Eye on solutions

It's no longer business as usual when it comes to center store. Traditionally, as grocery retailers attempted to differentiate their banners via the perimeter — “leading with quality and service” — they counted on center store as the secret weapon to counteract the resulting diluted profits, notes “Improving Price Image,” a May Competitive Edge report from the Barrington, Ill.-based Willard Bishop retail consultancy. But with center-store sales now declining, retailers’ secret weapon no longer can fund investments in the store perimeter.

“To offset the decline in profits, retailers raise center store prices, and a vicious cycle ensues,” the publication states.

Although a great perimeter might function to drive traffic, retailers really need to rethink center-store pricing to revitalize sales here, says Jim Hertel, managing partner, Willard Bishop. That means hitting price points that shoppers view as “reasonable.”

But center-store declines can be attributed to more than pricing issues.

“As the availability and diversity of perimeter products increased, both retailers and suppliers took the bait,” explains Jerry Lauro, senior director, global business development for Stamford, Conn.- based Daymon Worldwide. “Add in the demise of cooking, [the perimeter’s] nutritional advantages and evolution of food culture, and we are where we are.”

Instead of focusing on “rebalancing” sales in-store, he says, retailers should be looking at ways to satisfy shoppers via the entire store. And that will require a revitalization of center store with an eye toward “consumer-centric solutions” throughout the whole store. Such solutions must be relevant to shoppers; save them time; entertain, surprise and delight them; and drive them back to the banner.

To create the types of solutions Lauro outlines — and breathe new life into/reap greater profits from center store — retailers will need to get creative in merchandising and marketing efforts. And store brands could play a significant role in those efforts.

Emphasize value, innovate

Hertel advises retailers to communicate effectively on the good values they offer, and to give shoppers a value option in every center-store category.

“Make sure prices are ‘right’ on the items which disproportionately impact price image — approximately 5 percent of the store’s selection with high penetration and velocity,” he adds.

Here, retailers also should position their private brands in “more of a leadership role” when it comes to communicating with shoppers, says Dave Olson, vice president of sales, private brands west for Omaha, Neb.-headquartered ConAgra Foods.

“Consumers who look for value, for example, should have large-size value packs or $1 price-point offerings as part of their private brand assortment,” he says. “Consumers who value all-natural or more premium products can have their needs met by tiered or differentiated retailer brands.”

Recognizing that any revitalization of center store begins with products, retailers also will need to innovate here to attract attention and create new uses, Lauro says. And any innovation must be relevant to the shopper.

“Take the Booz & Co. approach that winning and durable strategy is about customer value, not competition,” he says, “although keeping up with your competitor’s good ideas has value, too.”

Among the questions Lauro suggests retailers to ask themselves to guide innovation are:

• Which shoppers are and are not buying a particular product?
• How are “super-users” using the product in ways others are not?
• Does the product have a health advantage — or could you give it one?
• How could you give the product more flavors or different flavor combinations?
• At what time of the day are consumers not using the product — and how could you tie product usage to those dayparts?

Retailers also could work with their store brand suppliers to create “short-term special products,” says Clay Dockery, division vice president, corporate brands for Portsmouth, Va.-based Massimo Zanetti.

“One of the most common opportunities you hear in consumer interaction about grocery shopping is the need for the ‘treasure hunt,’ something new that will delight shoppers,” he says. “This is a great opportunity to drive loyalty to your own brands.”

Private brand innovation also can be achieved by tailoring product offerings to meet additional consumer needs, Olson says. He points to the opportunity, for example, to offer 2-ounce single-serve pita chips in the deli section for on-the-go meals, 9-ounce versions in the produce department for snacking or entertaining, and 20-ounce versions, in a variety of flavors, in the traditional snack aisle.

“Private brands can also help to redefine the traditional stock-up trip by providing multiple solutions for new ‘categories’ like on-the-go snacking, lunch box, healthy eating, all-natural, etc.,” he says.

