The iPod Shuffle

The grocery industry looking to dial up the competition

CHICAGO -- At FMI Speaks 2005, the opening session of this year's FMI Show in Chicago, Michael Sansolo, senior vice president of the Food Marketing Institute (FMI), said there is no easy message, no three-word clich a, no call to action that will work for everyone in the room to guarantee success in the grocery business. The industry we have today is more complex, more different, more changing, more challenging than we have ever seen in the past. We live in a world where every trend seems to have a contradictory trend.

But he did offer up a symbol of [image-nocss] the current climate the supermarket industry and retailers in other channels are facing. He held up a small white box. He said the grocery industry needed to be like that white boxan Apple iPod.

By allowing the listener to store thousands of songs and shuffle them in any order, the now-ubiquitous successor to the Walkman has created a new set of rules for how consumers are able to listen to music, much to the dismay of radio stations nationwide. Listernership is dropping because of factors such as the iPod. But now radio stations are loosening their formats and shuffling their playlists to emulate the eclectic mixes of the iPod users.

This translates to the supermarket businessand, in fact, to the convenience store business and any retail businessin that while we talk about the importance of niche and distinction and focus, we have to understand that these shoppers are confusing people. They've never been easy for us to [classify and anticipate their needs and habits]. We've got to find ways to excite them, give them something new, different, that helps them get through their day, said Sansolo.

Other channels still dog supermarkets, but FMI members say they are more worried about supercenters, new supermarkets, warehouse clubs, dollar stores, natural/organic stores and ethnic stores than they are about c-stores. But the grocery industry seems to be moving more toward a convenience store model, despite that ranking of concern.

Small is big and big is still big. The average size of a U.S. supermarket has hovered roughly around 45,000 square feet for several years: 44,072 (2000); 46,760 (2001); and 47,500 (2002). But new stores were significantly smaller: 34,000 (2003). But did anyone anywhere notice the decline in big stores? There seems to be as many superstores and supercentersas ever. So how did the number come down?, Sansolo asked.

The answer: If you look at the current universe of supermarkets, only about 2% qualify as small stores. But in [FMI's] survey, nearly 15% of the stores opened in 2003 and 2004were small stores, he said. And those stores fit into three distinct niches: Hispanic, gourmet and organic.

So there are retailers who, as the market is producing larger stores, more emphasis on convenience, more emphasis on one-stop shopping, we have a tremendously successful subsegment that is opening up and looking at smaller stores, said Sansolo. They are just attacking certain niches, and serving the daylights out of them, and letting somebody else take the rest of the shopping trip.

Jeff Noddle, the chairman, president and CEO of SUPERVALU Inc., Minneapolis, and the newly elected FMI chairman, said Smaller store size means operators are focusing their offering better.

And the supermarket is no longer the place we go to buy food. Sansolo said, Numbersshow there is a continuing erosion in the percentage of trips for food that are owned by the supermarket channel. Supermarkets are still dominant, he said, and shoppers say they will go to a supermarket most of the time, but a lot of shoppers are going to other formats. And much of the population is young enough to have grown up in this era of channel blurring.

When asked what would make the supermarket better, and get them to go to that primary store more often, consumers surveyed by FMI said get me in and out of the store faster, Sansolo said. They are time poor, so they are looking for faster checkouts, quicker stops.

He cited new models such as Food Lion's Bloom, where the store is dedicated to a quick shopletting the consumer come in and go out very fast, grab just a couple items and move. Understand that convenience can be a sales point.

When asked what would get shoppers to use their secondary store more, low price was the main motivator. Fast checkouts, more specials, better meats, better produce, better employees and better location followed in diminishing importance. Not that long ago, location, location, location were the three most important reasons to shop the store. And it still matters. Because convenience matters. And there are so many ways that location comes into that. But in so many other ways, distinction matters, Sansolo said.

Concerning retail gasoline, he said, Obviously, the gasoline business is a truly difficult business to be in at the momentbut there are companies that are finding it a great tool to give the shopper one more reason to come to my store,' not your store'.

Click here for an executive summary of FMI Speaks.

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