From November 2007

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Bigger vs. better
Kroger could be considered a latecomer to the supercenter game. The first Kroger Marketplace entry, a 110,000-sq.-ft. store built to counter Wal-Mart head-on, was thought by shoppers to be “not as strong or well positioned” as their traditional stores, according to research SIRS compiled in 2005. Kroger executives made significant improvements to the next generation of Marketplace stores and shoppers responded favorably, moving the ratings needle several notches in two years. A bigger box isn’t necessarily a better box, and Kroger needs to guard against running counter to shopper trends.

From 2005 to 2007, Kroger Marketplace stores improved by 10 points (on a 100-point scale) by improving the shopping experience and showing greater concern for the welfare of shoppers.

There’s also more to be done in the area of winning shoppers’ trust in the brand. Right now, Kroger Marketplace has a rating of 46 – slightly better than the U.S. norm, but not in the same league with the best performers in the category.

The study finds that Wal-Mart’s shoppers are not only tired of oversized stores; they seem to have suffered a significant decline in the area of trust, as the company’s ratings have slipped 15 points in five years. (Trust is defined as having faith in the products, the services and the store brand.)

“Five years ago, Wal-Mart was among the top merchants in the country when it came to trust; they had a score of 46;” says Chris Ohlinger, CEO of SIRS. “Today, that number is 31 – well below average.”

Adding insult to injury, Wal-Mart also faces challenges in the area of “shopper experience.” And while other supercenters can adapt more quickly to realign with shoppers’ ever-changing whims, Wal-Mart operates nearly 2,400 supercenter locations.

Still, it’s difficult to find an expert in the food arena willing to roundly criticize Wal-Mart. “Wal-Mart has sparked its share of innovation in the food arena over the last two decades and I think there’s more to come,” says Jon Hauptman, a partner with Willard Bishop LLC. “If you look at what they’re doing with the Neighborhood Market concept, there’s no question they’re watching shifts in the customer landscape very closely. They’re adding supercenters on the one end and Neighborhood Market on the other. That’s a lot of ground to cover.”

And they may be on the verge of dabbling in formats smaller than anyone might have imagined. Last month, Wal-Mart announced plans to open two 42,000-sq.-ft. Neighborhood Market units in Southern California; the company also is reported to be exploring a smaller local convenience market. It recently registered new trademarks, including “City Thyme” and “Field and Vine.”

The most immediate challenge for supermarket retailers who have jumped on the big-box bandwagon will be to re-think ways to make their stores “shop smaller.” The study finds clear evidence that shoppers age 55 and older are less attracted to the big-box format. And, since 2005, shoppers’ desire to shop big-box food stores has declined more than 10 points.

Wendy Liebmann, founder and president of WSL Strategic Retail, believes that a move toward building smaller stores closer to home may indeed be afoot. “Shoppers’ behaviors are affected by what’s going on around them,” she says. “Rising gas prices will impact the number of trips consumers make to big supercenters that are typically miles from home.”

Mixed emotions
Much of the research compiled by SIRS explores shoppers’ motivation for choosing one store over another when purchasing groceries. The data refers to these factors as “where to shop” drivers, and SIRS categorizes the triggers as being emotional, rational – or a combination of the two. Emotional factors include perception of the shopping experience – including store ambience, customer service and the level of trust that a consumer feels toward the store brand. Shoppers’ view of a retailer’s total value for the money is a good example of a rational factor.

Shoppers have always made decisions about where to shop based on a complex amalgam of rational and emotional factors, but for retailers it’s the emotional side of the equation where they’re most able to effect change. Earlier in the decade consumers were more likely to be swayed by factors such as price and the convenience of one-stop shopping – hallmarks of the big-box formula. Today, it’s the so-called “touchy-feely” factors that are weighing most heavily on consumers’ decision-making.

The study finds that retailers that succeed in winning shoppers’ trust generally enjoy the strongest brand positioning and performance measurements. Still, there are very few retailers that stand out when it comes to this key “where-to-shop” driver. One that does is Publix Super Markets: SIRS’ data finds that the Lakeland Fla.-based chain leads the pack when shoppers were asked to rate various supermarkets based on trust and concern. Publix received a rating of 58 – six points higher than its closest competitor, and 15 points higher than the U.S. norm.

What gives Publix the edge? Shoppers cite in-store health clinics, easy-to-shop store size and a friendly, neighborhood atmosphere. Not to be overlooked is the fact that chain executives continue to innovate and make changes that mirror how today’s consumer lives and works.

Publix introduced the Sabor stores, which cater to Hispanic shoppers, about a year ago; there also are GreenWise markets selling natural and organic foods. Publix is experimenting with curbside delivery service for deli items at one store, a mini Italian Market inside another and there are plans to test meal-assembly at two stores.

Three other retail chains garnering high ratings (52) from shoppers in the area of trust are Bloom, Wegman’s and Safeway Lifestyle stores.

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