How Low Can You Go?

In the mounting frenzy for consumers' shrinking wallet share, retailers have to get even more creative. Forget simply drawing shoppers to your store the most successful strategies in 2009 will also focus on squeezing the tiniest of margin gains by influencing purchases at the shelf level. Just take a look at the strategies outlined in the following pages. As club stores continue to encroach on traditional

In the mounting frenzy for consumers' shrinking wallet share, retailers have to get even more creative.

Forget simply drawing shoppers to your store — the most successful strategies in 2009 will also focus on squeezing the tiniest of margin gains by influencing purchases at the shelf level.

Just take a look at the strategies outlined in the following pages.

As club stores continue to encroach on traditional retailers' territory, Wegmans and Meijer are not only pre-empting trips to that channel with the offer of jumbo packs without a membership fee, they've also made club-sized store brands the focal point of their super-size strategies.

Chains should also make relevant savings convenient by offering digital coupons that are accessible online and via cell phones. Consumers “shop” for deals on individual items and meals and link them to their loyalty cards with a click of the mouse.

The marketing of low-priced meal deals is also gaining momentum in other ways. Retailers are cross-merchandising recipe components while touting that they can be combined to create meals for less than $2.50 a person.

In-store media — such as Wal-Mart's Smart Network, which customizes marketing messages by store, screen and time of day — leverages the most relevant content to drive purchases. More retailers may follow suit with next year's release of the Nielsen Co.'s syndicated service, which measures the effectiveness of in-store marketing tools.

And don't forget the store brands. Although the struggling economy has been a boon for corporate brands, the most successful results in fact come when these items are promoted in tandem with national brands.

Convert Club-Goers

Warehouse club stores have become a godsend for shoppers hoping to stock up on bulk-size savings. Now, traditional grocers are forestalling their separate trips by mixing in club-pack sizes with conventional quantities.

Wegmans sought a piece of the jumbo pie when it began promoting “Club-Size Savings Without Membership Fees” in its paper and canned goods, frozen foods, snacks, meat, seafood, poultry and other categories.

“Club packs can be a great way to lower the cost per item or serving, especially for shoppers with large families or ample pantry and freezer space,” said the Rochester, N.Y.-based chain.

The grocer is on the right track with its selection of super-size offerings, Jim Wisner, president of Wisner Marketing Group, Libertyville, Ill., observed.

“This is an untapped opportunity that's been underserved for years,” he said.

Wisner suggests that chains interested in following suit stick with categories with high repurchase frequency, as well as price-sensitive items that are used on a daily basis, such as cereal, pet food, diapers, bottled water, carbonated beverages, cookies, crackers and certain frozens.

“Various retailers who've tried this in the past thought the focus should be on No. 10 tins of vegetables, but that's cafeteria stuff,” Wisner said.

Supermarkets should also be open-minded when it comes to club-size pricing, especially since the real value in merchandising extra-large packaging is in keeping business from going to the club channel, he added

“I see a lot of supermarkets who don't understand how the pricing dynamics work,” Wisner noted. “If you trade a customer up to a larger package and preclude them from going elsewhere, that's going to be a lot better [financially] than trying to hold your margin range.” When considering price, retailers should also take into account the supply chain efficiencies offered by merchandising palletized displays.

Although the strategy lends itself to stores with excess square footage, thanks to the Web, smaller grocers can also join the club.

Meijer added bulk-size groceries and dry goods to its online offering as part of its “Grocery by the Case” initiative, launched in October. With free shipping on orders of $150 or more, Meijer estimates that consumers will save at least 5% buying by the case. “This is another example of our efforts to help Meijer customers save time and money,” said Rob Fleener, vice president of marketing and e-commerce for Meijer, in a statement.

Grocery by the Case is also an opportunity to promote large quantities of store brands. Among the offerings: Meijer Organics Chicken Broth, pack of 12 (32 ounce), $20.42; and Meijer Classic Olive Oil, pack of 12 (17 ounce), $56.33.

