least emotionally; and overall, the young have become as conservative in their attitudes toward shopping and their willingness to spend as older shoppers. The WSL Report, based on survey data, indicated that as many as one-third of shoppers with incomes more than $150,000 per year are cutting spending and avoiding places where they are tempted to overspend. And that more than half of all ages and income groups feel that the recession will be around for another two years at least, and that it may take them two years after that to recover their financial stability. Those facts support the notion that value shopping is a trend that will be around for a while and that it's an opportunity for food retailers serving shoppers of all economic strata. At a recent event for the opening of the Martin's banner at a former Ukrop's site in Richmond, Va., stores, Jim Scanlon, a regional vice president for Martin's, said the ability to better serve value-seeking shoppers even among the upscale-leaning group that typically shopped at Ukrop's, would be a major benefit of the switch. More and more people are watching their dollars and being careful with their spending, so having the ability to do double coupons that enhance people's ability to save money is critical, he said. That's what it's all about right now, no matter what your income level. A trend toward more frequent visits and smaller shopping baskets has been reported by food retailers at the discount level all the way up to high-end players. At the same time, higher-income shoppers are drifting into channels where they hadn't previously shopped. The latter phenomenon bears watching, noted Burt P. Flickinger III, managing director of Strategic Resource Group, New York.
- 3. In terms of serving value shoppers, what we're seeing is Aldi on a multinational level and WinCo on a regional basis doing the best job, Flickinger told SN. Flickinger likened recent price skirmishes between Aldi and Wal-Mart in the U.S. with Aldi maintaining a price advantage on items such as canned vegetables despite aggressive Wal-Mart rollbacks to their battles several years ago in Germany. That, he said, ran Wal-Mart off the continent and cost them millions. While Wal-Mart isn't exactly in the same danger in the U.S., Flickinger said that small stores like Aldi, which can be more convenient to shop and offer the absolute best value, are winning value shoppers today vs. other vehicles. As we interviewed more and more shoppers at Aldi parking lots, they told us they couldn't afford to shop at Costco or BJ's where they have to pay for a membership, and they can't afford to shop at Wal-Mart for everyday low prices when Aldi's got everyday lower prices, he said. Successful conventional supermarkets are those that detected the developing taste for value in shoppers early and adjusted accordingly, sources said. Those with a reputation for providing everyday value going into the recession have fared considerably better than rivals who did not, as evidenced by same-store sales struggles of such chains as A&P and Safeway both of which have hastily instituted everyday-low- price programs in recent months.
- 4. The Techno Consumer May 10, 2010 12:00 PM, By JON SPRINGER THE RISE OF TECHNOLOGY as a social force is transforming society on multiple fronts, and grocery shopping is no exception. Retailers who are to be successful today need to be quick to understand how those changes are affecting shoppers and how to cater to shoppers increasingly influenced by technology, observers say. Traits: Carries coupons on her cell phone; sees the Internet as a primary shopping destination. Habitat: Facebook, Twitter and other dot-coms. Take, for example, how technology has transformed the grocery store stalwart, the coupon clipper, which has followed coupons from their old home in Sunday newspapers to the new frontier of the Internet. The coupon clipper is no longer someone sitting on at their kitchen table clipping, they're on the Web surfing, said Dave Marcotte, a consultant with Management Ventures, Cambridge, Mass. That's a very different activity, and one we might not understand everything we need to know about yet. The clipper has been swept up in a move toward the Internet that is changing just about everything and offers the potential to make a techno-shopper out of anyone. According to the How Americas Shops 2010 Megatrends Survey from WSL Strategic Retail, online shopping has taken a great leap forward. Once all about convenience and selection, the Internet has become the go-to channel to find the lowest prices and coupons, the survey noted. And while the supermarket and mass merchandiser are still the top channels for women to shop weekly (they are each visited by 64% of women weekly, according to WSL) the Internet is now No. 3 with 24% of women shopping there weekly. That's up from 10% in 2008. The growth of the Internet is not surprising. The growth of broadband access brought millions of homes into the fold. And today, growth is sparked by mobile smartphones with Internet access and new capabilities. This easier access to the Internet will make cyberspace about so much more than buying. It will play a larger role as the place where people go to find coupons, promotions, lowest prices, information they trust all at their fingertips, the Megatrends study said. This is forcing traditional retailers to rethink how they communicate, connect and sell every day.