Merchandise in multiple locations

Retailers need not — and should not — limit placement of center-store items to the center store area. Hertel advises, for instance, cross-merchandising promoted center-store items in complementary perimeter departments.

Mark Coleman, vice president of the retail division of Ayer, Mass.-based Catania-Spagna, agrees. In fact, he recently proposed to a large retailer an effort to cross-merchandise/promote olive oil with items in both the produce department and the bakery department.

“Since the olive oil we were discussing is on feature at a great price, why not display a few cases in the fresh lettuce section of the department?” he says. “Couple that with some balsamic vinegar and maybe a little salt and pepper, and now you have ‘impulsed’ the customer into possibly five purchases instead of one.”

In the bakery, Coleman adds, that same olive oil — and/or infused olive oil and balsamic vinegar — could spur impulse purchases on these products plus bread.

To be able to engage in such efforts, however, “store merchandisers need to be commissioned with the authority to cross-merchandise any product among all departments in the store,” he stresses.

Dan Kelly, vice president of sales for Musco Family Olive Co., Tracy, Calif., acknowledges that grocery retailers’ category or departmental-specific management approach can make it difficult for a product to get placement in another department.

“However, a more holistic private brand strategy that breaks down those barriers within the retailer can be a distinct advantage versus branded CPG suppliers trying to find space outside of their traditional departments,” he says.

Engage shoppers

Also key to revitalizing center store — and making a connection between center store and the perimeter — is the ability to engage shoppers. Here, knowledgeable employees and in-store sampling help.

“Often, you will see sampling venues within many of the perimeter departments,” Dockery says. “There are associates engaged with consumers, helping them navigate through the options they have to purchase.”

A high correlation can be found between many products and categories in center store and the perimeter, he adds. Retailers that “create a linkage” between a number of these products and categories in engagement efforts will be able to drive incremental sales.

And private brands, representing approximately 23 percent of units sold, loom large in the engagement opportunity, Dockery contends — for millennials, in particular, considering that they are less brand loyal than other key demographics and the most comfortable trying private brands.

“With the new pattern of shopping often … for a meal that will be immediately prepared, the focus on helping that consumer navigate to every product they need to answer the ‘what’s for dinner?’ question is more relevant than ever,” he says.

Electronic media also can be helpful to retailers in efforts to attract both millennials and Generation X to center-store own-brand items, Kelly notes.

“Tell them how the private brand product is better or different, and reward them for the purchase if it makes sense,” he says.

Partner with brands

To boost private brand and overall center-store sales, Olson advises retailers to leverage the strength of national brands in promotional and cross-merchandising efforts. For example, retailers could use a high-household-penetration brand such as Swiss Miss with private brand cookies to create seasonal programming, or a highly purchased brand such as Hunt’s tomatoes with store brand pasta to create a meal solution.

“The right mix of branded and private brand options for consumers drives trips, purchases and profitability,” he says.

Rethink layout

Retailers also shouldn’t be afraid to do a bit of shifting of the store planogram if it ultimately could result in increased sales and profits across the store. Clusters based on trip missions represent one opportunity.

“With today’s access to loyalty card data, retailers can identify trip ‘missions’ and merchandise categories based on how they are purchased,” Hertel advises.

For the coffee category, Dockery says Massimo Zanetti has envisioned a setup similar to retailers’ wine departments. Research the company conducted recently shows that for one thing, consumers would like to see a greater variety of coffee products offered.

“They have further stated [that they want] some of the thematic elements of the perimeter department — such as a desire for sampling and an opportunity for education about products,” he says. “There is an opportunity to take this concept a step further with food pairings, a common theme you are seeing in the growing coffee consumption market of Brazil.”

Put it all together

Finally, it’s important that efforts to revitalize center store do not take away from the perimeter, or vice versa, Lauro stresses.

“The call to action is to blend and balance from any area of the store to create relevant solutions,” he says.

It comes down to retailers’ knowing their customers and adapting to their behaviors, Kelly says.

“Today’s consumer likes to be engaged prior to shopping and during the trip itself,” he adds.