Posted on: Wednesday, June 22, 2005
Putting the 'super' back in markets
Editor's note: As Islanders juggle time-starved schedules and tight budgets, and respond to a blizzard of nutrition news, their eating patterns and food-shopping habits have changed radically. Spurred by competition, grocery stores are changing accordingly. A highly competitive industry with very narrow profit margins, supermarkets are generally tight-lipped about their plans and strategies, leaving consumers with little understanding of these stores we visit so often.
Today, we take a look at how supermarkets here are changing, and why. Next week, we go behind the scenes in one store. |
| What they're trying |
| Supermarket trends |
By Wanda A. Adams
Advertiser Food Editor
Haruko Onishiro of Kapahulu, 73, can remember when there were no supermarkets. Her daughter, Nancy Lee, 51, of Kaimuki, recalls planning menus, making a list and shopping just once a week. Lee's daughter, Tami Lee Souza, 30, of Mililani, says she's in the supermarket "every day," even though she has "no time to cook" except on weekends.
Advertiser library photo Nov. 24, 1954 All three say food shopping takes a big bite from their budgets the national average is $38 per person per week so price plays a role in their choice of store. But Onishiro, widowed and suffering health problems, also values single-serve packaging and healthier foods. Lee, whose divorced son has boomeranged back home with his three children, buys in bulk, shopping both the supermarket and Costco. Souza and her husband are weekend gourmets, experimenting with wine and Food Network recipes.
The three generations represent the challenges for today's supermarkets: Changing needs. Broader tastes. Cutthroat competition.
Perhaps you've noticed:
At Foodland Beretania, the deli is stocked by white-coated chefs, and the usual fried chicken shares space with blackened 'ahi with soba and grilled pork with pineapple salsa; the labeling in the wine section focuses on flavors. In Safeway stores, colorful posters advertise "Ingredients for Life," chill cases are filled with restaurant-quality, heat-and-eat soups and other dishes, and the meat department features premium private-label meats. Star Markets' renovated Mo'ili'ili store boasts an olive bar, a Foods of the World section and new signs that allow you to stand in one place and see the directories for every aisle. In Times stores, shelves are dotted with colored tags advertising discounts and Royal Card savings, and the wine selection has grown more interesting. These retailers are responding to consumer trends: Lack of time. Less planning and more impulse shopping. Greater interest in healthy eating. Hobby cooking and entertaining. Short-cut cooking. A hunger for ethnic products. Demand for greater variety. A desire to find it all in one place.
These come bundled with price consciousness, all the keener in paradise-taxed Hawai'i.
'Unusual market'
The Islands have their own quirks. Says Abel Porter, Foodland Super Market Ltd.'s president and chief operating officer, "Hawai'i is a very unusual market when it comes to its passion for food, food being the centerpiece of every gathering. There are a lot more dual-income families, and there is a lot more takeout food."
But he notes that Hawai'i's supermarkets are a little behind the curve: While restaurants here do a lot more takeout than on the Mainland, grocery stores do less. Most still have only relatively modest sandwich delis if that.
Hawai'i supermarkets are, on average, a bit smaller than those on the Mainland 30,000 square feet or smaller, compared to the national average of 45,500 square feet. And, as George Glukfeld, general manager of Safeway Hawai'i notes, Island stores must make room for locally made and locally preferred products from arare and crackseed to bagged rice and poke.
The driving force behind the supermarket evolution is competition.
"There is always someplace else to go to buy food," said Michael Sansolo, senior vice president of the Washington, D.C.-based Food Marketing Institute, trade organization of the supermarket industry. "I'm old enough to remember when a supermarket sold one kind of product, a drug store sold another and everybody had their own domain. Today, we can buy the same products in many different kinds of stores."
The institute counts more than 15 categories of businesses that compete with the conventional supermarket. Big-box stores such as Costco and Sam's Club are the biggest threat, but even Longs Drugs stores sell food. Hawai'i's stores face added competition from large ethnic groceries, such as the Daiei chain, Marukai membership stores, and Palama Market, which recently opened a spiffy new Korean market in the Ala Moana area.
"It's an exciting time," said Star Markets president and chief operating officer Karl Wissman, putting a positive face on things. Competition "is making us all operate better."
Hot products
Star's renovated Mo'ili'ili store is a vision of that chain's future, Wissman said. "Expanding itemization" is store-speak for the addition of thousands of strategically selected products high-volume, highly desirable items that might lure customers away from another store.
Star belongs to a consortium of independent retailers, Raise the Bar, which pools information about merchandising, customer service and product sourcing.
In a program called Healthy Living, Star has identified eight choice areas such as organic, fat-free, low-carb, low-sodium, wheat-free and have added products in these categories, Wissman said. The items are stocked throughout the store, not isolated in a "health foods" section. This is called "integration" mainstreaming what were formerly considered "specialty" products, a tactic Foodland and other stores are using as well.
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A new vision
At Foodland, chairwoman and chief executive officer Jenai Sullivan Wall is overseeing company-wide initiatives that range from Wineplicity (grouping wines by flavor profile, not grape variety) to the upcoming introduction of in-store espresso bars. Earlier this year, Wall and Porter took a dozen managers to the Mainland to tour 80 stores in six days. They chartered a bus, debriefing and brainstorming between store visits. "It was a team-building experience and a chance for the staff to become clear on our vision," Wall said.