- 5. Similarly, retailers should look to crafting a Web presence that isn't just an added convenience but a strong store on its own, the report added. A retailer's website cannot be an add-on. It will become the No. 1 store, the most profitable store, and in many cases the flagship store. A number of supermarkets have been actively courting the newly wired (or unwired) shopper. ShopRite, Keasbey, N.J., this year launched an iPhone application allowing shoppers to easily browse its weekly circular and provided a widget to report the deals on a blog or social network. Food Lion, Salisbury, N.C., is installing kiosks at stores to provide custom coupons for shoppers using their loyalty card. A&P, Montvale, N.J., has recently taken to offering shoppers coupons via text message and applying the discounts to frequent shopper cards automatically. This aligning of shopper with particular data to relevant offers helps to craft a personalized shopping experience that technology affords, sources said. Think of everything in the store as an IP address and everything communicating back and forth, that's Internet cloud technology, Marcotte said. You have a store cloud and a corporate cloud and have intersection points for vendors, where you can open up your cloud for six coupons of their choice. That whole couponing thing is suddenly very different. That's really a big change. While a need to cater to technology-assisted shoppers is self-evident, solutions are not necessarily obvious. Examples can be found nearly every day on the Facebook site of Food Lion, which caters to its fans on the social networking site by making offers of text-based coupons. The comment field, however, frequently fills with unhappy shoppers for whom text messages cost what they might otherwise save, or don't have devices that can get them such offers.
- 6. The Health and Wellness Shopper May 10, 2010 12:00 PM, By JON SPRINGER JAY JACOBOWITZ has a word of advice to grocery stores considering targeting the health and wellness shopper: Do it already. Traits: Concerned about preventative care; taking personal responsibility for own health. Habitat: Organic and natural retailers, and conventional chains like Hy-Vee that take a proactive approach to nutrition and wellness. If you are not going to have a health and wellness initiative in your operation, you're going to miss the boat,� Jacobowitz, president of Brattleboro, Vt.-based natural products consultant Retail Insights, told SN in a recent interview. You cannot be on the wrong side of this issue. That's the direction that food is going in. Jacobowitz supports his contention by citing figures illustrating natural and organic foods which currently comprise only about 6% of the total retail food market growing by around 8% annually, vs. 1% growth for all conventional foods, over the last 30 years. If you extend those trend lines out the next 30 years, writ large, he said, food with good ingredients become half the industry. The good news, Jacobowitz notes, is that all that growth is pretty much up for grabs, which is why retailers need to develop strategies to capture the shopper motivated by health and wellness, and understand the forces that are driving that growth. If you take a look at the 40,000-foot view and fly over, you'll see overall food sales are around the flat line, but as you segment to the good ingredient side you'll see robust growth, Jacobowitz said. As you move down to ground level and walk into the store, you'll see the battleground is very messy and lines are blurry. Everyone is in the game. And the battle is going to be bloody and messy. Market share for health and wellness is up for grabs. Some chains are making aggressive plays for it. Sprouts Farmers Market, a fast-growing natural chain based in Phoenix, is focused on capturing natural and organic growth where it happens with consumers making the switch from conventional foods and conventional stores, according to Doug Sanders, president and chief operating officer of the 44-store chain.
