RETAIL VIEW: Niche marketing taking hold with traditional retailers
- by Tim Linden | April 12, 2006
Over the past year, The Produce News
has run numerous stories about traditional retailers diversifying and entering into different niche markets or reinventing themselves in one way or another.
-- Dick's Supermarkets in Wisconsin and Illinois launched an extensive promotion campaign redesigning and touting its produce departments.
-- Sixty-eight Food Lion stores in the Charlotte, NC, area are being remodeled and redesigned to tailor their offerings to fit customers' specific needs.
-- Kash n' Karry debuted a new retail concept, Sweetbay, in Florida, attempting to appeal to more upscale consumers.
-- Both Giant Foods Inc. and Safeway beefed up their organic offerings and promoted the concept in Washington, DC.
-- Even Wal-Mart announced a huge increase in its organic offerings at a significant number of its stores.
The list goes on, and it apparently puts these firms right in the middle of an industrywide trend that shows no signs of abating.
The Food Marketing Institute recently released a new study titled Facts About Store Development, which shows that target-marketing is the new buzz word in the retail sector. The supermarket trade association sent a survey to its member companies in the United States, and received a total of 77 responses from retailers representing 4,208 stores. The typical supermarket size represented in the survey is just over 48,000 square feet, with 72.4 percent of the store dedicated to selling space. These stores carry a median of 45,000 items, have 10 checkout lanes and conduct 15,345 transactions per week.
In a press release announcing the availability of the study for purchase, FMI Senior Vice President Michael Sansolo said, "Shifting consumer behaviors and attitudes, shorter product lifecycles, new store concepts and competitive pressures from a broad range of retail formats are driving a fundamental change in the way food retail companies do business. There is no longer a 'one format fits all' supermarket. Understanding the specific needs of your targeted consumers and delivering what they need are essential for success."
The companies surveyed, as well as those about which The Produce News
has written over the last year, are developing new approaches to reaching traditional as well as non- traditional shoppers. Niche marketing is in. The survey revealed that retailers are developing multiple approaches even in the same geographic area as they develop different formats for different demographics. These formats are being classified under general categories by these retailers including gourmet-specialty, natural-organic and ethnic. Two-thirds of the companies responding to the FMI survey said that they had developed or were developing upscale formats; 50 percent were targeting organic customers, while 25 percent were focusing on ethnic formats to correspond to demographic shifts in their marketplace.
Supermarkets are also changing the look of their stores to attract new customers. Safeway has updated many of its stores to what it calls its "Lifestyle" format. These stores include upscale lighting, floors and produce department bins. In addition, they often have expanded deli, meat and floral sections. And many contain Starbucks. The coffee bar trend is catching on nationwide as more than half the FMI respondents said that they are at least experimenting with coffee bars in their stores.
Sampling is also catching on as retailers like Trader Joe's and Costco make it an everyday occurrence in their stores. In the FMI survey, retailers indicated that in 72 percent of new stores, space for cooking demonstrations is allocated when creating the store design.
The effort to target within the store has always been popular as virtually all supermarkets are sectionalized. But the percentage of stores devoting space to specific products is always revealing. The following specific items are fairly universal, with the percentage of stores devoting space to these items listed after the department: Deli -- 91; Fresh, Prepared Foods for Takeout -- 83.6; Private Label Products -- 83.6; Ethnic Foods Aisle/Section -- 79.1; Floral/Plant Shop -- 76.1; and Fresh Seafood -- 74.6.
Retailers are targeting shoppers at all spots on the spectrum as the FMI survey also showed that more than half the respondents now have dollar aisles. Not quite as popular but still very significant, just under 50 percent of the retailers have low-carb food sections. But, the FMI survey opined that like the Atkins diet itself, the inclusion of this specific section is on the decline.
When deciding to go into a new format, it appears as if remodeling is a bit more popular than building a new store. The report shows that remodeled stores represent 5.7 percent of all stores in 2005. That is up from 4.9 percent in 2004, which represents a 16 percent increase. Contrast that to new stores, which actually declined slightly to 3 percent, and store closings, which dropped to 1.9 percent of all stores. That is a significant improvement from 2004, when 2.5 percent of all stores, according to survey respondents, were closed. Remodel, rather than build or close, seems to be the order of the day.