COMPETITIVE

EDGEBy Craig Rosenblum August 2014

Five Ways to Differentiate Retail

WillardBishop.com

How Supermarkets can Win-Back their Market Share

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Willard Bishop recently published its annual

The Future of Food Retailing report. As expect-

ed, the supermarket channel continued to lose

market share to non-traditional formats such

as mass/club, drug, and conveniece stores. As

illustrated below, the supermarket reigned su-

preme in 1998 with 90% dollar share; while

non-traditional formats and convenience stores

accounted for 2% and 8%, respectively. In 2013,

traditional formats had lost 44% of their dollar

share, which was redistributed to non-tradi-

tional formats and c-stores.

Non-Traditional Mass/Club, Drug, Supercenter, Dollar

Traditional Supermarkets

Convenience With and Without Gas

2%

46%90%

39%

15%8%

One Size No Longer Fits All

While channel blurring continues to meld into omni-channel, it is clear that the one-size-fits-all model of retail will no

longer suffice - regardless of channel structure. Innovation, which has been typically centered around food, is happening

quickly and offerings are getting more specialized. Consider the following:

Rite-Aid’s Beverly Hills 90210 Store has evolved into way more than your traditional drug

store. This store consists of a Fresh Café, Wine and Spirits, and a décor that looks more like

a Nieman Marcus department store than a drug store.

Target Express and Walmart Express continue to evolve their concepts to meet consumer

needs and eliminate the issue of having to find locations which can support only 100,000+

square foot stores. These new express stores, which are approximately 15,000 – 20,000

square feet, are designed to address the urban shopper versus the traditional suburbanite.

The express stores offer grocery and grab-and-go meals/snacks, along with other tradi-

tional mass items such as clothing, electronics, and household chemicals.

Brothers Marketplace (Roche Bros.) in downtown Boston’s famed Filene’s Basement, is a 2-sto-

ry, 25,000 square foot (3,000 at street level and 22,000 occupying the historic basement) su-

permarket that caters to young foodies and the health-oriented consumer. Brothers Market-

place is also concentrating on local and specialty brands, prepared foods, and workers whose

expertise can help shoppers become better cooks.

What Used to Be Differentiators are Now Table Stakes

The ability to differentiate brands and stores has become more difficult than ever as click-and-mortar retailing

continues to drive omni-channel strategies. Consequently, fierce competition has increased table stakes.

For example: Location is less importantThe physical store location, as well as being a steward

of the community, have been downgraded. Ecom-

merce works well in tandem with retail outlets, but a

physical presence is no longer a requirement as com-

panies like Amazon, Fresh Direct, and PeaPod have

proven.

Specialty products have gone mainstreamNatural, organic, and specialty items have exploded

in popularity and now command more shelf space.

For example, the Cheese category was once limited to

pre-wrapped slices. Anything more required a trip to

a Wine and Cheese shop or to a specialty retailer like

Lund’s & Byerly’s or Whole Foods. Now traditional

grocers like Kroger (Murray’s Cheese Bar) and Weg-

man’s offer expansive varieties of cheeses from all

over the world.

Service beyond the courtesy deskService is no longer relegated to the courtesy desk lo-

cated at the front of the store. Retailers, focusing on

their stores’ perimeter, continue to expand their ser-

vices in the areas of floral, deli, prepared foods, and

in-store bakeries. Some stores are fulfilling custom

orders with even richer services such as butchers, ko-

sher specialty counters, and local farmers available in

their Produce department.

Health means more than RxHealth has moved beyond going to the doctor or the

drug store to pick up your prescription. Many tradi-

tional grocers have moved well beyond prescription

fulfillment and into the business of health and well-

ness. In addition to a Pharmacist, many retailers have

Dieticians and Minute Clinics ready to help with ev-

erything from meal-planning to ear infections.

The basics are a givenToday, shoppers expect a clean, safe, and frustration-

free shopping experience. This includes consistency

of service and a friendly staff that is courteous and

attentive, while keeping the checkout lines to a mini-

mum.

