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In The Trenches: Traditional supermarkets facing challenges

During my many road trips, I always make it a point to visit a number of supermarkets to browse through all of the departments, especially produce. My primary interest in perusing the stores is to examine the retail merchandising, since selling is the most important function of the entire operation.

As I walk throughout the stores, I have noticed a serious trend that is becoming more pronounced each and every day: The customer base is decreasing as shoppers scamper in all other directions for groceries.

One of the reasons most customers are departing is the fact that many common grocery items can be purchased at other types of retail outlets. Dollar stores, drugstores and convenience stores have increased grocery space and added more variety to the shelves, including dairy and fresh baked products.

In a stop at a local drugstore, I was amazed to discover expanded aisles of groceries as well as new refrigerated dairy and frozen food cases recently installed. This spelled out one point rather clearly: their grocery sales are growing from heightened customer purchases.

A compatible scenario was at one of the dollar stores in the same general area. They reset the entire store and placed frozen food and dairy cases all along the rear wall, dramatically increasing the grocery section of that store.

On another stop, after filling up my vehicle at a gas station, I went into the convenience store to pick up a soft drink. Inside was an eight-foot case of fresh produce and a customer picking up a head of Iceberg lettuce, a few tomatoes and some peaches. She also grabbed a bunch of bananas on a display near the checkout counter.

After these experiences, there is no doubt in my mind that conventional supermarkets are being challenged more than ever for a piece of the food pie. It may be a thin slice now, but the portion is growing larger.

The majority of consumers today are smarter shoppers. They have become better educated during the downward economic era as to how much their dollar can buy. Therefore, the aging traditional supermarket landscape is beginning to change, but not all for the good.

So, where are consumers heading these days to do most of their grocery shopping? They can't find every need in a gas station or drugstore. Besides, prices are much higher at those retailers. Quite simply, the majority of shoppers are now pouring into the mass discounters, club stores and low-priced outlets. The main reason is that they can get more for their dollar on basic food items.

The recent consumer grocery outreach has sparked a diverse mix of new programs being developed by conventional supermarkets. Some concepts are meant to protect the current customer base while others are to lure new shoppers into their stores.

One of the supermarket approaches in competing against the discounters is to promote new lower prices. You've seen the typical window signs posted, such as "We lowered 4,000 prices." But this program theme basically admits that their prices were too high in the first place. This is not a good message.

Traditional supermarkets are becoming so saturated with control programs that it is creating a backlash at the store level. Massive and aggressive displays of produce are hardly seen in stores anymore. Specific programs have leaned towards "conservative selling," which employs smaller displays, minimum stocking levels and less inventory.

Since high gross profit is such a major priority in traditional supermarkets, many of the policies have turned displays into one layer of produce in order to cut down on shrink. Fewer customers means less product turnover resulting in heavy shrink created by overstocking.

Customers feel more comfortable about shopping from a display filled with abundant product. It just appears to them that the produce is fresher. Therefore, as produce departments downsize to a slimmer appearance, limited purchases are being made.

Another control program that has eaten away at sales is the cutbacks in store labor. With all the consumer demands these days, it is next to impossible for one or two employees to maintain a utopian produce department and achieve a pie-in-the-sky gross profit demanded by management.

Where is all of this grocery shopping headed? Online shopping can now be added to the traditional supermarket headache. It just seems to be piling on and getting more difficult to handle. Unable to price competitively against the big discount stores is a primary reason for consistently declining sales.

Are traditional supermarkets en route to only becoming convenience stores for shoppers? The struggles continue with no relief in sight.

Ron Pelger is the president and CEO of RonProCon, a consulting firm for the produce industry, and the chairperson of FreshXperts LLC, a consortium of produce professionals. He can be reached by phone at 775/853-7056 or by email at ronprocon@gmail.com, or check his details on freshxperts.com for more information.