CENTER IN THE MIDDLE

As the once-distinctive line between traditional supermarkets and mass merchandisers continues to blur, more and more Center-Store items persistently play a large part in the metamorphosis.Some mass merchants make no bones about their attempts to capture supermarket sales and one day transform themselves into a full-blown competitor of every department, while others are making more gradual shifts

As the once-distinctive line between traditional supermarkets and mass merchandisers continues to blur, more and more Center-Store items persistently play a large part in the metamorphosis.

Some mass merchants make no bones about their attempts to capture supermarket sales and one day transform themselves into a full-blown competitor of every department, while others are making more gradual shifts into the supermarket business.

On recent visits to several alternative stores in the Dutchess County, N.Y., area, SN found a little bit of both approaches at work.

A Wal-Mart in the town of Fishkill was in the process of being remodeled into a supercenter during a Jan. 10 visit. This will add a full-service supermarket to the side of the existing store by this summer, according to Keith Morris, spokesman for Wal-Mart's corporate headquarters in Bentonville, Ark.

Standing at 115,000 square feet now, the building will be expanded to 230,000 square feet, taking on an additional 40,000 square feet of grocery merchandise and adding wider aisles to the entire store, Morris said.

"All of the big three are experimenting with the supercenter," Morris said, referring to his company, Kmart and Target. "That's not driven by the industry or the company; it's customer driven.

"Our focus groups always say they are pressed for time. This provides a one-stop shopping environment format that allows you to do all your traditional grocery shopping under one roof. One-stop drives the success, as well as good presentation and products at the right price," Morris said.

There are more than 600 Wal-Mart supercenters across the country and all carry the same everyday-low-pricing policy, even in the grocery area, Morris added.

It is for just this reason that traditional supermarkets are in danger of being completely cannibalized by mass merchants, Burt Flickinger 3rd, managing director of the Westport, Conn.-based Reach Marketing, told SN.

"The mass merchandisers are a clear threat to the supermarket industry and they threaten the very survival of regional chains," said Flickinger, who also noted the recent bankruptcy filings of several one-time prosperous supermarket chains, including Jitney-Jungle and Homeland.

According to Flickinger, the catalyst behind these filings was the tremendous expansion of the Wal-Marts, Costcos, BJs and Sam's Clubs, which he says have taken business away from supermarkets by offering lower prices.

"Costco is about 30% cheaper than the cheapest supermarket, and when you walk into a Wal-Mart there are signs everywhere saying it will beat every advertised price, so there's not a prayer of competing," he said.

While the largest percentage of consumer dollars for nonfood products is still spent in supermarkets, mass merchants with supercenters have picked up steam recently, particularly in certain food categories, according to Homescan data from market research firm ACNielsen, Schaumburg, Ill.

According to the statistics, in 1998, 46.5% of U.S. consumer shopping dollars were spent on nonfood in supermarkets, while 24.7% went to mass merchants with supercenters.

In dry grocery, 75.9% of purchases were made in supermarkets, while 10.5% were made at supercenters.

The only place where shoppers displayed a noticeable preference for the alternative's selections was in the baby-needs segment, where they spent 54.5% of their funds at supercenters, compared with 15.8% in supermarkets.

Although other categories consistently fared better for the supermarket in 1998, mass merchants gained ground among personal soap and bath additives, 38.7% supermarkets vs. 34.8% MMs; laundry supplies, 48.6% vs. 31.6%; and candy, 41.1% vs. 28.9%.

Flickinger said that, over the course of the last decade, there has been a $100 billion increase in the number of products found in supermarkets that are now sold in supercenters. He said that in an average Wal-Mart, 35% of the items are also sold in supermarkets such as Kroger's, and, in a Wal-Mart supercenter, it's more like 75%.

While Flickinger said he believes mass merchants are more aggressive in the battle for consumers, Morris said he believes both formats have been moving into each other's territories.

"Supermarkets are adding more retail items. It's a trend all around," Morris said.

As it stood on the day of SN's visit, the Fishkill Wal-Mart had a lot to offer in nonperishables, with three aisles devoted to household products including laundry detergent, paper towels, garbage bags and dishwashing liquid, plus one large endcap featuring tissues, paper plates, storage bags and plastic cups.

In other categories, Wal-Mart boasted three 30-foot aisles dedicated to pets, with dog, cat and small-animal supplies, toys, shampoos and more.

On the grocery side, there were two 21-foot aisles devoted to cereal, cookies and crackers and one 21-foot aisle containing chips, salsas and dips.

Some of the other dry grocery products observed by SN at Wal-Mart that day included Sam's Choice sodas, seltzers and juices; Bisquik pancake mix; Miracle Whip mayonnaise; Taco Bell brand refried beans; Velveeta shells with cheese; Dinty Moore beef stew; Sam's Choice caramel popcorn with jumbo peanuts (a 10-ounce box for 88 cents); shelf-stable puddings; Spam; and Del Monte vegetables on sale, a 14.5-ounce can of cut green beans for 50 cents.

At Big Kmart in Poughkeepsie SN found seven full consecutive aisles labeled pantry, which included items such as peanut butter, jellies, oils, spices, chips, soda, home-cleaning products and small-animal supplies.

The aisles were set up very similarly to what one might find in a supermarket, and certain endcaps spotlighted various specials, including a price break on a 200-ounce bottle of Tide laundry detergent for $13.69. Also, on another aisle end, an array of Nabisco products was on sale for $3.59, including SnackWells Mint Creme cookies in a 6-ounce box, Chewy Chips Ahoy! 1-pound bag, and pizza-flavored Cheese Nips baked snack crackers in a 13.5-ounce box.

But, the most similar features to a supermarket at Kmart were the store's refrigerator/freezer displays, which included items like eggs and cheese, and an endcap freezer case between pantry aisles #5 and #6 containing DiGiorno and Tombstone frozen pizzas.

In very close proximity to the Big Kmart, and directly next door to a large Price Chopper, a Pharmhouse in Poughkeepsie was also undergoing remodeling on the day SN visited, but Center-Store items were nonetheless clearly visible.

The store featured full aisles with baby products, cleaning essentials, pet supplies, cereals and other staples such as pasta sauces, spices and macaroni.

Perhaps the only saving grace for supermarkets in the midst of this fierce competition, Flickinger said, is store brands.

"Private label presents supermarkets with an opportunity for increasing consumer continuity; it's a great opportunity to save Center Store," Flickinger said.

"Kroger is doing a superb job, but Costco is far out in front of supermarkets with respect to private label. Supermarkets can maintain their share in the next two to three years by doing well in private label."