Supermarkets Find Footing in Competitive Environment

Supermarkets Find Footing in Competitive Environment

Much more quickly than it appeared, Wal-Mart phobia is abating.

It was not very long ago that every traditional retailer was, if not panicked, at least very concerned by the continuing encroachment of Supercenters. So much has changed: In recent months, Wal-Mart has pulled back on Supercenter expansion, made a number of merchandising missteps, and lost out on a bid to start its own banking entity. From reviewing the many news sources on the Internet, it would seem that Wal-Mart is yesterday's story, while Tesco, which has yet to open a store, is the latest media darling.

While it would be unwise to count the Bentonville giant out — or, for that matter, Target, which tends to go more slowly, but eventually gets its merchandising just right — things are looking much better for traditional grocers who have found their footing in the new competitive environment.

Kroger is hitting on all cylinders and its bigger Marketplace stores are apparently having the desired impact on shoppers. Rather than imitating the wide-ranging product mix of the other giant stores, Kroger is more focused on home goods and cross-merchandising with food.

Safeway's “lifestyle” stores have renewed that company's position in the market, while its Blackhawk gift card program has proved to be a remarkable success story. Unless there is a strong incentive — in this case, a well-thought-out program designed first for the food channel — supermarkets usually are very reluctant to support other retailers in any way. That other supermarket chains have embraced Blackhawk says much about the program and the strategic vision of the retail company behind it.

Meanwhile, Supervalu is making many smart moves as it integrates the Albertsons stores.

Among regional chains, there are even more potent signs of strength, as the retailers draw on their unique capability to combine food and other products to carve out a distinct market niche.

For example, Giant Eagle recently launched a new small-format store combining food, pharmacy and fuel, along with an edited assortment of HBC, GM and groceries. It's about the size of a chain drug store, and aims to fill a convenience niche like Tesco's concept. Recent news reports in the Cleveland area indicated that this chain is getting ready to build one of its largest stores — 87,000 square feet — and other reports have hinted that it is considering even bigger units.

Much like Kroger's Marketplace stores, H-E-B's Plus format approaches the size of Supercenters, incorporating a substantial mix of nonfood product, and have been successful enough for the retailer to expand the concept.

Publix and Wegmans demonstrate continuing excellence in all areas of their businesses. One example seen recently in a Wegmans store: All the products necessary to create a summer smoothie were displayed together on one fixture. That's the kind of smart cross-merchandising that will keep traditional supermarkets in the game for a long time to come, regardless of competition from other channels.