As any retailer will tell you, you can't compete in the center of the store on price alone.That's the theory. Yet in SN's third annual online survey of Center Store performance, many retailers still see price as the top way to draw shoppers back from dollar stores, drug stores, supercenters and other low-cost purveyors.Asked to pick the key way to compete for Center Store sales, a significant portion

As any retailer will tell you, you can't compete in the center of the store on price alone.

That's the theory. Yet in SN's third annual online survey of Center Store performance, many retailers still see price as the top way to draw shoppers back from dollar stores, drug stores, supercenters and other low-cost purveyors.

Asked to pick the key way to compete for Center Store sales, a significant portion of retailers - about 19% - listed price, behind assortment (34%) and private label (24%), and ahead of value-added offerings such as clubs and loyalty cards (13%).

Several said their low-price strategies would drive sales growth this year.

"We have just altered our format to an [everyday-low-price] format, and customers will be purchasing more Center Store items," one retailer wrote. "Our retails are better than they were last year."

Said another, "We have placed a little more price emphasis on this portion of the store and added some variety to offset some negative trends there."

Many of the retailers - who represented more than one-third of the nearly 200 respondents - said they recognized that they needed more than just hot prices to get people to walk the center aisles. Good service, excitement and assortment also are essential.

"[Temporary price reductions] and EDLPs, signed right, can attract attention," one retailer respondent said (comments were kept anonymous). "Beyond that, you have to beat people with a stick to shove them down our Center Store aisles with a Wal-Mart Supercenter 10 minutes away and a Dollar General in my parking lot. Ouch!"

Other respondents echoed that view, and called for a return to service, information and entertainment.

"Grocery shopping is considered a chore by most people, but when a store gives them a great experience, they will be loyal customers," wrote one.

"Women make up the majority of shoppers in supermarkets. Most all women can cook. Many men like to cook as well. Teaching them how to cook a specific dinner will tempt them to buy a product they may never have tried. Go to a home show or other event and you will most always find a crowd surrounding a person demonstrating cooking of some sort," proposed another.

Offered another: "Grocers must not forget that they are at their core a marketing company."

Concerns about channel blurring notwithstanding, retailers tended to be more optimistic than other survey respondents about the sales outlook: 72% of these respondents predicted Center Store sales would increase this year, vs. 68% of all respondents. Among the optimists, many cited price emphasis, upgraded assortments and merchandising.

Pessimists said aggressive competition, decline in emphasis on Center Store and larger economic forces would curtail growth.

It's not just Wal-Mart, said one retailer. "Winco, Trader Joe's and many others are carving into our sales with great niche and neighborhood marketing."

Wrote a sales agent, "Center Store has been a stepchild over the past 10 years. Emphasis has been placed on perishables and prepared/value added items. The small increase will be fostered by higher fuel prices - understanding the increases in resins and shipping accompanied by more eating at home."

Interdepartmental competition also was identified as a threat to the Center Store, although opinion here was uneven. Nearly 18% of overall respondents listed perimeter departments as a major threat to center aisle sales, but only 7% of retailers did.

A non-retailer respondent expressed a widely held view in writing, "Dry grocery seems to be shrinking. Pressure from the perimeter of the store is evident as grocers try to differentiate themselves and move away from the 'big middle' towards a more holistic approach, with more produce and fresh departments to attract and retain new customers."

The news isn't all gloom and doom, though. Natural and organic products, ethnic specialties, frozen foods and private-label goods are ringing up sales, as consumers look for foods that promote good health, have varied flavors, are easy to prepare and save them money.

Natural and organics are the area seen as the most innovative, as chosen by more than 51% of all respondents. That's up from last year, when just over 35% of respondents picked that category as the most innovative.

A healthy majority - 60% - expects health and wellness to be the top Center Store trend this year, up from 48% last year. Convenience was a distant second, favored by 23%.

Retailers are chasing this trend in a number of ways.

Nearly 51% said they would introduce private-label natural/organic products this year, up from 42% last year. A new survey question asked how they would improve their image with the wellness-oriented shopper, and more than 57% of participating retailers replied that they would increase or update their assortments and use shelf tags or other signage to communicate their offerings.

Ethnic marketing also is capturing a lot of retailer attention, with 15% naming ethnic flavors as the top Center Store trend. Many retailers reported they're marketing to ethnic shoppers with expanded ethnic product assortments and private-label product launches and by supporting community events and using bilingual communications.

Yet a paucity of customer knowledge threatens retailers' ability to capture a greater share of the ethnic food dollar.