- 7. The percentage of the consumer base that are actively seeking a healthy lifestyle has increased in the last two to three years, Sanders told SN in an interview. We kind of position our company as a transitional market for people who want to get into a healthy lifestyle but don't know how to do it. Sprouts, which was founded in 2002, tended to draw an older health food shopper base in its early days, Sanders said. Today, it's really become more accepted among all age demographics. We have families shopping, kids, adults. It ranges from someone living a full-on healthy lifestyle to someone who's just wanting to learn more about it to someone who's just shopping for produce. A growing awareness of health care and of health care's cost is among the major factors influencing consumers to shop for food with health and wellness in mind, observers said. The trend that's really taken off in the last year is the idea of the consumer taking a personal look at the whole idea of health care, asking themselves: How am I personally responsible for my own heath care? Sanders said. I think we are seeing a more proactive approach to staying active and staying fit that centers around diet and exercise. So we're seeing a big influx of interest in shoppers interested in getting a healthy lifestyle, improving their diet and wanting to know more about food.
- 8. The Underserved Consumer WHO ARE underserved consumers? Traits: May be from low or middle income; lacks cars. Habitat: Both inner-city and rural communities. The underserved, who have attracted a great deal of attention this year as part of the national debate on obesity, are people who live in so-called food deserts, which are communities that lack proximity to a supermarket and its fresh food offerings. According to the U.S. Department of Agriculture, about 23.5 million people in the U.S. live in communities that are more than one mile from a supermarket or large grocery store. Food deserts are stereotyped as low-income urban neighborhoods with largely minority populations. But many underserved areas exist in small-town, rural communities and even suburban communities, with substantial Caucasian populations. Pennsylvania, for example, is dotted with small underserved towns of mixed incomes and ethnicities. Overall, though, people of color, primarily African Americans, are more likely to live in a food desert, especially in urban areas, said Mari Gallagher, principal of Chicago-based Mari Gallagher Research and Consulting Group, who has written extensively on the food desert issue. In Chicago, where Gallagher has studied food desert conditions, 609,034 people lived in those neighborhoods in 2009, 23,940 fewer than lived there in 2006 when she conducted her first study. Of the 2009 total, 478,300 (78.5%) were African American, 56,863 (9.3%) Hispanic and 78,592 (12.9%) white. In California, with its heavier Hispanic population, food desert communities have a primarily Hispanic makeup. For example, in South Los Angeles, where Fresh & Easy Neighborhood Market opened a store in February, the consumer base is 90% Hispanic, said spokesman Brendan Wonnacott. The neighborhood had been in need of more fresh food options for generations, according to a Fresh & Easy release.
- 9. Fresh & Easy, based in El Segundo, Calif., opened a store in downtown Fresno, Calif., another underserved community with Hispanic residents as well as daytime businesspeople, in January; it was the area's first grocery store in two generations, said Wonnacott. The chain, a division of U.K.-based Tesco, first entered a food desert area in February 2008 with a store in Compton, Calif., which has a mix of Hispanic and African American consumers. We're opening stores in all types of neighborhoods because we fundamentally believe everyone � regardless of where they live deserves access to quality, fresh food at affordable prices, said Mary Kasper, vice president and general counsel, Fresh & Easy. Fresh & Easy does not significantly alter its approach small-format, low-price, focused on private label and prepared meals by neighborhood or demographic, said Wonnacott. However, the chain does modify an individual store's merchandising and quantity of some products, based on location. In a Hispanic area like South L.A., a Fresh & Easy store would stock produce geared to that population such as chayote squash, he noted. To further support the South L.A. community, Fresh & Easy held a job fair that attracted hundreds of residents, said Wonnacott. The company also partnered with L.A. City Councilwoman Jan Perry, who helped enact a moratorium on new fast-food establishments in the area. Earlier this year, the Baltimore Health Department started the Virtual Supermarket Project to bring fresh foods to two underserved neighborhoods through a partnership with Santoni's Supermarket (see New Online Programs Target Food Deserts, SN, April 5, 2010). Health department staffers at two local libraries help residents place online orders to Santoni's, which delivers them to the libraries the next day.
