Why Shoppers Shop Supermarkets

<body topmargin=0 leftmargin=0 marginheight=0 marginwidth=0> <table cellpadding=0 cellspacing=0 border=0><tr> <td valign="top" colspan=2 height=110 BGCOLOR="#666699" TEXT="#080000" bgproperties="fixed" background="04900840erlcjm.png"> <div> <B> <TABLE BORDER="0" CELLPADDING="1" CELLSPACING="1" WIDTH="600" BORDERCOLORLIGHT="#C0C0C0" BORDERCOLORDARK="#808080" FRAME="BOX" RULES="ALL" ALIGN="LEFT" HSPACE="0" VSPACE="0" > <tR> <tD VALIGN=TOP HEIGHT= 103 ><NOBR><div> <A HREF="index.htm" TARGET="_top" TITLE="Hoytnet Home"><U><B><IMG SRC="063775a0.jpg" border=0 width="119" height="90" ALIGN="BOTTOM" HSPACE="0" VSPACE="0"></B></U></A></div> </NOBR></tD> <tD VALIGN=TOP><NOBR><div> <B>Hoyt & Company</B></div> <div> <A HREF="services.htm" TARGET="_top" TITLE="What We Do"><U>What We Do</U></A> | <A HREF="who.htm" TARGET="_top" TITLE="Who We Are"><U>Who We Are</U></A> | <A HREF="articles.htm" TARGET="_top" TITLE="How We Think"><U>How We Think</U></A> |<A HREF="contact.htm" TARGET="_top" TITLE="Contact Us"><U> Contact Us</U></A></div> </NOBR></tD> </tR> </TABLE></B></div> <bR> <div> </div> </td> </tr><tr> <td valign="top" width=165 BGCOLOR="#CCCCFF" TEXT="#080000" background="04311c00egdysm.png"> <div> <A HREF="articles69.htm" TARGET="_top" TITLE="Chris Hoyt Articles"><U><B>Back to:  Articles</B></U></A></div> </td> <td valign="top" height=370 BGCOLOR="#FFFFFF" TEXT="#080000"> <div> <B>Reveries.com - April, 03</B></div> <bR> <div> <I><B>Why Shoppers Shop at Supermarkets</B></I></div> <bR> <div> BY<B>: Chris Hoyt</B></div> <bR> <div> <B>Despite that supermarkets can no longer compete on price against value discounters, they maintain an overwhelming advantage when it comes to household penetration and trip frequency.</B></div> <bR> <div> In fact, 100 percent of households still shop supermarkets an average of about 1.5 times per week -- compared to 63 percent penetration for supercenters and a frequency of a little more than about once every three weeks.</div> <bR> <div> The question is: If price is the key determinant in the consumer's decision of where to shop, how do supermarkets retain their significant advantage?</div> <bR> <div> To answer this question, Hoyt & Company recently undertook an informal survey of why consumers shop supermarkets versus other channels.</div> <bR> <div> We conducted about 100 consumer intercepts per store in the parking lots of Safeway, Albertson's and Fry's (Kroger) and outside Wal-Mart Supercenters and Costco (police blotter coverage is available upon request).