ST. LOUIS -- No one can ever accuse National Markets of suffering from an identity crisis.
Customers of this feisty, 18-unit independent based here can pore over rustic wooden bins for their produce at Gibson's Farmer's Market, purchase New York-style cold cuts at a Thumann's branded deli, or choose supermarket fresh meals from a cold case named "Gibson's on the Go!"
While slapping a name on a department to give it an identity is not necessarily a new strategy, here the idea is working because the theme is reflected in the smallest details, say company officials. And the idea is to extend the concept of branded fresh merchandising from section to section into a web of distinct identities and a stronger fresh-food image overall.
The experience begins with the produce section, described by National Markets officials as the gateway to the rest of the store.
Customers entering the doors face displays where mounds of fresh bulk produce take center stage. With simple box crates and bushel baskets spilling over with fresh fruit and vegetables, the fixtures themselves are limited to a small supporting role. The spotlight is on sheer abundance.
Jim Robinson, produce sales manager, estimates a full 75% of the chain's selection is in bulk form. "In a farmer's market, people like to pick [the item] up and hold it," he said. Here, customers work the aisle by their senses of touch and smell.
Signage also reflects the homespun theme. Mass-produced plastic signs have been replaced with plain cardboard squares imprinted with magic marker. Simple promotional messages like, "Gibson's Got a Deal!" are displayed over the day's sale items.
"We use anything we can think of that would draw attention to the product," Robinson said.
The rest of the produce department inventory is comprised primarily of value-added branded salad mixes and bagged items. Indeed, only one store -- the company's flagship in Chesterton, Mo. -- contains a dedicated organics section and a fresh juice machine.
As the store develops the market concept, specialty sections such as organics will be added depending on the needs of customers. The primary goal -- branding the section with a solid identity -- is being achieved by offering the most popular items at competitive prices, much like a real farmer's market, chain officials said.
The atmosphere is effective; for example, one recent late-spring afternoon, cut watermelons were sitting on crushed ice and pints of strawberries were lined up in their shipping boxes, ready to go. The only thing missing was a blue sky, although the roadside feel of the department did extend upwards where more bushel baskets and wagon wheels were perched casually atop the refrigerated cases.
The merchandising power behind Gibson's Farmer's Market is enhanced by removing refrigeration from one side of the aisle. It also opens up a significant amount of selling space.
According to Robinson, in those National units where this type of remodeling is feasible, the departments become 25% to 35% larger just by dismantling the refrigeration.
"We got away from the conventional supermarket look, throughout the department," Robinson, a 33-year produce category veteran, explained. "Whenever you go in, and take out refrigeration and put wooden boxes in, that creates the farmer's image in itself."
The retailer's chosen format does have its challenges, however. In a department ruled by low prices, Robinson estimates that produce margins are only 20% to 25% of gross earnings.
"We're in it to make money, but we know we're going to have a lower margin in produce because our prices are so cheap," he said. In comparison, the competitors he visits are "shooting for at least the 40s" for their gross margins.
Still, competitors in the market have acknowledged National's competitive spirit in the produce category by only occasionally engaging in brief price skirmishes.
"After a while, everybody seems to settle back into their own programs, because they realize their own programs work," said Robinson. "Our program stresses price. We've made our point and everybody knows it."
Sourcing locally from a supplier in the city's Terminal Market district contributes to National's ability to offer low produce prices. According to Robinson, the arrangement allows him to take advantage of special one-day offers that slower-moving wholesale grocers usually cannot catch. These shipments end up as unadvertised specials in the store, further likening the Gibson's program to a real farmer's market, where the variety changes every day.
"I think we've got [customers] to the point where they're coming in looking for those deals, along with the good prices we've got in the ads," he said.
On the day Robinson spoke with SN, he was making room in some stores for a special shipment of orange-flesh honeydew melons, "something you don't see that often with a good cost to me," he said.