- 10. The Indulgent Shopper May 10, 2010 12:00 PM, By ELLIOT ZWIEBACH THE INDULGENT consumer can be a boon for supermarkets — when she's not shopping at Costco or Whole Foods. Traits: Doesn‟t pay attention to price; doesn‟t use coupons; willing to splurge. Habitat: Costco, Whole Foods, higher-end supermarkets. Indulgent shoppers are “the sweet spot for supermarkets,” said Jonathan Ziegler, an analyst with PUPS Investment Management Co., Santa Barbara, Calif., “because they buy items with higher rings and certainly higher margins. And they are likely to make ancillary purchases to go with the higher-end merchandise they've already picked out.” What is “indulgent” is all in the eye of the beholder, he added, “and it cuts across supermarket formats. Someone might indulge for a party or to fulfill his own whims. It's about buying something over and above the most basic item. “Indulgence could also refer to someone switching to filet mignon from hot dogs every so often, or someone who buys high-end wine instead of „two-buck Chuck‟ at Trader Joe's or someone buying flowers every couple of days.” There are fewer indulgent shoppers patronizing stores of late because of the weak economy, Ziegler said. “When the economy was better, there were more indulgent shoppers because people felt better about spending.” Supermarkets do devote some of their advertising dollars to these shoppers, he added. “They would be remiss if they didn't advertise to the indulgent customer by including higher-priced perishables in their ads, or flowers, or Scotch or upscale wines.” Bill Bishop, principal at Willard Bishop, Barrington, Ill., described indulgent shoppers as “24-karat customers.”
- 11. Although they comprise only a small segment of the buying public — probably less than 10% — “they have to be identified carefully because they have the money and the ability to spend more than other shoppers,” he said. “Frankly, it's a really important group for the upscale market segment and the mainline supermarket operator who wants to hold onto a good swatch of business rather than see it move to Whole Foods,” Bishop pointed out. With Whole Foods' sales rising, “it would seem the indulgent shoppers are spending more of their money there, and spending it faster,” Bishop noted. “For that segment, spending is truly discretionary.” But those indulgent shoppers can be retained by conventional operators to keep them from moving over to Whole Foods, Bishop said. “Only about 5% of shoppers do most of their spending at Whole Foods, which means 95% of shoppers only go in for something special. So mainline retailers don't need to spend a lot of money to get more business from the indulgent consumer.” One researcher said these types of consumers actually spend less money than other groups in the supermarket, however. “These are people who spend less than the average group in the supermarket — only about $5,700 per year,” said Mack Hoopes, lead investigator for the “Shopper Perspectives” study issued annually by Henkel Consumer Packaged Goods Co. North America, based in Phoenix, which calls this type of consumer the “carefree” customer. That figure was up $300 last year compared with 2008, however — apparently the result of the carefree shopper eating out less and buying more food products from supermarkets to eat at home. Indulgent shoppers tend to shop two times a week, and particular retailers attract this type of shoppers, such as Costco, Hoopes told SN. In fact, “carefree” shoppers account for approximately 50% of Costco's revenue, he said. The people who can be characterized as indulgent or carefree are not the biggest earners, Hoopes pointed out. “About 6% of them make only $10,000 a year, so their attitude is not based on income,” he said. “While the traditional wisdom says people with a lot of money spend more on indulgences, our data says money has nothing to do with it,” Hoopes explained. “They just buy what they want to buy. “They don't have time to shop or read ads — for them it's all about a tradeoff between time vs. energy.” In addition, these shoppers do not use coupons, Hoopes told SN. “In fact, they won't be caught dead with coupons. And if they buy something on deal, it's by accident. They buy what they want when they want it.”