</div> <bR> <div> The results:</div> <div> <TABLE BORDER="0" CELLPADDING="1" CELLSPACING="1" WIDTH="573" BORDERCOLORLIGHT="#C0C0C0" BORDERCOLORDARK="#808080" FRAME="VOID" RULES="NONE" HSPACE="0" VSPACE="0" > <tR> <tD VALIGN=CENTER HEIGHT= 57 WIDTH="7"><IMG BORDER="0" SRC="1x1.gif" HEIGHT="57" ALIGN="bottom" WIDTH="7" HSPACE="0" VSPACE="0"></tD> <tD VALIGN=CENTER WIDTH="8"><IMG BORDER="0" SRC="1x1.gif" HEIGHT="57" ALIGN="bottom" WIDTH="8" HSPACE="0" VSPACE="0"></tD> <tD VALIGN=CENTER WIDTH="548"><div> <IMG BORDER="0" SRC="Symb075c00b700f000000000.png" HEIGHT="16" WIDTH="24" ALIGN="bottom" HSPACE="0" VSPACE="0">88 percent of supermarket shoppers said they shop supermarkets primarily for perishables, versus only 64 percent for Wal-Mart and 36 percent for Costco</div> </tD> </tR> <tR> <tD VALIGN=CENTER HEIGHT= 38 ><NOBR><IMG BORDER="0" SRC="1x1.gif" HEIGHT="38" ALIGN="bottom" WIDTH="7" HSPACE="0" VSPACE="0"></NOBR></tD> <tD VALIGN=CENTER WIDTH="8"><IMG BORDER="0" SRC="1x1.gif" HEIGHT="38" ALIGN="bottom" WIDTH="8" HSPACE="0" VSPACE="0"></tD> <tD VALIGN=CENTER WIDTH="548"><div> <IMG BORDER="0" SRC="Symb075c00b700f000000000.png" HEIGHT="16" WIDTH="24" ALIGN="bottom" HSPACE="0" VSPACE="0">Only 13 percent of supermarket shoppers shop supermarkets for price -- versus 71 percent for Wal-Mart and (surprisingly) 50 percent for Costco</div> </tD> </tR> <tR> <tD VALIGN=CENTER HEIGHT= 57 ><NOBR><IMG BORDER="0" SRC="1x1.gif" HEIGHT="57" ALIGN="bottom" WIDTH="7" HSPACE="0" VSPACE="0"></NOBR></tD> <tD VALIGN=CENTER WIDTH="8"><IMG BORDER="0" SRC="1x1.gif" HEIGHT="57" ALIGN="bottom" WIDTH="8" HSPACE="0" VSPACE="0"></tD> <tD VALIGN=CENTER WIDTH="548"><div> <IMG BORDER="0" SRC="Symb075c00b700f000000000.png" HEIGHT="16" WIDTH="24" ALIGN="bottom" HSPACE="0" VSPACE="0">At the time of our interviews, only 12 percent of supermarket shoppers were shopping that day for a "major shop" (as opposed to a "fill-in") versus 36 percent for Wal-Mart and "0 percent" for Costco</div> </tD> </tR> <tR> <tD VALIGN=CENTER HEIGHT= 38 ><NOBR><IMG BORDER="0" SRC="1x1.gif" HEIGHT="38" ALIGN="bottom" WIDTH="7" HSPACE="0" VSPACE="0"></NOBR></tD> <tD VALIGN=CENTER WIDTH="8"><IMG BORDER="0" SRC="1x1.gif" HEIGHT="38" ALIGN="bottom" WIDTH="8" HSPACE="0" VSPACE="0"></tD> <tD VALIGN=CENTER WIDTH="548"><div> <IMG BORDER="0" SRC="Symb075c00b700f000000000.png" HEIGHT="16" WIDTH="24" ALIGN="bottom" HSPACE="0" VSPACE="0">63 percent of supermarket shoppers buy groceries in other supermarkets, 33 percent in supercenters and 56 percent in club stores.</div> </tD> </tR> <tR> <tD VALIGN=CENTER HEIGHT= 76 ><NOBR><IMG BORDER="0" SRC="1x1.gif" HEIGHT="76" ALIGN="bottom" WIDTH="7" HSPACE="0" VSPACE="0"></NOBR></tD> <tD VALIGN=CENTER WIDTH="8"><IMG BORDER="0" SRC="1x1.gif" HEIGHT="76" ALIGN="bottom" WIDTH="8" HSPACE="0" VSPACE="0"></tD> <tD VALIGN=CENTER WIDTH="548"><div> <IMG BORDER="0" SRC="Symb075c00b700f000000000.png" HEIGHT="16" WIDTH="24" ALIGN="bottom" HSPACE="0" VSPACE="0">Importantly, only 52 percent of supermarket shoppers feel that their supermarket carries "all" of the items they want to buy -- versus 57 percent for Wal-Mart and "0 percent" for Costco (but this is to be expected).