Wednesday, February 17, 2010

Is the supermarket a part of history?

Being the original self service concept with a history of half a century, the one format loosing to any challenger, is the super market. Being the traditional choice due to its reasonably priced/reasonably sized assortment situated at a popular location, the super market looses to price conscious shoppers choosing the discounter for the staples, the deli for the extras and the convenience store for the things that they need right now.

On the German market, discounters has replaced super markets to a large extent, while in Denmark, Sweden and other places the battle still rages with a large degree of the market still in the traditional channels and with players fighting with a wide array of weapons, some on the offensive and some en-trenched defending what they have.

The reaction to discounters and other formats are mainly:

Imitation of discounters:

Cutting out SKUs in each category enabling to lower prices though not to discount levels.

These actions are needed but also prompted by “normal” competition and increased pro-ductivity demands.

Heavy private label saturation.

Private label products supplement market leader and second runner up, as a low price alternative or a differentiation factor, adding quality image to the retailers store brand.

Creating discount ranges

Especially Danish supermarkets has followed the strategy of creating a 200 or 300 SKU wide “EDLP-assortment” with basic items to battle the discounters.

Imitation of premium providers

Focusing on fresh produce and service density

Going back to basic, and providing high qual-ity fresh produce for the quality conscious consumer is an often used tool, though one that increases cost and normally lowering margins. This has to be done will great con-sequence if the customer should be able to tell the difference from today’s stores.

Upgrading shopping environments

Adding new fixtures and upgrading stores to new concepts is a weapon that is creating the need for heavy investments, and needs to be really differentiation and innovation to be more than “another rebuilt store”. This is a way to imitate some of the premium providers.

Consumer differentiations

Differentiation of stores to attract and stand up to the needs of different type of target seg-ments such as Spanish Plus Fresc, with different departments in the shop depending on if you are health conscious, interested in new products, living in the fast lane and so on.

Bringing in eye candy and new hot premium products

New displays and special selected ranges, once again borrowing the tactic from premium providers, though doing this to the extent that creates an impact means a large investment.

Imitating convenience stores

Creating quick-shops

The idea behind quick shop is to that offer a few selected SKUs just inside the entrance enabling the hurried consumer to grab a few basic things like milk and bread for tomorrows breakfast, without having to instead of rush-ing to the nearest convenience store. I e a convenience store within the super market.

Doubtlessly, the competition will lead to a place were the term super market no longer is relevant to describe the stores that fits the standard criteria for being a supermarket. Some players will move into soft discount and others be converted into almost truly premium concept. Smaller supermarkets, especially in city locations will probably turn into convenience type stores while larger ones will be squeezed into compact hypers.

The defensive actions taken by cost cutting, which often should have been done a long time a go, and going back to delicatessen for example is not neces-sary something that the customer consider are worth paying the price for. And no matter what, fighting with price against a discounter is a war of attrition a super market cannot win, as it cannot win the war of costs.o