- 12. The Convenience Shopper May 10, 2010 12:00 PM, By MARK HAMSTRA IN THE food-retailing universe, Wal-Mart Supercenters are often cited as the antithesis of convenience big, sprawling boxes of 100,000 square feet or more located on the outskirts of population centers. Traits: Wants to get in and out of the store quickly. Habitat: Small-format stores; shopping online. But the Supercenter is not the only weapon in its arsenal. In addition to the Neighborhood Market banner at an easier-to-shop 40,000 square feet the company has begun testing some even smaller prototypes, and recently hinted that more stores like the Wal-Mart Marketside format could be on the way. In the United States, we have considerable opportunities in major metropolitan markets, with innovative new formats and by making our existing assets more productive, Michael Duke, chief executive officer, said in Wal-Mart Stores' annual report to shareholders, which was published last month. Many industry observers took the innovative new formats comment as a reference to Marketside by Walmart, a chain of smaller, convenience-oriented stores that debuted in the Phoenix market in 2008. The four stores, measuring about 15,000 square feet each, have a more upscale feel than the chain's supercenters and have a strong focus on prepared and convenience foods. Some analysts question whether Wal-Mart will seek to expand the concept further it put expansion of the format on hold last year but smaller, convenience-oriented formats have now become part of the portfolio of many major food retailers, especially as small, limited-assortment stores like Aldi continue to expand. Tesco's commitment to the Fresh & Easy Neighborhood Market format, a 15,000-square-foot concept with 159 stores in the Southwestern U.S., illustrates this focus on the convenience-oriented consumer. Sir Terry Leahy, CEO of London-based Tesco, said the concept appeals across economic groups and age groups, with its limited assortment, easy-to-shop format, prepackaged produce and focus on prepared foods. Bill Bishop, chairman of Willard Bishop, Barrington, Ill., said increasingly convenience is measured by the ease in which a store may be shopped.
- 13. I think convenience used to be thought of as proximity to home or work, or how easy it is to get in and out of the parking lot, he told SN. But today I think convenience is also influenced by the size of the store, and how long it takes to get through the store. That can include things like the checkout speed, and ensuring that the product selection is optimized and is in-stock. Trader Joe's, for example, has a strategy for expediting checkout when lines begin to form, which adds to their convenience, he noted. They know how to take care of that, and you don't find that in too many places, Bishop said. He also said having self-checkouts Fresh & Easy uses self-checkouts exclusively, with personnel on hand to assist is important to imbuing a sense of convenience in the supermarket. Handheld scanners such as those used by Food Lion's Bloom stores and tested by Ahold's Stop & Shop chain are another example of checkout technology that seeks to make the shopping trip more convenient, Bishop noted. The increasing use of online ordering and in-store pickup also adds convenience for shoppers, he pointed out. Merchandising commonly purchased products like bread and milk near the front of the store is another initiative supermarkets should consider to appeal to what Bishop called the �hit-and-run� shopper. Most supermarkets have done a good job putting cold beverages near the front of an end-aisle display, but there are still not that many that do a good job of putting things like bread and milk at the front,� he said. I'm afraid the philosophy is, Why don't we go ahead and make them walk so they can find more stuff to buy. Well, there are a lot of places where you don't have to do that any more.�
- 14. The Channel Surfer May 10, 2010 12:00 PM, By MARK HAMSTRA AS THE NUMBER of food-retailing channels has proliferated in recent years, consumers are finding it easier and easier to become channel surfers. Traits: Has money to spend; seeks diverse experiences. Habitat: Any retailer that can meet a specific need. Recent data from SymphonyIRI, Chicago, show that 55% of consumers shopped for grocery products at 10 or more places in the last year. One of the things that has always intrigued me is that the people who spend the most tend to shop the most places, and I don't think that's always appreciated, said Bill Bishop, chairman of Willard Bishop, Barrington, Ill. I think the most important shoppers have a much greater tendency to shop multiple places. While some channel-surfers might also be cherry pickers seeking out the best deals, many are also looking for specific niche products that might only be carried by certain retailers. These are people who search out special reasons to use what otherwise would be a niche retailer, Bishop explained. People who find the special reasons for using Amazon, those are also people who might find a reason to use a limited assortment store. They spend the effort because it is worth their while, he said. For the bigger spenders, it is worth more of their while to do that. The best way to capture more business from these shoppers is through having a diverse offering and leveraging the Internet to allow more personalization of the shopping experience and a more robust product offering, Bishop explained.
