Common sense wins in food retailing today

Articles
June 15, 2009

Common sense wins in food retailing today

Supermarkets are supposed to shine when it comes to staples, especially during a fiscally wrenching period like this where household purchases are largely essentials. Food stores are supposed to represent the one retail class that consumers could count on to deliver basics without fuss, consistently and ethically, in any economy. The retail graveyards are proof, however, that many marquee names have tripped up on the fundamentals, or were eventually shunned due to their own arrogance. Why else wouldn’t food stores assort and price to suit their markets, or execute consistently in the aisles, or keep known brands on the shelves that people trust—whether national or regional names or the chain’s own? This is a short recap of two operators—Giant-Landover and Aldi—that seem to have the formula right for today’s environment, when shoppers’ conservation of money, time and energy are high priorities. Their approaches differ, but both work for their customers. Giant-Landover grew sales by 3.6% in its latest quarter by delivering elements beyond price that shoppers want: comfort (wide aisles, bright lights), savings and speed (hand-held scanners), access to healthful foods (organics). The chain’s third-straight quarter of sales growth represents efforts by the mid-Atlantic operator to help restore market share under attack by Wegmans, Harris Teeter, Whole Foods and others, reported the Baltimore Sun. It cited Food World magazine figures that Giant lost nearly two points of market share, to 27.48%, in the 12 months ended March 2008.

Supermarkets are supposed to shine when it comes to staples, especially during a fiscally wrenching period like this where household purchases are largely essentials.  Food stores are supposed to represent the one retail class that consumers could count on to deliver basics without fuss, consistently and ethically, in any economy. 

The retail graveyards are proof, however, that many marquee names have tripped up on the fundamentals, or were eventually shunned due to their own arrogance. Why else wouldn’t food stores assort and price to suit their markets, or execute consistently in the aisles, or keep known brands on the shelves that people trust—whether national or regional names or the chain’s own?

This is a short recap of two operators—Giant-Landover and Aldi—that seem to have the formula right for today’s environment, when shoppers’ conservation of money, time and energy are high priorities. Their approaches differ, but both work for their customers.

Giant-Landover grew sales by 3.6% in its latest quarter by delivering elements beyond price that shoppers want: comfort (wide aisles, bright lights), savings and speed (hand-held scanners), access to healthful foods (organics). The chain’s third-straight quarter of sales growth represents efforts by the mid-Atlantic operator to help restore market share under attack by Wegmans, Harris Teeter, Whole Foods and others, reported the Baltimore Sun. It cited Food World magazine figures that Giant lost nearly two points of market share, to 27.48%, in the 12 months ended March 2008.

By contrast, Aldi offers limited assortments (1,400 fast-turn items) featuring its own brands almost exclusively (95% of what it sells) in cut-case displays, plus high-quality fresh produce. The chain claims it can save shoppers up to 50% on their purchases and meet 90% of a household’s grocery needs. Its compact stores, at 8,000 square feet, devote about 40% of space to fresh perishables and frozen foods.

While Aldi’s international operations do give the chain an added perspective in serving multi-cultural markets within the United States, its success rests more on the values it delivers up and down the supply chain: Aldi consistently presents low prices to shoppers, and uncomplicated business terms to the suppliers upon which it relies. The chain’s principles: no rebates, discounts, coupons, slotting fees or unwarranted deductions.

There’s no set success path in food retailing; winning comes from knowing your customers and your prospective customers. As these operators illustrate, there may be seemingly infinite measures on which to compete, but winners stay true to their operating principles, as long as they’re congruent with what shoppers in their markets demand.