Channel Report: Supercenters

The sinking economy has marketers looking for a life preserver to keep them afloat until the tide turns, and a recent report by Information Resources Inc. (IRI) indicates that CPGs have found some success in supercenters, showing "sizable share gains over the past year across every major CPG department." Those gains came from all household-income groups -- and the changes in purchasing patterns are expected to hold up even after the economy improves."In the past year, we've seen a big shift in spending toward supercenter stores," says Sheila McCusker, editor of IRI's "Times & Trends" report, where the study was reported in July. These gains are significant, after three years of relatively flat market share for supercenters, she notes. The stores also are gaining across all economic levels, including upper-income households. "That's a huge finding," she says. "Especially in the past two quarters, supercenter stores have gained at all income levels, and that's a huge shift." (For more specifics, see the charts at right.)The study by the Chicago-based company reported data from 100,000 consumers, who tracked their purchases in the 52-week period ending June 15, 2008. They used home scanners provided by IRI and logged where the purchases were made. That approach ensures the data encompasses all expenditures, McCusker notes, including those at supercenters, club stores, dollar stores as well as channels better represented by P-O-S scanner data. The pounding from gas prices, financial losses, housing doldrums, energy costs and more has consumers rethinking their shopping patterns, looking to conserve gas (one long trip or several shorter ones?) and money (spend more to stock up and avoid eating out?). The survey indicates that the economy has impacted behavior at every income level -- such that cost is a bigger factor than convenience at all levels, McCusker says."Even at the highest income levels, consumers are making tradeoffs in what they're buying," she says. "Even upper-income people say they're struggling to afford their groceries because they're getting hit with increases from all sides."The category hit hardest by supercenters' growth has been food marketing, says Bill Greer, director of communications for the Food Marketing Institute in Washington, DC. "Supercenters have caused a major competitive impact on food in particular, because they can offer a wide range of products at a low cost," he says. "They've gained a significant market share, particularly at this difficult economic time. The lower cost of food they can offer is an attractive proposition."Merchandising Stays the SameEnsuring merchandising pieces reach the floor in supercenters seems to provide a spike, but meeting retailers' needs creates challenges as in any other channel, notes Gina Cabrera, merchandising manager at Imation Inc. in Cerritos, CA. "Some are more stringent about specifics than office superstores, but it depends on the company and the type of promotion," she says. "Sometimes they allow us to be creative and do our own branding. Other times, in the same store, they give us a template and we have to meet their guidelines, but we can be successful both ways."Imation produces mostly account-specific items by working closely with buyers, Cabrera adds. But in many cases, the buyer for both the traditional mass-merchant store is the same as for the supercenter stores (although she sometimes works with more than one buyer based on where in the store the products are sold). The buyers often have A, B and C stores, with some of the higher-volume traditional stores being grouped with supercenter stores in the A group. "The breakdown usually is by volume," she explains. In the larger-volume stores, the floor space could be different or the load-in quantities will vary, especially if a larger footprint is available.As a result, for some categories, display pieces don't differ from what supercenter retailers request for their traditional stores. "For toys, there's really no difference," says a marketer with a major toy manufacturer who wished to remain anonymous. "There are different traffic patterns, so placements may change. But the footprint is no larger, so we don't use different merchandising."Kara Buckley, global external relations manager for Venus razors at Procter & Gamble in Cincinnati, agrees. "We've found that if there are differences in needs here, it would likely be in terms of the total volume of displays vs. the size of displays."In other categories, notably consumables, marketers report making adaptations.Although it's difficult to specifically characterize a supercenter customer, Imation's Cabrera notes the stores tend to devote more space to impulse products, such as the company's blank-media lines. "Grab-and-go products work very well with supercenter store displays."Peggy Collins-Polovich, director of global marketing at Energizer Inc., St. Louis, agrees supercenter stores work well for impulse and "prompted" products -- those purchased if consumers are reminded of their need. "You have to think differently about where you place displays and how you can capture both stock-up and fill-in customers," she says.Targeting MindsetsEnergizer's shopper research led to a reorganization of the battery category for the supercenter channel, Collins-Polovich notes, using information about consumer mindsets. Customers only are willing to spend a certain amount of time shopping, she explains, so if displays help the decision-making process move faster, they are willing to make more decisions -- and buy more. "If you can help them