</div> </tD> </tR> <tR> <tD VALIGN=CENTER HEIGHT= 57 ><NOBR><IMG BORDER="0" SRC="1x1.gif" HEIGHT="57" ALIGN="bottom" WIDTH="7" HSPACE="0" VSPACE="0"></NOBR></tD> <tD VALIGN=CENTER WIDTH="8"><IMG BORDER="0" SRC="1x1.gif" HEIGHT="57" ALIGN="bottom" WIDTH="8" HSPACE="0" VSPACE="0"></tD> <tD VALIGN=CENTER WIDTH="548"><div> <IMG BORDER="0" SRC="Symb075c00b700f000000000.png" HEIGHT="16" WIDTH="24" ALIGN="bottom" HSPACE="0" VSPACE="0">Only 42 percent of supermarket shoppers buy non-edible groceries in supermarkets (pet food, paper, etc.) versus 64 percent at Wal-Mart and 100 percent at Costco.</div> </tD> </tR> <tR> <tD VALIGN=CENTER HEIGHT= 57 ><NOBR><IMG BORDER="0" SRC="1x1.gif" HEIGHT="57" ALIGN="bottom" WIDTH="7" HSPACE="0" VSPACE="0"></NOBR></tD> <tD VALIGN=CENTER WIDTH="8"><IMG BORDER="0" SRC="1x1.gif" HEIGHT="57" ALIGN="bottom" WIDTH="8" HSPACE="0" VSPACE="0"></tD> <tD VALIGN=CENTER WIDTH="548"><div> <IMG BORDER="0" SRC="Symb075c00b700f000000000.png" HEIGHT="16" WIDTH="24" ALIGN="bottom" HSPACE="0" VSPACE="0">In addition to perishables, the other most frequently-cited reasons supermarket shoppers shop at supermarkets are location, service and "more choices"</div> </tD> </tR> <tR> <tD VALIGN=CENTER HEIGHT= 57 ><NOBR><IMG BORDER="0" SRC="1x1.gif" HEIGHT="57" ALIGN="bottom" WIDTH="7" HSPACE="0" VSPACE="0"></NOBR></tD> <tD VALIGN=CENTER WIDTH="8"><IMG BORDER="0" SRC="1x1.gif" HEIGHT="57" ALIGN="bottom" WIDTH="8" HSPACE="0" VSPACE="0"></tD> <tD VALIGN=CENTER WIDTH="548"><div> <IMG BORDER="0" SRC="Symb075c00b700f000000000.png" HEIGHT="16" WIDTH="24" ALIGN="bottom" HSPACE="0" VSPACE="0">Conversely, both Wal-Mart and Costco shoppers have "zero" expectations of either supercenters or clubs to provide either "service" or "more choices."</div> </tD> </tR> </TABLE></div> <bR> <div> Net on survey: <I>Consumers no longer perceive supermarkets as grocery price leaders and do not shop the channel primarily for price savings.</I></div> <bR> <div> Message to supermarket executives: Continuing a 24/7 fixation on price is now counter-productive relative to other ways of meeting shopper expectations that would add genuine value to the overall supermarket shopping experience and leverage supermarkets' inherent strengths in the process.</div> <bR> <div> What other ways? Well, what we are not going to say is, "brand the store" -- a totally unrealistic approach in view of the fact that supermarkets barely have sufficient margin to continue to survive, much less to blow-up their basic business models and re-position all of the bricks.</div> <bR> <div> Assuming, therefore, that most supermarkets are locked into their current configurations, the first constructive step for any supermarket wishing to remain in business long-term is <I>to shift its focus from the relationship it has with its suppliers to the relationship it ought to be building with its customers.