- 15. A number of retailers have websites that allow customers to get regular announcements when the items they are purchasing are on sale, he said. In addition, offering an expanded product selection online might help prevent channel erosion and retain more shopping trips, he explained. One such operator that does this is Wakefern's ShopRite, which offers a selection of sharply priced home appliances and other general merchandise through its website, ShopRite.com, that allows customers to either have them delivered to their homes or to their local store for pickup. Merchandise offered includes sewing machines, patio umbrellas, video-game hardware and other items normally not sold inside ShopRite stores. The website is provided by MyWebGrocer, a turnkey provider of supermarket Web services. Bishop related a story about how he became more of a channel surfer when a type of cookie he wanted was no longer carried in his local supermarket, but he was able to find it through Amazon.com. If the retailer had said, If you can't find what you want, check our website, and then had a robust answer to that, we would have never gone to Amazon, he explained. A report by WSL Strategic Retail showed that women have been shopping fewer channels during the recession, and making fewer shopping trips per week. Women made about 3.9 total shopping trips per week in a recent three-month period and shopped at an average of 3.7 different outlets, according to the Shopping Trends 2010 survey. In that three-month span, women shopped 8.2 different channels, vs. 8.6 different retail channels in 2008. Women are trying to live within their budget which means resisting the temptation to stock up if they can't pay for it. Stocking up less means more trips to replenish, and going to more stores to find the best sales and the lowest prices, WSL said in its report. Therefore, the new, smart and thrifty shopper is making more trips in a week to more stores. Recent survey data from Retail Forward, part of London-based Kantar Retail, show that supermarkets were able to increase the number of visits from customers in the last year. Increasingly, shoppers are being drawn back to the supermarket in large part because of the strong price/value/quality proposition and aggressive pricing by leading chains as well as a growing roster of supermarket formats, Retail Forward wrote in a recent report, noting that shoppers reported an increase of 2.4 percentage points in weekly visits to supermarkets and an increase of 3.2 percentage points in monthly visits.
- 16. The Ethnic Shopper May 10, 2010 12:00 PM, By ELLIOT ZWIEBACH ETHNIC SHOPPERS come in many nationalities, though Hispanic consumers from a variety of countries south of the U.S. border are the most common, with Asians a distant but potent second. Traits: Fast-growing population; tends to eat at home often. Habitat: Often prefers mom-and-pop stores, or small chains that have created bonds with their communities, or Wal-Mart. What's exciting for retailers, for the most part, is that ethnic shoppers spend more time eating at home, with most of the 21 meals a week eaten at home by ethnic consumers and they tend to have more people around the table for each meal, Bill Bishop, principal at Willard Bishop, Barrington, Ill., told SN. With Hispanic and Asian populations continuing to show major growth, the ethnic market is a huge and growing segment, Bishop added. Ethnic shoppers generally fall into three groups, Bishop pointed out: those who have just come to the U.S.; those who are in transition; and those who are fully acculturated. Yet much of their business especially among the first two groups tends to go to mom-and-pop stores, Bishop noted, because there are only a small number of American retailers that do a good job serving their needs. Wal-Mart is one that comes to mind in many categories in many stores. Some Hispanic-oriented chains are not mom-and-pop stores but they are not mainline grocery stores either, Bishop said. They are basically ethnic stores that serve specific populations, he explained.
