Grocery Headquarters

Enter the Dictator

Nov 1997 v63 n11 p20(2)

(supermarket customers)(includes related article on marketing for supermarkets)

Bob Gatty

COPYRIGHT 1997 Delta Communications Inc.

"The consumer is king" is no longer the battle cry. Today's consumer has even more power than that of a mere monarch.

The supermarket industry is turning itself upside down because it sees itself being waylaid by every manner of competitor, from cafeterias and fancy restaurants to self-service gas stations. It's spending billions of dollars on technology - implementing systems designed to figure out just what the consumer wants, and provide it as quickly and efficiently as possible.

No doubt, there is more to come.

"The consumer is not king anymore," said futurist William Knoke. "The consumer is dictator. Consumers are sophisticated, and they know what they want more than ever."

Knoke, president of the Harvard Capital Group, told supermarket wholesalers and food distributors that massive change is coming as a result of consumer demands, and that they'd best be prepared. Speaking at the Food Distributors International (FDI) executive conference in Bermuda in mid-September, Knoke predicted customization, globalization, placeless offices and outsourcing will become the norm in the 21st century, and cautioned that as Internet commerce expands and retail stores come under siege, some of today's supermarkets will cease to exist.

"There is a new mindset," said Knoke. "Generation Xers cannot be sold. You have to supply them with information. They are not going to respond to pushy sales people. We are becoming much more cyber savvy, all of us."

With customer surveys showing that only 11 percent of people regard grocery shopping as fun and 83 percent say it takes too much time, Knoke warned that many shoppers will take advantage of online shopping. "It really doesn't make sense to go to the store," he said. "Doesn't it make sense to automate that task?"

Thus, for supermarkets to survive, they must adapt, taking advantage of opportunities made possible by changes in consumer attitudes and responding to consumer demands. Stores must customize service, he said. Retailers must remember that a growing number of customers will be telecommuters increasingly focused on what their computer can achieve for them.

June Cleaver, where are you?

"The forces of change are picking up speed," added Ira Blumenthal, president, Co-Opportunities Inc. "Change is inevitable. Growth is optional."

Citing the many choices customers have when purchasing food, Blumenthal cautioned companies to pay attention. "You no longer can sell people what you want to sell them," he declared. "You can only sell them what they want to buy."

Thus, it's essential for wholesalers to make sure the products they carry meet these demands.

"More and more people are working at home," he said. "The family is going at 100 miles an hour." Convenience is crucial.

Blumenthal cautioned supermarkets to recognize the implications of the increasing numbers of middle aged and older shoppers in today's marketplace. "This means savvy and sophisticated dining guests," he said. "But they have greater expectations than ever before. They have greater disposable incomes than ever before."

Noting that by the year 2000, 74 percent of American families will be dual income, Blumenthal asked, "June Cleaver, where are you?"

Everybody is getting into the food business, he said, pointing out that the Horne Depot do-it-yourself chain is selling on premise food and has opened 150 Depot Diners. "Blockbuster Video will be in the business," he said. "Watch Tandy. Watch Radio Shack.

"There are no rules anymore," Blumenthal said. "Nothing is non-traditional anymore. Everything is up for grabs."

To those who say supermarkets cannot compete with restaurants as eating destinations, Blumenthal argued that this is not the intention. The supermarket's opportunity, he said, is to provide "restaurant-quality food for people to take home."

Quality and pizazz, he said, are the keys. "In order for prepared foods to succeed," he cautioned, "they must be restaurant-quality, restaurant-style, restaurant-standard, and marketed with restaurant-type packaging."

The wholesaler's role

It is important for supermarkets to recognize that they have not been particularly good as food manufacturers, but get high marks from consumers for freshness and efficiency, advised Mike DeFabis, president and chief executive officer of Associated Wholesale Grocers Inc., Kansas City, Kan.

"The supermarket is not going to be the answer in terms of preparation of food in individual stores," he said, adding that [supermarkets'] biggest opportunity is to provide quality food that can be taken horne and heated.

"So you might see wholesalers with alliances as the people who will prepare this food," said DeFabis, adding that it is critical for wholesale companies to align themselves with the right manufacturer.

Keep in mind, said DeFabis, "the customer doesn't care who made that product. It doesn't matter if the store made it from scratch. It just doesn't matter."

Is the trend toward foodservice overblown?

"Look at the grocery store," DeFabis said. "The only areas of growth are in produce, deli/foodservice and the bakery." In fact, he added, at his company, the breakdown today is 55 percent refrigerated product, and 45 percent dry.

Why? Because the consumer is now directing decisions made in supermarket executive suites across the nation. It's a turnaround, but as Blumenthal said, it's the future.

RELATED ARTICLE: Taking advantage of consumer power

The consumer may be gaining power, but Bill May, vice president for marketing and MIS at the Nash Finch Co., believes supermarket retailers can turn customer needs and wants into cash register rings.

"I believe retailers will be turning their attention to customer-specific marketing much more than in the past," says May. "These programs gather as much data as possible on each individual customer and allow retailers to provide goods and services as a value/price proposition that will drive the business."

As retailers begin to understand how to take advantage of this information, May predicts they will be able to develop "very powerful" marketing tools that provide consumers good value on the products they normally purchase and encourage them to purchase related products they may not otherwise buy.

That, he says, will help generate profits along the distribution chain.

"The consumer as dictator? Not quite," he says. "In fact, that's almost offensive to me."

"I don't think it makes any difference whether you call them king or dictator," adds Jeffrey Noddle, executive vice president at Supervalu Inc. "They are still making all the decisions. Consumers are always going to vote with their dollars."

Still, supermarket companies can influence consumer behavior, Noddle adds. "I don't believe that consumers know what they want a lot of the time. They can be influenced with merchandising, pricing, advertising - all of the things that we do."

Meanwhile, Noddle believes the supermarket industry is on the right track with HMR initiatives, although he says strategies need to be better focused.

"I don't think the concern is an over-reaction," he says. "We've raised a whole generation of people who don't look at scratch cooking any more. They are going to buy prepared foods from somebody. So there is a niche for the supermarket. But we need to become more time friendly. I don't think there is enough substance yet as to what plan we should follow."