Corporate chef Keoni Chang and his staff chefs have introduced house-made restaurant-quality menu items to the Foodland Beretania deli. Now the company is outfitting a central catering kitchen to serve all the stores. Head baker Judy Aveiro is developing a fresh-baked line just for Foodland. The deli is also meant to drive shoppers into the rest of the store. Chefs do cooking demonstrations, recipes are posted to encourage customers to try new products, and the deli uses ingredients from the store.
Service is another Foodland tack. The company's Hoaloha (friendship) program incorporates a group of tactics greeting customers, asking if they need help, etc. that everyone must memorize. Every store has a "service champion," a staffer who has demonstrated good customer-service skills and is given four hours a week to mentor others in one-on-one pep talks or present Hoaloha ideas to groups. Mystery shoppers report on the service they receive, jotting down names; these reports are closely tracked.
Between small profit margins (the institute reports an average of 1.45 percent profits, with larger chains below 0.85 percent) and the advantage enjoyed by no-frills box stores, it's tough for supermarkets to compete solely on price. But price strategies such as seasonal specials and "loss leaders" selling staples at discount Êare used by all retailers.
Pricing strategy
Times stores have made pricing the centerpiece of the company's marketing strategy, aggressively advertising color-coded everyday low prices and specials.
Last year, the chain purchased Fujioka Wine Merchants, and its wine selection has become more eclectic under the direction of Lyle Fujioka.
Safeway nationally is "rebranding" with its Ingredients for Life program, which incorporates higher-quality perishables (from produce to Safeway-brand chilled prepared foods, such as soups), premium proprietary brands such as Safeway Select and Rancher's Reserve, emphasis on employee service training and a $100 million advertising campaign.
The heart of the initiative is the Lifestyle format store with softer lighting, warmer colors, more and expanded service counters, sushi bars and even olive bars. Hawai'i's first Safeway Lifestyle stores will be in Hawai'i Kai and Kapolei in the near future, general manager Glukfeld said. Eventually, all stores will adopt some version of this format, said Safeway director of public affairs Jennifer Webber.
All the retailers agree that, projects and programs aside, individual stores have to know what their particular customers want. Computerized inventory systems closely track sales. Loyalty card programs offer an avenue for communicating with regular customers via newsletters, and for charting their buying patterns. Stores subscribe to ratings services that track statewide sales so they can compare their in-house numbers. And they employ mystery shoppers for feedback on stores' performance.
Still, said Sansolo, the best information might not be the most sophisticated: "It all comes down to the store manager and the employees knowing their neighborhood." This includes keeping tabs on nearby competitors. Said one Foodland department manager, "If you're not in and out of the other guy's stores all the time, you're not doing your job."
Some stores are attempting to be more interactive. At Star Mo'ili'ili, a new initiative guarantees that, if they don't have an item you want, they'll research it and get back to you within 48 hours. Foodland has a similar policy. Foodland Beretania store director Clarence Morinaga says it's definitely worthwhile to approach someone if you've got a request. "If a product is going to make a difference to a customer shopping here, we want to try to get it," he said.
"Feedback is absolutely essential," said the Food Marketing Institute's Sansolo. "It's important for supermarkets to be good customer-service representatives, but I think it's also important for us to be good consumers and say what we want."
Next week: The secret life of a supermarket
Onishiro and Lee say they cook from scratch less often, and take many more shortcuts using mixes and products instead of raw ingredients and buying more heat-and-eat dishes.
As this 1954 Star Market shows, grocery stores used to be smaller and stocked fewer products, primarily dairy, meats and grocery items.
Adding products without increasing store size complicates things, requiring stepped-up delivery and stocking schedules and fewer "faces" (outward-facing rows) for each product. But Wissman says grocers can't afford to let smaller competitors like health- and specialty-food stores have an edge. "How can a tiny little store have these items when we don't? ... We certainly won't have as complete a line as they do, but we can carry the 20 percent of the line that has 80 percent of the movement," he said.
Supermarket statistics
The year the first supermarket, King Kullen Grocery Co., opened in New York
Number of supermarkets in Hawai'i*
U.S. average supermarket trips per week, 2004
U.S. weekly sales average per square foot, 2004
U.S. median store size, in square feet, 2004 (trending upward for past decade)
U.S. average weekly sales per supermarket, 2003 (trending downward since 2000)
Sources: *2002 Census statistics; excludes convenience, specialty, liquor stores; includes box stores); U.S. statistics from Food Marketing Institute
What they're trying
Retailers agree trends are a bit slow to surface in Hawai'i supermarkets. Around the nation, these supermarket innovations are cropping up: Self-checkout technology (found at Wal-Mart and Kmart) In-store chefs (as at Foodland in Hawai'i) Hand-held scanners to total spending as you shop Smart carts with built-in directories, sales information, coupons Decor and display that mimics farmers markets, old-time butcher shops "Taste ambassadors" doing daily sampling A return to open-window service meat counters Displaying high-frequency items at front (i.e. milk, eggs, beer) Low-profile shelving making it easier to see across the store Carpeting some areas (adds comfort, slows shoppers) More inviting color and light schemes Touch-screen information stations Wine-department kiosk with food-pairing info Smaller carts for smaller stores |