- 17. According to Jonathan Ziegler, an analyst with PUPS Investment Management Co., Santa Barbara, Calif., a conventional store that offers ethnic merchandise may not fit the needs of all ethnic shoppers. To many Hispanics, a store like Gigante was too Anglicized for them, he explained. To some degree it depends on how long a shopper has been in this country. Second- or third-generation ethnic shoppers are more likely to go to a conventional supermarket for ethnic foods if the supermarket in their area stocks merchandise to appeal to that segment. With Hispanics becoming the majority population in California, most supermarkets carry large ethnic selections as a way to broaden their appeal, Ziegler noted. Some large traditional chains that have opened formats specifically targeting Hispanic consumers include Lakeland, Fla.-based Publix Super Markets, which has opened four Sabor locations in Florida. The stores include bilingual ads and product information, and an expanded selection that includes a larger variety of Caribbean, and Central and South American products. Hispanic products are integrated throughout the store. Many smaller mom-and-pop ethnic stores, or smaller supermarket chains with an ethnic orientation, are able to survive adjacent to larger conventional supermarkets because the owners of the smaller stores have bonded with the neighborhoods, Ziegler said. They carry items a supermarket chain won't carry, or they drill down to offer more basics. They go for more authenticity, and they have a greater understanding of the unique products preferred by the ethnic group because the owner is generally closer to his own roots than anyone at the supermarket, regardless of whether the supermarket has hired nationals from that ethnic group to run its stores. I'm not sure how many store managers are as in touch with the ethnic groups in their communities the way the owners of the mom-and-pop stores are. It's just a more personal touch. The smaller operators can exist side-by-side with the chains because they are not mutually exclusive, Ziegler pointed out. The chains probably get good ideas from those ethnic stores to determine their own product mix. According to a study of ethnic consumers by a CPG company, Hispanic mothers are focused on food quality and value, with an overriding interest in serving whole foods and made-from-scratch meals for their families. For some companies, Hispanic marketing is viewed as just a line item within a brand or company budget, the study said, with a misguided approach of taking the English version [of a marketing effort] and running it through the Google translator. The study also said some companies make the primary mistake of waiting for consumers to assimilate, rather than actively finding ways to connect meaningfully with them now.
- 18. The Green Shopper May 10, 2010 12:00 PM, By MARK HAMSTRA SHOPPERS CONCERNED about the environment would like to know that the retail store where they buy their food shares their concern. Traits: Skews younger and more upscale; concerned both about the environment and their health. Habitat: Whole Foods, farmers markets. That's why when Hannaford Bros. opened its first LEED (Leadership in Energy and Environmental Design) certified store in Augusta, Maine, last year, it dedicated a large area near the entrance to educating consumers about its environmental efforts. Some green shoppers are impressed with the outward expression of environmental initiatives the fact that a store uses solar panels to heat 80% of its water, for example, said Bill Bishop, chairman of Willard Bishop, Barrington, Ill. If you go in an Aldi store, they have detailed explanation about why everything refrigerated is behind glass or plastic, and you are much more forgiving when you know it is for a good cause, he said. In Fresh & Easy, the employees are very knowledgeable about how they use LED lights to save energy, and they can tell you that the light switches go off in the back room when they are not in there. Such initiatives lend a positive aura to supermarkets, Bishop explained, although he added that he does not think supermarkets are receiving as much credit as they could for making these efforts. One of the best opportunities might be to figure out ways to communicate that to the customers, because a lot of us are doing more than most people realize, he said. He also noted the overlap between consumers interested in buying local and organic products and those interested in other green activities.
- 19. At the Hannaford Bros. LEED location, employees were given extensive training about the various energy- friendly design elements there, such as its elaborate, environmentally sensitive cooling systems and its use of recycled materials. To educate consumers, the store includes a detailed display at the front of the store, divided into sustainability initiatives surrounding people, product and planet, which coordinates with the sustainability theme of the chain's Brussels-based parent company, Delhaize Group. Everything that we educated our associates on, our customers have at their fingertips as well, Ruben Lemelin, the store's manager, explained to SN when the location opened last year. The chain also sent out printed material explaining the store's environmental sustainability efforts with its ad fliers when it first opened and gave out some 60,000 reusable bags to increase awareness. In addition to the extensive display near the store's entrance, customers are also encouraged to visit an area on the chain's website that includes educational information about the store. With about 77% of consumers saying they make at least some green purchases, it's clear this is a large group with broad demographic characteristics. The group tends to be born after about 1950, surveys suggest, and is likely to be more affluent than the average consumer. Knoxville, Tenn.-based Shelton Group, an ad agency that specializes in green products, conducted a survey last year of green consumers and divided them into two mindsets, based on their devotion to the green cause. The Engaged Green Mindset is marked by optimism, extroversion and a propensity to try new things and is more likely to respond to themes of innovation and possibility, wrote Suzanne Shelton, founder, president and chief executive officer of the Shelton Group. The Mainstream Green Mindset is more pessimistic, introverted and apt to like things known and tried responding to themes of security and reliability. The Shelton Group study, called Green Living Pulse, suggested that the key to reaching green consumers is to make an emotional appeal, rather than laying out a scientific rationale for choosing green products.
