JACKSONVILLE, Fla. – Long gone are the days when shoppers auto-piloted to the nearest grocery store to purchase food.
Last year, research conducted by retail consulting firm Retail Forward found that 46 percent of shoppers prefer to shop for food where they can also purchase items like clothing, home accessories and CDs (think Wal-Mart and Target stores).
Nowadays, as more shoppers eschew their local grocery store for the price-slashing power of a Wal-Mart Supercenter, analysts say grocery stores are retooling their strategies to halt shoppers from shifting their allegiance to one-stop "big box" retailers. Meanwhile, some shoppers are altering their shopping patterns altogether to chase the best customer service or unique, specialized products.
The shake-up means traditional grocery stores are reinventing product mixes and creating niches to maintain market share and sustain sales growth, all while capturing the attention of an increasingly disloyal army of shoppers. Retail analysts say the key to luring customers back to grocery stores is to offer them something unique: Top-notch customer care, eclectic and exclusive products or an innovative store floor plan were examples given.
"At this point, supermarkets have either caved in to the pressure (of Wal-Mart and others) or they've figured out how to compete," said Mark Hamstra, the retail and financial editor of Supermarket News.
But that strategy shift is a bumpy road for grocery retailers.
"I think generally that traditional supermarkets are being phased out," said David Livingston, a supermarket analyst and founder of DJL Research. "Look at how much business Wal-Mart is getting. It's all about price - convenience is secondary."
In Jacksonville, Wal-Mart's aggressive expansion has disrupted the market shares of the other grocery chains, according to the December issue of the Shelby Report, a grocery industry publication that tracks supermarkets' market share.
While Publix still reigns as the top grocery store in the area with 42 stores and 33.17 percent market share last quarter, its market share dropped 1.19 percent points when compared to the same time period in 2005.
In second place is Wal-Mart, which brought its Supercenters to the Jacksonville market in 2003, with 12 locations and 26.68 percent of the area's market share, 8.48 percent points up from the same time period in 2005.
Winn-Dixie, which has only recently emerged from bankruptcy, was first knocked out of its No. 2 position by Wal-Mart in September 2006. In the Shelby Report's December issue, Winn-Dixie's 45 locations captured 22.83 percent of the market share, down 2.89 percent from 2005.
Supercenters are applying a lot of pressure to traditional grocers, said Sandra Skrovan, vice president of Retail Forward, during an Internet seminar last month.
In addition to the onward march of Supercenters, more people spend money eating out at restaurants, which is also pinching grocery store sales, Skrovan said.
According to Retail Forward, 10 years ago, supermarkets accounted for 44 percent of food and drug retail sales. Nowadays, Skrovan says, it's down to 28 percent. Skrovan said Retail Forward found only a third of shoppers polled in the company's Shopper Scan survey still made a weekly trek to the supermarket.
Plenty of factors are chipping away at grocery sales. "Supercenters are a big change driver," Skrovan said during the Web seminar, noting that Wal-Mart's food business was estimated to total $120 billion in domestic 2005 sales. Meanwhile, Target stores (as well as smaller retailers, like dollar stores) are devoting more shelf space to food.
The key: Be different
In order to better compete with the price-slashing capabilities of giants like Wal-Mart and Target, today's grocery stores must re-invent their core selection and focus on a new mix of categories, ranging from ethnic to gourmet to organic foods, said Dan Stanek, executive vice president of Retail Forward, during the Web seminar.
Lakeland-based Publix, he noted, was experimenting with this concept by testing a "store within a store" hawking health-focused, natural and organic products under Publix's Greenwise banner. Locally, a new Mandarin Publix location on San Jose Boulevard has devoted several aisles to its Greenwise store, which has seen success, according to Dwaine Stevens, a Publix spokesman.
"I'll put it this way: (Greenwise) has been largely accepted by our customers," Stevens said, noting that Publix executives are pleased with its performance. "I think with this particular market, customers are looking for something unique: customer service and a huge offering of products."
That's a sentiment echoed by Retail Forward's Stanek. "Retailers are trying to differentiate from one another," he said during the Web seminar.
Hamstra says that's an opportunity for supermarkets to wow customers by emphasizing in-store butchers or an extensive produce selection - things the local Wal-Mart might not have. Meanwhile, grocery stories are becoming more deft at retooling their strategies by cutting operational costs so they can slash prices, and by developing exclusive "private brand" products customers can't find elsewhere.
Winn-Dixie has made a point of improving store appearance and customer service, and new stores are expected to open next fiscal year. Executives have stated goals of revamping dozens of stores with new colors and signage, along with a floor plan emphasizing fresh produce.
"You can't beat Wal-Mart when it comes to price, so grocery stores must make themselves a niche," said analyst Livingston. "Publix stands apart with customer service. Whole Foods does it with the organic market."
That said, Wal-Mart has made a push into the organic market as well, announcing last year that it planned to double its organic offerings. But analysts say traditional supermarkets might still have the edge.
"People go to a chain like Wal-Mart for dry goods and the basics, like a bulk pack of detergent or Gatorade," Hamstra said. "Most analysts are looking at Wal-Mart's addition of organic offerings as a non-event. Wal-Mart is responding to customer demands, but they haven't really gone into it in a big enough way that it's going have a meaningful impact."