The Gibson's Farmer's Market concept has been popular enough with shoppers that company officials want to devote more space to it. They announced last week that produce square footage will be expanded in all 18 stores, doubling the size of the department in most units.
According to Robinson, this means that the chain's flagship store is getting 16 more freestanding produce bins, which will be added to the 52 already on the floor. In many units, the expansion will include the removal of the first grocery aisle.
There are also thoughts of bringing the produce section outside the store in true farmer's market fashion. "Even if you take just 10 power items out there on weekends -- we're going to drive our business with perishables," said Robinson.
Indeed, if the produce department is the customer's gateway to the store, then chain officials are also using the branding concept as the gateway to higher profits. Nowhere is this more evident than in the deli, where National has brought in Carlstadt, N.J.-based Thumann's for a three-year branding agreement. (This was first reported in SN's June 8 issue.)
Since opening the prototype unit in April, profits in the deli are up 55%, and 25% storewide, according to June Smith, director of deli/seafood. Two more stores have since received a Thumann's makeover, and the rollout will continue to each of National's 16 store delis.
Customers who may be unfamiliar with the Thumann's product line are exposed to a pair of video monitors that were installed in the deli during the retrofit. Both play continuous 90-minute loops of Thumann's infomercials. The branded message is carried out into the waiting area, where a freestanding open case merchandises Thumann's hams, wursts and such condiments as spicy deli mustard.
The "New York deli" look also comes in the form of an authentic hot-dog cart, complete with umbrella, which sells hot Thumann's frankfurters in front of the deli counter. On warmer days, a second cart is stationed outside the store in the parking lot. At the prototype operation, an average of 100 hot dogs a day is being sold, according to National officials.
As is the case in the produce department, the company is seeing lower margins in the Thumann's deli, in the latter case compared with what the department was doing before the remodeling effort; but the new department is enjoying an upsurge in volume, Smith said.
Margins in the old deli arrangement pushed the 50% mark, while the new branded concept has seen that number drop back to the neighborhood of 40%. "Our deli is driven by volume more than ever," she said. "People are coming for the quality."
The Thumann's deli has also strengthened its sandwich business, according to Smith. The sandwiches, which retail for an average of $2.39, pair the Thumann's provisions with fresh-baked bread from the store's bakery.
At the flagship store, a custom sandwich bar has been installed adjacent to the deli, where customers can fix the sandwiches to their liking with lettuce, tomatoes, condiments and other additions. They can also customize the prepared foods from the nearby "Gibson's on the Go" case by using the condiments at the bar.
A microwave stands ready to reheat any of the foods, and full seating between the deli and produce sections encourages customers to stay and eat on-premise.
Also added to the deli section is a new hot pizza program, the Pizza Shoppe. Customers can order customized slices or whole pies to go, all made with frozen, Chicago-style crusts. The dough is thawed, sauced and covered with fresh-grated cheese and toppings, and finished in a deck oven in the back of the service area.
Prices for slices start at $1.09. For family-size appetites, the store offers a pizza dinner package that not only includes the pie, but also a large salad for four and a 2-liter bottle of soda for $14. Plans may eventually include the sale of parbaked pies merchandised in the Gibson's on the Go! case.
Gibson's on the Go! is also new to National Markets' flagship store, but it is developing quickly and there are high expectations that this concept will help to unify the various fresh departments by incorporating some items from each. What's more, it draws higher margins, generating margins of just over 50%.
"We have the toasted ravioli or the shrimp rolls or lasagnas," said Smith. "We've got desserts, some pies and brownies; individual serve salads and, of course, sandwiches."
Sodas and self-service coffee are also available, along with the sandwich bar and seating. All items are prepared from scratch daily in the individual departments, and those items bound for the fresh meals case are packaged, dated and priced.
Most of the entree-style items are also available from the deli, as are the sandwiches. National officials say they are trying to strike the right balance between the conflicting demands for freshness and convenience, and they hope the ready-to-go case satisfies both needs.