- 20. The List Maker May 10, 2010 12:00 PM, By ELLIOT ZWIEBACH CONSUMERS who plan their shopping trips with a list of what they want to buy can pose a challenge for supermarkets, which count on point-of-sale displays and other in-store features to generate impulse buying decisions. But these consumers can be prompted to buy more than they planned, observers told SN. Traits: Plans shopping trips carefully; aware of best deals; on a budget. Habitat: Supermarkets that provide reliably low pricing. These are people who pre-shop by studying ads, coupons and websites, the ones who make their decisions before they get to the store, said Mack Hoopes, lead investigator for Shoppers Perspective, an annual study by Phoenix-based Henkel Consumer Packaged Goods North America. He said Henkel's categorization of shoptimizers parallels SN's planner/list-maker designation. As the economy has weakened, the number of list makers has been increasing, Hoopes pointed out. Given all the planning they do, they usually shop more often up to four times a week � so they provide a great opportunity for grocers to figure out what they want and then try to sell it to them.� One of the biggest surprises in his research, Hoopes said, was finding that list makers do not fall into any single demographic. You can't categorize them by income, age, generation, size of household or ethnic origin. They are people who think of shopping as a sport or a game they like to spend time playing, he explained. They are people that read and compare ads, in print and on the Web, and who spend a lot of time planning their shopping trips, and they may be the most savvy shoppers. Their lists may indicate when an item is on sale and what the price is, and they know what they can save with coupons or loyalty cards.
- 21. Supermarkets who hope to attract the list makers must get them into the stores to expose them to the store's pricing or product offerings, Hoopes noted. For example, Kroger has been able to gain not only the trust of these shoptimizers but also to retain their business over the last year with good pricing. The first thing a retailer needs to know is, what categories are important to this shopper. The list maker listens to all ads, looks for all coupons, pays attention to in-store displays, and he's looking for price reductions. He has his ears and eyes open all the time. Bill Bishop, principal at Willard Bishop, Barrington, Ill., said planners and list makers are the most rapidly growing consumer segment. Making a shopping list is the behavior that's most universal in terms of its benefits, he told SN. If you are well off, it's a smart thing to do; and if you're struggling financially, it has a high return. But the real significance of this group for me, which is not always obvious, is that retailers have to find ways to influence decision-making before the shopping trip by moving beyond tools like print ads that they rely on heavily now. That means, to a large degree, moving to the Web � and this planning and list-making behavior plays very naturally into the spreading popularity of the Web. In fact, several retailers make it easy to make a shopping list, including Festival Foods in Wisconsin, whose website keeps track of previous purchases to help formulate future shopping trips, and Giant Foods of Carlisle [an Ahold division], whose website allows you to put together a personal shopping list to help you keep track of what you need. Jonathan Ziegler, an industry analyst with PUPS Investment Management Co., Santa Barbara, Calif., said list makers are very organized and very anal and when they run out of something, they write it down on their shopping list immediately. They may make a list because they're on a budget and they believe the list will help them spend no more than their budget permits, though it's doubtful that ends up being the case. Items are usually added to the list for one of three reasons, he said: the household runs out of an item; someone sees an ad on TV for something they want to try; or coupons for particular items fall into someone's hands. List makers are apt to follow their lists pretty closely, Ziegler added, but if the market is doing its job, then point-of-purchase programs tie-in displays, in-store sampling, multiple-buy offers, promotions or other inducements are likely to prompt even list makers to beef up their market basket and buy more than what was on their list. Those additional purchases round out a store's sales, Ziegler said. Someday, he suggested, shopping lists could be delivered by consumers via cell phones to the supermarkets so the stores will know what kinds of items to stock because the more the supermarket knows about planned purchases, the more prepared it can be.