Power Shift
Mass merchandisers continue to gain packaged goods companies’ respect as retailers and marketers hone their consumer focus. Wal-Mart, of course, still sets the gold standard for operations and marketing excellence. But Target Stores has gained favor as it expands, and becomes a power retailer. That’s got supermarket chains scrambling to maintain their share of CPG sales as marketers-especially food companies — gravitate towards mass merch.
The crucial tool is consumer insight, says Don Stuart, partner at trade marketing consultancy Cannondale, Wilton, CT. “Consumers will play a bigger role,” he says. “The more retailers can do to tap the psyche of consumers, the more effective they’ll be — as long as they have the basic building blocks of efficiency, data technology, and operational elements.”
For the fifth straight year, Wal-Mart led the 2002 PoweRanking survey as best retailer overall; it was also CPG’s top choice for nine of 10 criteria. Target saw the biggest gain in marketers’ esteem, up 9.6 percentage points to third place (from fifth) as best overall retailer. Club store Costco, was up 2.6 percentage points to ninth place (from tenth in 2001). PoweRanking’s 122 CPG respondents ranked Bentonville, AR-based Wal-Mart and Target, Minneapolis, Nos. 1 and 2 as “best retailers with which to do business,” “best job of branding stores,” and “best supply chain management.”
“The continued ascendancy of Wal-Mart and compression of supermarkets has shifted industry leadership,” says Stuart. “I wouldn’t be surprised to see dollar stores pop up on the survey in a few years.”
Traditional supermarkets’ consolidation makes for more centralized buying. “It’s the only way to get enough clout to compete with Wal-Mart,” Stuart explains. Still, it muddies consumer research: Wal-Mart has enough store-level data that it can cater to local tastes despite centralized buying. Grocers’ challenge is to keep appeasing regional tastes while building national clout.
Safeway has struggled with that. The Pleasanton, CA-based company is selling 113 Dominick’s stores in Chicago after settling a contentious labor dispute in November (see Deals). Safeway bought Dominick’s in 1998; it alienated shoppers when it replaced Dominick’s specialty items with Safeway Select private-label, and closed costly Dominick’s fresh stores. Hard-line contract negotiations angered longtime staffers used to the founding family’s largesse, and Safeway threw in the towel on making peace with Chicagoans.
That illustrates the need for retailers of all stripes to sharpen their consumer research. “Retailers are doing more via shopper cards and in-store [observation] to see and understand consumers’ buying behavior,” says Stuart. “We’ll see retailers get separated based on that factor.”
Manufacturers will lead the charge, using their own consumer insights and research expertise to help retailers find shoppers’ hot buttons. In fact, consumer-savvy marketers top PoweRanking’s manufacturers list: Kraft Foods replaced Procter & Gamble as No. 1 overall, and General Mills (3), Coca-Cola (4), Pepsi-Cola (5), and Campbell Soup (8) all scored higher than in 2001. Now manufacturers should bring research prowess to their sales staffs, Cannondale advises: “The more market research that can be applied, the more credibility the sales organization has, and the better the solutions provided for retail trading partners.”