</I></div> <bR> <div> Specifically:</div> <bR> <div> <TABLE BORDER="0" CELLPADDING="1" CELLSPACING="1" WIDTH="573" BORDERCOLORLIGHT="#C0C0C0" BORDERCOLORDARK="#808080" FRAME="VOID" RULES="NONE" HSPACE="0" VSPACE="0" > <tR> <tD VALIGN=CENTER HEIGHT= 57 WIDTH="7"><IMG BORDER="0" SRC="1x1.gif" HEIGHT="57" ALIGN="bottom" WIDTH="7" HSPACE="0" VSPACE="0"></tD> <tD VALIGN=CENTER WIDTH="8"><IMG BORDER="0" SRC="1x1.gif" HEIGHT="57" ALIGN="bottom" WIDTH="8" HSPACE="0" VSPACE="0"></tD> <tD VALIGN=CENTER WIDTH="548"><div> <IMG BORDER="0" SRC="Symb075c00b700f000000000.png" HEIGHT="16" WIDTH="24" ALIGN="bottom" HSPACE="0" VSPACE="0">Instead of "grow share, grow procurement budget, grow sales, grow profits," shift to "<I>give the customer an emotional reason to return</I>." (The former will follow.)</div> </tD> </tR> <tR> <tD VALIGN=CENTER HEIGHT= 38 ><NOBR><IMG BORDER="0" SRC="1x1.gif" HEIGHT="38" ALIGN="bottom" WIDTH="7" HSPACE="0" VSPACE="0"></NOBR></tD> <tD VALIGN=CENTER WIDTH="8"><IMG BORDER="0" SRC="1x1.gif" HEIGHT="38" ALIGN="bottom" WIDTH="8" HSPACE="0" VSPACE="0"></tD> <tD VALIGN=CENTER WIDTH="548"><div> <IMG BORDER="0" SRC="Symb075c00b700f000000000.png" HEIGHT="16" WIDTH="24" ALIGN="bottom" HSPACE="0" VSPACE="0">Instead of "increase trip frequency and transaction size," shift to "<I>pamper, surprise and reward</I>."</div> </tD> </tR> <tR> <tD VALIGN=CENTER HEIGHT= 38 ><NOBR><IMG BORDER="0" SRC="1x1.gif" HEIGHT="38" ALIGN="bottom" WIDTH="7" HSPACE="0" VSPACE="0"></NOBR></tD> <tD VALIGN=CENTER WIDTH="8"><IMG BORDER="0" SRC="1x1.gif" HEIGHT="38" ALIGN="bottom" WIDTH="8" HSPACE="0" VSPACE="0"></tD> <tD VALIGN=CENTER WIDTH="548"><div> <IMG BORDER="0" SRC="Symb075c00b700f000000000.png" HEIGHT="16" WIDTH="24" ALIGN="bottom" HSPACE="0" VSPACE="0">Instead of "just another supermarket selling groceries," <I>embed the store in the local community, </I>and become an acknowledged part of the flow.</div> </tD> </tR> <tR> <tD VALIGN=CENTER HEIGHT= 76 ><NOBR><IMG BORDER="0" SRC="1x1.gif" HEIGHT="76" ALIGN="bottom" WIDTH="7" HSPACE="0" VSPACE="0"></NOBR></tD> <tD VALIGN=CENTER WIDTH="8"><IMG BORDER="0" SRC="1x1.gif" HEIGHT="76" ALIGN="bottom" WIDTH="8" HSPACE="0" VSPACE="0"></tD> <tD VALIGN=CENTER WIDTH="548"><div> <I><IMG BORDER="0" SRC="Symb075c00b700f000000000.png" HEIGHT="16" WIDTH="24" ALIGN="bottom" HSPACE="0" VSPACE="0">Promote to satisfy your customers, not your suppliers</I>. This is going to be hardest for most supermarkets, because it means changing from a deal-driven to a consumer-driven buying and promotion mentality (but don't worry, the money will still be there!).</div> </tD> </tR> <tR> <tD VALIGN=CENTER HEIGHT= 19 ><NOBR><IMG BORDER="0" SRC="1x1.gif" HEIGHT="19" ALIGN="bottom" WIDTH="7" HSPACE="0" VSPACE="0"></NOBR></tD> <tD VALIGN=CENTER WIDTH="8"><IMG BORDER="0" SRC="1x1.gif" HEIGHT="19" ALIGN="bottom" WIDTH="8" HSPACE="0" VSPACE="0"></tD> <tD VALIGN=CENTER WIDTH="548"><IMG BORDER="0" SRC="1x1.gif" HEIGHT="19" ALIGN="bottom" WIDTH="548" HSPACE="0" VSPACE="0"></tD> </tR> </TABLE></div> <div> The net result of doing these types of things will be to create value beyond price and establish a loyal base of customers that goes beyond the relatively weak arguments currently offered by supermarket frequent shopper programs -- and everything else supermarkets do to imitate other channels or that is easily replicable by other channels.