make a choice that is right for them, they have time to buy other products. Organizing the category by shopper needs will sell products better than putting up price stickers." Energizer also determined that high-tech batteries sell well not only in the electronics department, but also in the supercenters' book aisle -- because customers there have a different goal and browse longer. "It's not about just throwing things out there today. The mindset differs between retailers and even aisles."Supercenters also provide more opportunities to reach female shoppers, due to their customer mix skewing that direction, presumably because more women shop for groceries. Imation has created more display pieces to target that audience for supercenters, especially Super Target stores, since Target's traditional stores target women more often, Cabrera notes. "Women are becoming more popular in our merchandising message as a result," she says.Supercenters maximize their layouts more than other channels do, especially for healthcare products, notes IRI's McCusker. "Many of them have developed healthcare as a destination," she says. They position the pharmacy at a central location, with adjacencies for associated healthy food and beverages as well as OTC drugs. "Supercenters are doing a great job of leveraging their layout to create growth platforms." Understanding the Shopper Health concerns offer other channels key ways to regain customers, notes FMI's Greer. Linking to the pharmacy, promoting organic foods and hiring dieticians help add services customers want and can't get elsewhere. "Each store has to know keenly who its customers are and respond to those needs." Indeed, the IRI report suggests that competing channels must "get ahead of shifting shopping patterns through monthly tracking of trips, trip types and share shifts." It also suggests finding ways to "maximize every visit to the store through assortment and merchandising aligned with high-priority trip types" and "implement multi-unit promotions in categories with relatively low price points."Marketers, meanwhile, "need to re-evaluate current channel investments and distribution strategies to tie to shifting shopping patterns." The report notes, "Competing retailers require targeted, market-level competitive strategies vis-a-vis supercenters."The challenge presented by supercenter stores won't go away, even as the economy revives, notes McCusker. "Some customers, especially high-income ones, who have more options, will go back to their earlier patterns," she suggests. "But not all of them will. Supercenters are opening them to more opportunities to shop, and if the experiences are positive, they will stick. As pre-downturn conditions return, we won't be going back to things as usual."Opportunities ExistBut all is not bleak for other channels, IRI's report indicates. "There are distinct windows of opportunity for competing retailers who deliver against consumers' most pressing needs," it reports. Retail success will occur by determining what those needs are and how they can most efficiently be met by the resources available to the store.Supercenters typically are used for less frequent, larger basket purchases -- the "stock-up" trip, McCusker notes. More frequent trips to closer stores are done for fill-in purchases -- and some of those may be larger. "Consumers making fill-in trips are more receptive to creating a larger basket," she says. "It's important for retailers to determine what's in the fill-in basket and how to make it easier to buy those products." If the same five items show up on many receipts, she points out, stores should find ways to merchandise those items to encourage those purchases.FMI's Greer agrees. "Consumers tell us that they make larger purchases at supercenters, but they go to their local supermarkets for meat and other perishables," he says. "Supercenters have challenged a lot of retailers, especially the small independents who have competed on price, to find ways to fight back. They are creating an intense focus on the customer's needs."One such retailer is Publix Super Markets Inc., the 946-store, five-state chain based in Lakeland, FL. The chain performs a variety of research studies with its customers on their experience in the stores, and it surveys consumers prior to entering markets and after the store opens. "We want our customers to tell us what we're lacking and what we could do better," says Maria Brous, director of media and community relations. "We use that information to consistently tweak our presentation to meet local needs. We can't take a cookie-cutter approach."Many Publix stores compete with supercenters, she notes, but the company doesn't target programs to fight a particular competitor. "We want every customer to be a Publix customer," she says. "We're all competing for the same share of stomach, especially in tough economic times, and that includes restaurants and all retailers who sell food."Publix has particularly promoted price savings recently, she notes, both fine-tuning existing programs and creating new ones. In its sales circular, for instance, the retailer promotes a variety of buy-one, get-one-free products. It used to scatter them throughout the flyer based on category, but now it groups them in one high-profile spot. "Customers didn't realize how many there were," she explains. "Now the specials have more impact and show the variety that is available."

Channel Report: Supercenters

P2PI MEMBERS

JOIN P2PI

Related Images

Business Topic

Company

P2PI MEMBERS

JOIN P2PI

Related Images

Related Articles

Business Topic

Company