Less Choices, Smaller Stores

January 13, 2010

The undiscussed beauty of the small-format food store is how its pared assortments focus shoppers on what’s available—

The undiscussed beauty of the small-format food store is how its pared assortments focus shoppers on what’s available—which is often healthy, fresh, and high-margin private label foods and beverages.  We surmise the walk-out-of-the-store-empty rate is low because what’s offered is within an acceptable group of products for most shoppers who go there to eat or fill a need for the next day or two.

Since full-size supermarkets meet the fill-in and stock-up roles as well, their offers need to be more expansive, and their name brand and store brand choices more complete. But have they gone too far in giving people choices? The number of retailers paring back SKUs today suggests that is the case.

If inventories lean up and turn faster, and food-store shoppers can select more easily without the visual clutter and paralysis that comes from too much choice, retailers will have hit the sweet spot with their shelf displays and promotions. 

Such precision couldn’t come at a more opportune time. The dismal economy has led a multitude of retail channels to use food as a traffic builder and value enhancer—because people have to buy it, even when they curtail other expenses. Price wars with everyone—other supermarkets, clubs, supercenters, drug, dollar and convenience stores—have heightened as a result, but could abate once the economy rebounds and other channels focus on higher-ticket goods again.

Food and beverage competition remains pretty heated now, however. Two examples:
•    The latest Target circular devotes a back page to bulk specials. All-capitalized type proclaims “The Great Save Event. Value Sizes. Club Prices. No Membership Fees. All in one spot, for a limited time.  Two of the items: Honey Nut Cheerios, 47.25 oz., $6.99, and Tidy Cats Scoop litter, 38 lbs., $10.49.  This is part of a seven-week test of displays in the seasonal merchandise area of the sales floor.
•    Walgreens, which has long offered food for every day part, aims for a bigger role in food deserts, where supermarkets often under-serve low-income urban residents. Look for more chainwide food refinements, with Bryan Pugh on hand as vice president of merchandising and store format development. He was the chief retail operations officer of Tesco Fresh & Easy in the United States.

Most alternative formats don’t carry anywhere near the food and beverage SKUs of a supermarket, yet they’re stealing store trips with refined selections at the shelf. SupermarketGuru.com believes that when it comes to choice, less could be more in the supermarket.  Bad news for packaged-goods suppliers, especially non-leaders in their categories already stunned by retailers’ fascination with private label. But potentially good news for food stores that could perform better, and for shoppers who could fulfill missions more expediently.