Asked how well they know their ethnic shoppers and meet their needs, 71% answered fairly well or not at all. In comments, some explained that their markets were fairly homogenous, while others blamed shortfalls within their own organizations.

"Data collected through courtesy cards and shopping trends help us to make better decisions on behalf of the ethnic customers," wrote one.

"We are grasping this customer now, with some new neighborhood marketing that is being developed throughout the entire company," said another.

"They know that [there] is a growing need for Hispanic marketing and say they are [integrating] these items but they have not even broken the surface," said a third.

Private-label activity appears to be picking up over last year, as retailers see their proprietary brands as a way to stand out from rivals.

Retailer respondents to this year's survey planned more store-brand activity than last year's respondents. The most important area of activity was natural/organics, followed by specialty, ethnic and value tier.

Retailers see store brands as a way to carve out an identity for themselves while boosting profits in the center of the store.

"In the private-label arena, retailers can offer great products, often unique, at a very good margin. And they are items that the consumer can't readily do price comparisons with a Wal-Mart," wrote one retailer.

Channel blurring remains trading partners' biggest worry

What are the biggest threats to Center Store sales in supermarkets?

Retailers; Manufacturers

Perimeter departments: 7.5%; 28.3%

Alternative channels: 46.3%; 60.0%

Economy: 20.9%; 25.0%

Wal-Mart: 61.2%; 55.0%

Other: 4.5%; 3.3%

Too many products, not enough shelf space

What is the biggest challenge in managing shelf-stable categories?

Retailers; Manufacturers

Slotting fees: 4.6%; 31.1%

Space limitations: 56.1%; 52.5%

Out of stocks: 36.4%; 8.2%

Other: 3.0%; 8.2%

Retailers are more optimistic than vendors about the year's outlook

By what amount do you expect Center Store sales to change this year vs. 2005?

Retailers; Manufacturers

1% to 2%: 23.5%; 17.7%

3% to 4%: 20.6%; 43.6%

5% to 9%: 19.1%; 3.2%

10%+: 8.8%; 3.2%

remain the same: 13.2%; 11.3%

-1% to -2%: 7.4%; 8.1%

-3% to -4%: 1.5%; 8.1%

-5% to -9%: 4.4%; 4.8%

-10%+; 1.5%; 0.0%

Retailers Only

Health kick

Which of the following will you use to bolster health and wellness positioning in the next 12 months? Select all that apply.

In-store lectures 10.6%

Nutrition shelf tags/signage 57.6%

Newsletter/online information 25.8%

Growing/updating assortment 59.1%

Other 4.6%

Store-brand activity

Within private label, where do you plan to add to/update your offerings in the next 12 months? Select all that apply.

Ethnic 40.0%

Specialty 41.5%

Value tier 35.4%

Natural/organic 50.8%

None 7.7%

Other 4.6%

Ethnic variety on the rise

Which initiatives do you plan to increase your ethnic marketing reach in the next 12 months?

Increased product assortment 68.6%

Participation in community events 32.8%

Private-label launch 21.9%

Bilingual in-store communications/employees 31.3%

None 14.1%

Other 3.1%

Knowledge gaps

How well does your company know who its ethnic shoppers are and meet their shopping needs?

Not at all 15.4%

Fairly well 55.4%

Well 16.9%

Very well 12.3%

How We Did It: SN's Survey of Center Store Performance 2006 was conducted May 3-19 via its website and e-newsletter. SN received 192 responses, broken down as follows: retailer, 36.4%; manufacturer, 33.2%; sales agency, 9.1%; wholesaler, 7.0%; and other, 16.6%. Totals may not add up to 100 because multiple answers were allowed or because of rounding.

Manufacturers believe retailers need to bring theater to the aisles

What strategy is most effective in drawing customers to Center Store aisles?

All responses


Cooking demos/educational events 13.1%

Cross-merchandising 32.8%

Advertising 18.6%

In-store signage 14.2%

Other 8.7%

Diet is out, health/wellness is in

What do you expect will be the top trend in Center Store over the next 12 months?

All responses


Low-carb/diet 1.1%

Health and wellness/"good for you" 60.1%

Ethnic flavors12.0%

Other 3.8%

Variety, unique brands help retailers distinguish themselves

How can supermarkets best fight competitors for Center Store sales?

All responses

Private label21.1%

Price 17.3%


Value-added offerings (clubs, loyalty cards, etc.)15.7%

Other 15.1%

Health and wellness category dominates new-product activity

In which category do you see the greatest product innovation?

All responses

Frozen foods17.6%

Natural and organics 51.1%

Beverages 9.9%

Ethnic 8.2%

Private label 11.0%

Other 2.2%