Eggs, Milk And Underwear

Facing competition from discount stores, supermarkets try to lure busy customers by offering everything from ham to hammocks.

April 02, 2003|By Liz Atwood | Liz Atwood,Sun Staff

A luggage set is perched above the cheese in the dairy aisle. Patio furniture is on display beside the Easter candy. Boxer shorts are next to the checkout counter.

These days, major grocery chains are trying hard to put more "super" in the supermarket.

While nonfood items have been on the shelves since the days when the groceries were delivered from the mom and pop store on the corner, today's supermarkets are confronting problems the corner groceries did not.

They're facing increased competition from big discount stores, Internet food purveyors, specialty food stores and even restaurants for consumers' food dollars. Customers are fickle as to the stores they patronize, and increasingly, folks want to do all their shopping in one place.

In response, "Supermarkets are branching out," says Greg Ten Eyck, a spokesman for Safeway, which began a program about three years ago to boost the number of nonfood items in the store.

Now along with the flowers, cosmetics and medicine, Safeway sells lawn furniture, lamps and DVD players, toys and department-store gift cards. It also has teamed up with a Web site specializing in overstocked merchandise to sell clothing, electronics and housewares online.

Giant also is pursuing the busy customer by offering seasonal items such as barbecue grills, hammocks and wicker furniture in its aisles. "The industry has gotten very competitive," says company spokesman Barry Scher. "It's important for us to develop something new in the store."

The goal, he adds, is to give customers more one-stop shopping opportunities. "It adds a little excitement to the center core of the store," he says. "It really is for everyone. So many people are time-starved."

Industry experts have a name for this new trend: "channel blurring." What it means is Wal-Mart is looking more like your grocery store, and grocery stores are looking more like your Wal-Mart.

The changes began decades ago, says Todd Hultquist, spokesman for the Food Marketing Institute, an industry trade organization. Giant put pharmacies in its stores in the 1960s. In the 1980s, many supermarket chains added flower shops and in the 1990s, banks.

Meanwhile, discount stores have expanded their food line from chips and soda to include, in some cases, entire grocery stores with bakeries and produce sections.

As a result, consumers are scaling back on the number of trips they make to the grocery store, says Todd Hale, a senior vice president at ACNielsen U.S., a company that tracks retail trends.

In 1999, the average consumer made 83 trips a year to the grocery store. By last year, that had fallen to 73 trips, according to a new ACNielsen study. Meanwhile, the number of yearly trips to super centers (combinations of discount and grocery stores) increased from 15 to 21.

But while supermarkets are losing business to super centers, Hale says they retain a significant advantage over their competitors: Virtually everyone shops at a grocery store.

Rob and Kim Lovett of Bel Air were shopping for groceries in their Safeway last spring when they spied a wooden patio set with a table, umbrella, four chairs and a bench on sale for $299.

"For some reason it looked so good in there and the price was right," Rob Lovett said.

They took their groceries home and Lovett returned the next day for the patio set. A year later, they're still pleased with their purchase. "It wasn't a bad deal at all," Lovett said.

Hale believes to be successful, groceries must simultaneously pursue two strategies to win consumers. One tactic is to focus on what grocery stores do best by offering fresh produce, baked goods, meat, seafood and deli. The other tactic is to continue to expand the nonfood offerings. "I can't say it's working right now, but it's what they have to do," Hale says.

The advantage of the second option is obvious when you consider that food stores make about a penny profit for every dollar of food they sell. For nonfood items, even those sold at a discount, the profit margins can be significantly higher.

So clear out the Super Deals and bulk-food bins and make way for DVD players, leather coats, gas grills and lawn ornaments. Recently groceries have even started to sell gasoline and offer automotive care, Hultquist says.

"The trend is likely to continue," he adds.

But while the channels are blurring, there will continue to be distinctions between grocery stores and discount stores, Hale says.

For one thing, the grocery stores will continue to emphasize seasonal merchandise. They may stock televisions, DVD players, coats and ice scrapers during the Christmas season, but by March those items will be replaced by lawn furniture and Easter baskets.

One reason they can change merchandise so quickly is that stores now have better control over their inventory, thanks to computers and merchandise scanners, says Jeff Metzger, publisher of the Columbia-

based trade journal Food World. Managers know what customers like and don't like, so unpopular items don't linger and take up valuable space.

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