Mass merchandisers have been on both the winning and the losing ends of the beverage retail spectrum during the past year. Traditional mass merchandise outlets saw the smallest sales growth among non-traditional grocery outlets last year, according to retail analyst firm Willard Bishop, Barrington, Ill. Their supercenter counterparts, however, have been the biggest gainers.
Supercenters grew almost 12 percent to $152 billion in 2008, and increased store count by almost 10 percent, Willard Bishop reported in its study “The Future of Food Retailing.” Traditional mass merchandisers, on the other hand, gained only 1.6 percent in dollar sales. That trend is expected to continue, the company says, forecasting an annual sales loss of 6.2 percent into 2013 as more mass merchandise stores are converted to supercenters.
Supercenters, such as Super Target and Walmart Supercenters, are a hybrid of supermarkets and mass merchandisers, and more consumers are turning to these outlets, particularly in these challenging economic times.
Information Resources Inc., Chicago, reports that mass merchandise outlets were the only category of food retailer to lose household penetration during the year ending June 28, 2009. The mass channel dropped 1.3 percent in the number of households shopping that retail format, according to IRI’s “Times & Trends” report on channel migration. Supercenters, on the other hand, gained the most households, with a 1.8 percent increase. Likewise, the number of average purchase occasions for mass shoppers dropped by 4.7 percent, while supercenters gained 7.9 percent.
The implications for the migration to supercenters goes beyond the current economic situation, as households in nearly all income brackets have increased their use of supercenters, according to IRI. Those in the “doing well” and “living comfortably” income segments are increasing their use of supercenters as much as consumers in the “getting by” category. Baby boomers have shown the largest increase in supercenter shopping.
Strategic shift
Walmart is the leader in mass merchandiser and supercenter accounts, and the company has fared well in the current economy. Sales for fiscal 2009 were up 7.2 percent overall, and 6.8 percent in the United States.
The company changed its mantra this year from “Always Low Prices” to “Save Money. Live Better” to reflect value as well as low prices, and the strategy seems to be working. Cannondale Associates, Wilton, Conn., reports Walmart was the hands-down leader in its new PoweRanking study of retailers with the clearest company strategy. Almost 80 percent of consumer packaged goods manufacturers who responded to Cannondale’s survey said Walmart had the best strategy. That marks a 17 percent gain over last year, and the largest one-year increase in the study’s history. Fellow mass merchandise/supercenter retailer Target ranked third on the list, which also included supermarket retailers, club stores and drug stores.
Walmart, again, ranked highest in CPG manufacturers’ opinion of stores with the best branding. Nearly 55 percent of CPG respondents said Walmart did the best job of branding its stores. Target was a close second at almost 51 percent. Branding efforts included private label strategy, as well as emphasis on manufacturer brands and improvements to the in-store environment.
Target ranked far ahead of its mass merchandise/supercenter competition in the area of most innovative consumer marketing and merchandising, taking the top spot in that measurement. Walmart ranked sixth on that list. However, Walmart’s 18.4 percent of the vote was an increase of 3.4 percent over last year, while Target’s 39.4 percent was a decline of 4.4 percent vs. 2008.
IRI indicates in its 2009 “Times & Trends” report on Walmart that the company has emphasized merchandising this year with a “win, play, show” strategy that allows it to focus on the most promising categories and products. IRI also points out that Walmart has worked to fine-tune its supply chain initiative to reduce costs and pass those savings along to consumers.
Those efforts were highlighted in Cannondale’s PoweRanking results, which ranked Walmart first by almost 70 percent in best supply chain management. More than 95 percent of CPG companies ranked Walmart highest in supply chain management, which was an increase of 3.5 percent over 2008. Costco, which gained 2.3 percent vs. last year, was ranked second, with 28 percent of respondents indicating it had the best supply chain initiatives.
Interestingly, another Walmart strategy this year is reported to be a focus on smaller format stores, which seems to go against the successful shift to the large supercenter format. The Financial Times reported in October that Walmart is strengthening the management of its smaller Neighborhood Market supermarket-style stores by giving them dedicated buying and management teams. The small-format stores represent a small portion of Walmart sales, and potentially could help the retailer in urban markets where it has fewer locations. BI