Smaller supermarkets are gaining on supercenters in the eyes of consumers

From November 2007

By Susan Reda, Executive Editor

Size matters . . . but it turns out that in the supermarket arena, it doesn’t matter as much as it did a few years ago.

As America’s obsession with full-size SUVs, “Big Gulp” drinks and starter mansions begins to wane, so too has its enthusiasm for big-box food retailing. New research compiled by SIRS finds that the supercenter format – championed by Wal-Mart and imitated by numerous competitors – is not “packing them in” the way it once did.

Today, smaller stores that cater to consumers’ desire for prepared foods, more fresh produce and a more enjoyable shopping experience are gaining steam. By sidestepping a supercenter approach for one that connects with shoppers on a more emotional level, several chains and brands have succeeded in developing breakthrough concepts in a crowded marketplace, according to SIRS’ research.

Publix, Wegman’s and Bloom are among the supermarket concepts shoppers say they are gravitating toward – stores where the square footage doesn’t come close to rivaling the 200,000-sq.-ft. high-water mark.

The SIRS data consists of consumer research first amassed in 2002, and then replicated earlier this year. In all, more than 3,000 consumers were queried by the Ft. Mitchell, Ky.-based market research firm in an effort to gather information about grocery shopping behavior and store preferences in five key markets.

Initially, the research objective was to better understand Wal-Mart’s market share in the food retailing space. At the time, Wal-Mart seemed like an unstoppable machine, particularly in the food channel. By studying the key factors that influenced where consumers choose to shop for groceries, SIRS executives gained insight into how to compete more effectively against Wal-Mart.

Changes afoot
The data shows shifts in what motivates shoppers to choose one store over another and reveals that concepts that were considered fledgling five years ago have managed to break from the murky middle ground of supermarket retailing and gain resonance with today’s shoppers.

The research findings sync up with what many in the supermarket industry consider one the biggest stories of 2007: the debut of Fresh & Easy Neighborhood Market, a new concept developed by Tesco that bows this month. Fresh & Easy is a 10,000-sq.-ft. store that hopes to satisfy shoppers’ desire for great quality fresh foods at prices that don’t squeeze their wallets. The stores are situated in urban areas, making them convenient to shop.

Tesco, a U.K. retailer whose success in the supermarket arena is nothing short of legendary, reportedly studied the U.S. food market and American consumers for years before choosing this format. With only a handful of stores set to open this year, it will be some time before anyone can determine whether Tesco has hit a home run.

Still, the fact that it’s rolling out a concept that eschews the weekly trip to the supercenter at a time when shoppers seem to be looking for greater convenience and different shopping options is hard to overlook.

“Truth be told, there’s no one answer for every customer,” says Michael Sansolo, a consultant who splits his time between the Food Marketing Institute and Morning Newsbeat. “Trying to figure out what shoppers want is very complex, and it often depends on their mood and their need at a specific moment in time.

“A shopper will tell you that price is everything to her, then drive up the road to Starbucks and pay $4 for a mocha latte,” he says. “The stores that succeed are the ones that meet as many of a shopper’s needs as often as possible.”

Supermarkets have spent much of the last decade building bigger and bigger stores. Since no one expects them to instantly switch gears and revert to smaller footprint units, the challenge will be finding ways to keep the supercenter format in the front of shoppers’ minds.

Some have tried to do this through design; they’ve created smaller “neighborhood” style shops around the perimeter of the store in an effort to evoke a smaller store feel. Others have introduced in-store cafes and restaurants.

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