“These are value-driven consumers to begin with, so you want to lead with your best values,” said Wisner.
Julie Gallagher

Digital Couponing

As shoppers increasingly look to save time and money, more and more retailers are getting involved with digital coupons.

Such coupons are online and cell phone-based offers linked directly to loyalty cards. They're touted as a quick and easy way to save money.

Kroger Co. is one of the most active companies in the area, offering several online coupon programs, including a coupon catalog from Unilever; the “P&G eSaver”; and AOL's two-month-old Shortcuts platform.

To obtain a Shortcuts coupon, consumers register their loyalty cards for free at [4]. They can then search coupons by brand, product or category. Once they see an offer they like, they click on it, and the savings are added to their loyalty card. They can print out a shopping list to remind them of the offers they've chosen. Coupons are automatically applied to their purchases at the checkout.

In one of its newest initiatives, Kroger is offering coupons via cell phones. Kroger shoppers who register their loyalty cards with mobile coupon service provider Cellfire can receive coupons from General Mills, Kimberly-Clark, Pepperidge Farms and Del Monte on their cell phones.

Meanwhile, Giant Eagle in Pittsburgh jumped on the digital coupon bandwagon last year when it launched e-Offers, powered by News America Marketing's SmartSource iGroup direct-to-card (D2C) program.

E-Offers are available to those who enter their loyalty card at a link at [5]. Once they see an offer they like and click on it, the coupon is loaded onto their Giant Eagle Advantage Card.

And more than 21,000 grocery and drug stores nationwide are offering Upromise's new ecoupons to the mix.

Upromise is linking coupons to college savings. Each time a participant downloads a coupon from the Upromise website to their loyalty card, the face value is added to their college savings account once the product is purchased.

Kimberly-Clark, Procter & Gamble and Reckitt Benckiser are among 20 national manufacturers that will offer up to $25 in savings per month. Kroger, Safeway, Albertsons, Ahold and Price Chopper are among the retail participants.

Mona Golub, spokeswoman for Price Chopper, Schenectady, N.Y., said the program is an easy way to help parents save for college.

“Given today's economy, customers are looking to stretch dollars more than ever before,” she said. “Coupons are one of the ways that help them do that.”
Carol Angrisani

Market Miserly Meal Solutions

Retailers are responding to the economic downturn — and the growing number of people who are cooking from scratch instead of eating out — by bundling a variety of discounted items for a meal deal.

Meal solutions may have been around for years, but they are taking on a new form as retailers incorporate products from Center Store shelves and position them as a way to save time and money during these tough economic times.

Just last week, King Kullen's weekly circular promoted “The Real Meal Deal,” a combination of sale items that can be prepared to make a meal for six for $14.82, or $2.47 a person. The dinner included top round roast beef for $2.99 a pound; King Kullen frozen broccoli, 24 ounces, three for $4.98; and King Kullen gravy, 12-ounce jar, 99 cents.

“Meals prepared at home save you money,” the King Kullen circular read.

Whole Foods Market has even gotten in on the act. It recently challenged its food bloggers to develop tasty weeknight meal recipes prepared for under $4 per serving. Contest finalists included recipes for Wonton Noodle Soup, Sweet Potato and Black Bean Enchiladas, and Chicken Marsala With Brussels Sprouts and Capellini Aglio e Olio.

Albertsons is another retailer that's been active in the discounted meal solutions business. From Nov. 6 to Dec. 3, the chain offered $5 off instantly to those who purchased ingredients for a holiday meal consisting of a Hormel fully cooked entree, a Fresh Express salad and a Country Crock side dish.

“During this hectic holiday time, it's easy to have a hot, healthy meal on your table in minutes with this meal deal,” Albertsons wrote.

Stop & Shop has even held several “Affordable Food Summits” to help consumers cope with the rising cost of groceries. Free to the public, the summits provide tips and advice for creating healthy, affordable meals on a budget.

Stop & Shop also recommended meal ideas based on its private-label products. For instance, consumer advisor Andrea Astrachan recently wrote a weekly circular column about the benefits of incorporating its Nature's Promise products in recipes like Caesar Chicken With Penne and Mexican Mini-Turkey Loaves.