</div> <bR> <div> For supermarkets that do shift to this kind of platform -- and that persist in sticking to it while resisting the temptation to react to competitive threats -- the key benefit will be to start building the store equity everyone has been talking about for years but which apparently has been an elusive goal for large, public, supermarkets.</div> <bR> <div> Why is all of this worth it? <I>The more equity one builds, the less dependent on price one becomes.</I></div> <bR> <div> What is "equity?" Think of your favorite restaurant and the reasons you go there. Same with your favorite clothes store or hotel. Is price the reason people go to a Nieman's or a Nordstrom's or a Bennigan's or a Friday's with so many others from which to choose?</div> <bR> <div> How to get started? One idea – which seems obvious on the face of it -- is to <I>ask your customers</I> what they expect:</div> <bR> <div> <TABLE BORDER="0" CELLPADDING="1" CELLSPACING="1" WIDTH="573" BORDERCOLORLIGHT="#C0C0C0" BORDERCOLORDARK="#808080" FRAME="VOID" RULES="NONE" HSPACE="0" VSPACE="0" > <tR> <tD VALIGN=CENTER HEIGHT= 19 WIDTH="7"><IMG BORDER="0" SRC="1x1.gif" HEIGHT="19" ALIGN="bottom" WIDTH="7" HSPACE="0" VSPACE="0"></tD> <tD VALIGN=CENTER WIDTH="8"><IMG BORDER="0" SRC="1x1.gif" HEIGHT="19" ALIGN="bottom" WIDTH="8" HSPACE="0" VSPACE="0"></tD> <tD VALIGN=CENTER WIDTH="548"><div> <IMG BORDER="0" SRC="Symb075c00b700f000000000.png" HEIGHT="16" WIDTH="24" ALIGN="bottom" HSPACE="0" VSPACE="0">Of <I>your</I> supermarket!</div> </tD> </tR> <tR> <tD VALIGN=CENTER HEIGHT= 19 ><NOBR><IMG BORDER="0" SRC="1x1.gif" HEIGHT="19" ALIGN="bottom" WIDTH="7" HSPACE="0" VSPACE="0"></NOBR></tD> <tD VALIGN=CENTER WIDTH="8"><IMG BORDER="0" SRC="1x1.gif" HEIGHT="19" ALIGN="bottom" WIDTH="8" HSPACE="0" VSPACE="0"></tD> <tD VALIGN=CENTER WIDTH="548"><div> <IMG BORDER="0" SRC="Symb075c00b700f000000000.png" HEIGHT="16" WIDTH="24" ALIGN="bottom" HSPACE="0" VSPACE="0">How well you are delivering on this!</div> </tD> </tR> <tR> <tD VALIGN=CENTER HEIGHT= 19 ><NOBR><IMG BORDER="0" SRC="1x1.gif" HEIGHT="19" ALIGN="bottom" WIDTH="7" HSPACE="0" VSPACE="0"></NOBR></tD> <tD VALIGN=CENTER WIDTH="8"><IMG BORDER="0" SRC="1x1.gif" HEIGHT="19" ALIGN="bottom" WIDTH="8" HSPACE="0" VSPACE="0"></tD> <tD VALIGN=CENTER><NOBR><div> <IMG BORDER="0" SRC="Symb075c00b700f000000000.png" HEIGHT="16" WIDTH="24" ALIGN="bottom" HSPACE="0" VSPACE="0">What <I>your customers</I> would like to see improved!