Value is Less of a Differentiator than Before Although price can be a key differentiator or strategy − as in the case of EDLP (every day low price) for opera-

tors such as Aldi, WinCo and Woodman’s − it’s an integral part of every retailer’s value equation. The issues

most retailers face today is understanding where to invest (which shoppers, stores, categories, and SKUs) in

order to maximize ROI while driving sales, units, and shopper loyalty.

A recent survey of over 32 million shoppers, conducted by Catalina Marketing, identified that shoppers purchase

only 0.7% (260 of over 35,000) of items available in-store annually. Similarly, quarterly purchases accounted for

83 unique products; and 13 products on a weekly basis. This means that pricing may only be an issue for a select

number of items. This small percentage of available purchases, combined with the ongoing efforts to make price

more transparent, will allow shoppers to quickly compare items at different retailers. Add in price matching and

guarantee programs such as Walmart’s Savings Catcher, and it’s easy to see that price will no longer be a key dif-

ferenitator, at least not for the top 300-400 items.

Shopper Value EquationDuring the 1980s value was commonly defined as:

Value = (Price x Quality x Service x Assortment x Facility)

Thirty-five years later the formula remains applicable; however, click-and-mortar retailing is redefining the

equation’ s terms:

• Price – Total transparency and guaranteed low prices

• Quality – Branded or private label, premium or value, all are expected to be good

• Service – In-store, online, digitally integrated

• Assortment – endless shelf, everything is available online

• Facility – in-store, click-and-collect, home delivery

Given the competitive pressures retailers are facing

from brick-and-mortar, and ecommerce, it is essen-

tial that you differentiate your brand/banner to drive

sales and profits. Key differentiators include:

1. Brand Associations

Brand associates can be unique products that sepa-

rate the banner and create an enhanced position.

One such product is Trader Joe’s Two-Buck Chuck,

which remains one of the company’s key consumer

messages and top sellers.

Brand associations may also be programs like Shop-

Rite’s annual Can Can sale, which is now in its 43rd

consecutive year. Mention Can Can on the east coast

and consumers automatically think ShopRite.

2. Private Label

There has been a significant evolution of private label

from the days of “generics” and the stigma of poor

or inferior quality. Private Label products now cover

the full spectrum, including premium offerings, natu-

ral and organic, and GM and HBC. Retailers who put

there banner on the brand, as in the case of Weg-

man’s, integrate their overall value proposition. How-

ever, the same can be achieved without matching the

banner and the label, as demonstrated by Costco’s

Kirkland brand and Whole Foods’ 365 brand.

3. Shopper Insights

Understand your shopper, identify their needs and lo-

calize existing and new stores (or formats) accordingly.

While loyalty cards and personalization are the rage,

there is a tremendous amount of insight and nuances

about your shoppers that can be obtained through

mining transaction log and credit card data. By utiliz-

ing these data sets, you will better understand how

to cluster your categories and stores based on affini-

ties, while determining your shopper’s price sensitivi-

ties. This data is also useful for optimizing assortment

based on consumer appeal. These approaches enable

you to move well beyond the rudimentary geo-demo-

graphics and ethnic segmentation, traditionally used

to localize store designs, strategies, and tactics.

4. Communicate Your Difference

Communication and clarity of your brand and differ-

ence is essential. It has never been more important

to ensure you get credit for all that you have to offer

(mission, prices, products, services, etc.). However,

the days of limiting your communications to in-store

and the weekly ad, are no longer sufficient. Effective

communication strategies are being expanded to in-

clude digital platforms such as your website, social

media sites, and mobile apps.

Differentiation should be the Backbone of Your Competitive Position

Retailers must also actualize their banner’s mission

statement. For example, Walmart’s simple mission

is, “Saving people money so they can live better.”

This message is enforced by a multitude of programs

including roll-backs, clearances, and specials. The

company’s newest price matching program, called

Savings Catcher, checks competitor ads for items pur-

chased at Walmart, and provides an e-gift card for the

difference in price when a competitor’s price is lower.