“To help you with dinner ideas that receive rave reviews from your family, we have easy recipes you can make with Nature's Promise products on sale this week,” Astrachan wrote.

Fresh & Easy Neighborhood Market, El Segundo, Calif., meanwhile, highlighted discounted holiday meal solutions for Thanksgiving that could be prepared in three hours for $8 per person. The menu included Fresh & Easy Whole Turkey Wrapped in Smoked Bacon and Sage for $2.29 a pound; Fresh & Easy Mashed Potatoes, $4.99 for 28 ounces; and a Fresh & Easy Pumpkin Pie for $2.99.
Carol Angrisani

Focus on In-Store Media

Retailers are leveraging advances in technology to use more innovative forms of in-store media. A new Nielsen syndicated service that's set to launch next year will help them in the effort.

It's all part of the Pioneering Research for an In-Store Metric consortium, through which the Nielsen Co. plans to release a new nationally syndicated service to measure in-store marketing tools much in the same way the company does for television and other marketing expenditures.

Measuring in-store trade promotions is critical at a time when about 70% of shopping decisions are made at the shelf.

“In-store is gaining importance at consumer touch points,” Stephen Garry, director of advanced analytics at Clorox Co., said in a recent presentation about the PRISM research.

The new Nielsen service will measure shoppers in-store, including how traffic patterns vary across retailers and days; what the hot and cold zones are in a store; and what vehicles have the biggest impact on store traffic and conversions.

Anchored by Procter & Gamble and In-Store Marketing Institute, the PRISM consortium includes 3M, Clorox, Coca-Cola, Kellogg's, Disney and Miller Brewing, as well as Wal-Mart, Albertsons, Kroger, Walgreens and other retailers.

The planned new measurement tool comes at a time when retailers are employing new forms of in-store media. Wal-Mart, for instance, introduced the Wal-Mart Smart Network, a series of in-store TV screens that can be customized by store, screen and time of day.

The new network allows Wal-Mart to monitor and control more than 27,000 screens in more than 2,700 stores across the country.

That means that if it's hot outside, Wal-Mart can post a message about a sale on carbonated soft drinks, among many other possibilities.

The Smart Network is currently in about 300 stores. Installations will be completed in the remaining 2,400 by early 2010.
Carol Angrisani

Promote Private Label in Tandem With National Brands

As the economy continues its downward spiral, private labels persevere.

Mindful of the demand for store brands, supermarkets are giving these items top billing on in-store displays and in ad circulars.

During the 52 weeks ended Dec. 8, 67% of Fresh & Easy's ads were reserved for store brands, Aldi dedicated 63% of its ad space to private labels, Wegmans assigned 39% and H.E. Butt Grocery Co. allotted 30%, according to ECRM's Market Gate Ad Comparisons tool.

Although retailers are wise to move their corporate brands into the fore, many may be taking an unnecessary hit on profits when hosting price reductions in the absence of national-brand promotions, said Jim Hertel, president of Willard Bishop.

Results from Willard Bishop's Private Brand Performance Gauge show that optimal unit movement and retailer profitability are achieved when store brands and national brands are promoted simultaneously.

“Promoting them together also increases category excitement and interest among shoppers,” Hertel told SN.

He explained that a good rule of thumb when promoting private labels is to apply a discount of at least 10%. Retailers should also aim to make as much penny profit per transaction on the store brand as they do on the national brand, he said. “The penny profit ‘floor’ means that the retailer is financially indifferent between selling the private brand or the national brand. If giving the discount means that they'd have to go beneath the penny profit floor, they're probably better off not promoting the private brand.”

The success of retailers' store brands may even help pay for some discounts.

A recent Wall Street Journal report suggests that as private labels continue to encroach on national-brand share, retailers will have greater power when negotiating promotional funds.

“Private label has been an underexploited weapon that grocers have had at their disposal for years,” Marty Weintraub, a supermarket specialist at Karabus Management Inc., told the Journal. “At the end of the day, it gives them a little more leverage in negotiating power with their vendors.”
Julie Gallagher