</div> </NOBR></tD> </tR> <tR> <tD VALIGN=CENTER HEIGHT= 38 ><NOBR><IMG BORDER="0" SRC="1x1.gif" HEIGHT="38" ALIGN="bottom" WIDTH="7" HSPACE="0" VSPACE="0"></NOBR></tD> <tD VALIGN=CENTER WIDTH="8"><IMG BORDER="0" SRC="1x1.gif" HEIGHT="38" ALIGN="bottom" WIDTH="8" HSPACE="0" VSPACE="0"></tD> <tD VALIGN=CENTER WIDTH="548"><div> <I><IMG BORDER="0" SRC="Symb075c00b700f000000000.png" HEIGHT="16" WIDTH="24" ALIGN="bottom" HSPACE="0" VSPACE="0">Why</I> they shop other channels -- the <I>specifics</I> of what they like and don't like.</div> </tD> </tR> </TABLE></div> <bR> <div> The other resource -- and, in our opinion the best resource supermarkets can tap to begin creating value beyond price – is the data and intellectual capital of its suppliers. What suppliers bring to the party is:</div> <bR> <div> <TABLE BORDER="0" CELLPADDING="1" CELLSPACING="1" WIDTH="573" BORDERCOLORLIGHT="#C0C0C0" BORDERCOLORDARK="#808080" FRAME="VOID" RULES="NONE" HSPACE="0" VSPACE="0" > <tR> <tD VALIGN=CENTER HEIGHT= 19 WIDTH="7"><IMG BORDER="0" SRC="1x1.gif" HEIGHT="19" ALIGN="bottom" WIDTH="7" HSPACE="0" VSPACE="0"></tD> <tD VALIGN=CENTER WIDTH="8"><IMG BORDER="0" SRC="1x1.gif" HEIGHT="19" ALIGN="bottom" WIDTH="8" HSPACE="0" VSPACE="0"></tD> <tD VALIGN=CENTER WIDTH="548"><div> <IMG BORDER="0" SRC="Symb075c00b700f000000000.png" HEIGHT="16" WIDTH="24" ALIGN="bottom" HSPACE="0" VSPACE="0">Built-in consumer focus</div> </tD> </tR> <tR> <tD VALIGN=CENTER HEIGHT= 19 ><NOBR><IMG BORDER="0" SRC="1x1.gif" HEIGHT="19" ALIGN="bottom" WIDTH="7" HSPACE="0" VSPACE="0"></NOBR></tD> <tD VALIGN=CENTER WIDTH="8"><IMG BORDER="0" SRC="1x1.gif" HEIGHT="19" ALIGN="bottom" WIDTH="8" HSPACE="0" VSPACE="0"></tD> <tD VALIGN=CENTER WIDTH="548"><div> <IMG BORDER="0" SRC="Symb075c00b700f000000000.png" HEIGHT="16" WIDTH="24" ALIGN="bottom" HSPACE="0" VSPACE="0">Unparalleled marketing expertise</div> </tD> </tR> <tR> <tD VALIGN=CENTER HEIGHT= 19 ><NOBR><IMG BORDER="0" SRC="1x1.gif" HEIGHT="19" ALIGN="bottom" WIDTH="7" HSPACE="0" VSPACE="0"></NOBR></tD> <tD VALIGN=CENTER WIDTH="8"><IMG BORDER="0" SRC="1x1.gif" HEIGHT="19" ALIGN="bottom" WIDTH="8" HSPACE="0" VSPACE="0"></tD> <tD VALIGN=CENTER><NOBR><div> <IMG BORDER="0" SRC="Symb075c00b700f000000000.png" HEIGHT="16" WIDTH="24" ALIGN="bottom" HSPACE="0" VSPACE="0">A demonstrated willingness to help at every turn</div> </NOBR></tD> </tR> </TABLE></div> <bR> <div> Pick the supplier (or suppliers) you think would be most helpful at this, ask them to do some homework and get their recommendations on what they think you could/should do to begin building sustainable value.</div> <bR> <div> Moral of story: Its not just price; its a combination of factors carefully blended and balanced to satisfy a particular consumer need or aspiration. Each supermarket has to search within its own strengths to find the right formula. There are no easy answers, but -- frankly -- the alternatives look bleak.</div> <bR> <bR> <bR> </td> </tr></table></body>