But communication must extend beyond price. For

example, fresh and locally grown produce should

come with a story which explains where the produce

was grown, when it was harvested, etc. This gives

shoppers “reason to believe” your core mission.

Kroger gives their customers’ significant “reasons to

believe” by connecting their three-part message of

low prices, fast service, and high-quality/fresh

products, to their expanded services. For example,

Kroger’s health and wellness program is likely to in-

clude a pharmacy, dieticians, and minute clinics − all

of which are very useful for brand activation.

5. Truly Deliver Service

Many claim to be leaders in service; however, as you

walk stores throughout the industry very few retail-

ers truly are. Today, you must walk-the-walk and

talk-the-talk, as perception alone will not aid in dif-

ferentiation. For service to be a key competitive dif-

ferentiator, it must permeate the store. Reward and

recognition programs must be in place in order to

drive the desired behaviors. While branding service

is typically a headquarter-based initiative, it must be

embraced unilaterally so that it becomes part of the

company’s culture and reason for existence. While

top-down branding is commonplace, it will fail unless

service gets woven into each employee’s DNA − par-

ticularly those that interact with your shoppers at the

cash register, deli, meat counter, Produce department

and beyond.

Service continues to evolve by a select few that under-

stand a friendly greeting and a cheerful “thank you,”

are not really service. Service is helping shoppers lo-

cate products and making recommendations, as well

as solving a problem, or better yet, preventing one.

Service is doing things that help each customer have

a better shopping experience. For example, Kroger

has introduced a new infrared technology that mea-

sures the number of shoppers getting ready to check

out. The system then flexes the number of check-out

lanes accordingly so shoppers can check out quickly.

Now that’s service.

Differentiating your brand/banner is easier said than done. In addition to determining your banner or the brand’s

key attributes, you must make certain these attributes are suitable for competitive positioning. You must also

consider the time and costs of implementation. It’s better to focus on one or two areas than risk diluting your

differentiation efforts by taking on too much. You must also create performance

benchmarks with periodic evaluations to make sure your

strategy and messaging are delivering the anticipated

response. Finally, remain flexible yet committed

because winning and keeping market share is a

fluid process that requires constant navigation.

Craig Rosenblum | Partner Mr. Rosenblum leads Willard Bishop’s expansion efforts through business development and strategic alliances. Craig’s expertise includes supply and demand side technologies, systems and strategies. His rich expertise and leadership can be found in a number of industry initiatives, includ-ing Category Management, CPFR, ECR, Activity-Based Costing, and Data Synchronization. Craig has also been keenly instrumental in driving collaboration for companies such as CVS, SuperValu, Cadbury Schweppes, and Masterfoods USA.

Prior to joining Willard Bishop, Craig led the business development efforts for Prescient Applied Intelligence, Milton Merl Associates and Crossmark. He currently sits on the National Steering Planning Committee for UCon-nect, presents at CGIT and has been published in GMA Forum. Craig earned his B.S. degree in Packaging Science and Technology from Rochester Institute of Technology.

About the Author

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Copyright © Willard Bishop, 2014. All rights reserved.

To learn more about increasing market share and basket size through effective differentiation, contact Craig Rosenblum at 847-756-3726 or at craig.rosenblum@willardbishop.com.

Willard Bishop, with nearly 40 years of experience in

consumer packaged goods (CPG) and food retailing,

has earned the reputation as the industry’s preeminent

consulting firm. The company’s rich history is steeped in

delivering high-impact, high-value solutions across the

CPG value chain.

Today, Willard Bishop continues to enhance the perform-

ance of its clients by using advanced analytics and superior

insights to create game-changing outcomes.

Willard Bishop provides a solution matrix that combines

expert knowledge and insight with custom-developed

applications and tools, to improve client performance –

from concept to consumer.

Willard Bishop practice areas include:

• Activity-Based Costing • Retail Pricing/Promotion

• Localization Strategies • Shopper Relevancy

• eCommerce • Channel Development

• Collaborative Performance • Product Positioning

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