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Future Online Sales to Open Space for Design Innovation

Future Online Sales to Open Space for Design Innovation

Experts think it’s inevitable that sales of many non-perishable grocery categories will eventually take place online. Retailers need to meet that demand, but also the creative challenge of what to do with the space that it will open up in stores. Thom Blischok of Booz & Co. shared his ideas about “Tomorrow’s Trends Delivered Today: Store Design Trends — The Path to 2025” at a recent Food Marketing Institute conference, and then in an interview for this section. The full article is brought to you by Hillphoenix.

The coming shift of traditional center store products to online sales will result in a dramatic rethinking of supermarket store design as those items are no longer stocked, and more space opens up, said Thom Blischok, chief retail strategist, Booz & Co., San Francisco.

Today, 80% of the store is in merchandise, while 20% is accounted for by services, he said. Meanwhile 75% of capital investment dollars go to the store perimeter, while 15% is spent on center store, and 10% goes to the front of the store.

“Recognizing that there is a movement to the Internet, becoming world-class at what you do on the perimeter and with services is critical,” Blischok said in an interview after he presented his concepts at the recent Food Marketing Institute Energy & Store Development Conference in Baltimore.

“The biggest single movement in retail today is to change the shopping experience, which ties directly into store design,” he said.

By 2025, retailers can expect as much as 30% to 50% of the store to be in a broad range of services, such as ready-prepared food bars, doughnut hole bars, fresh pastry bars, and in-store training and education about nutrition and cooking, he said.

“Stores that try to be all things to all people are going to fail, unless they are really, really big. So you need to think from your shoppers’ perspective about how important is fresh, how important is convenience, and make sure that you use some of your shopper decision criteria in your store design,” Blischok said.

Stores need to be designed for simplicity and convenience, using people and technology to improve the service paradigm. “To win, store designers will focus on engaging the shopper,” Blischok said. He identified four key design strategies being implemented today:

  • Designs for smaller stores in smaller footprints. “That means getting the fill-in trip experience absolutely correct by designing simplicity in a way that center store is displayed, designing simplicity in the services and products you offer, and simplifying the categories and assortments.”
  • Designs that clearly demonstrate convenience. “Shoppers need to be able to find any product they want to buy in a store within seven to 15 seconds.”
  • Designs that exude continuous value. “That’s where you begin to bring in a broad range of store perimeter departments.”
  • Designs that articulate a solid understanding of the shopper. “Instead of pet categories, have pet departments. Instead of baby categories, have baby departments. Understand that people shop in certain ways and your strategy is to design that store, that assortment, that layout to meet the emerging needs of shoppers.”

Open Space Opportunities

Future store designs will have to account for certain center store categories moving online, which will result in much more available space in the store; decisions will have to be made about what to do with that space. “You could see store designs with more open aisles, expanded perimeter service departments, the emergence of whole new aisles based on high nutritional eating, or you could see a total redesign of the aisles,” he said. Also, areas will have to be designated for customers to pick up their online orders.

There will be innovative use of the extra space. One idea is to use hydroponics to grow fresh products in stores. This is now being tested by Giant Eagle in Pittsburgh, Blischok said. Hydroponics is a process of growing plants in sand, gravel or liquid without soil, using mineral nutrient solutions. “You are going to start growing some of your own product in the stores. That’s a differentiator,” he said.

Expanded bakeries and kitchens will be part of the design of some supermarkets, as well as expanded catering, which is a fast growing service. “With the weeding out of less profitable departments in stores, there’s more room for things such as sitting areas, coffee shops and small restaurants. You are going to have to install things such as wine bars, wine rooms or grills inside the meat departments so you can cook steak for shoppers. You will have to build a kitchen where people can learn how to cook healthy nutritional foods, or you will have to expand your food preparation technology so that when people want to buy a Thanksgiving meal, you can actually cook it for them, and have them pick it up,” Blischok said. Some retailers already moving in this direction include Wegmans, Mariano’s, Bristol Farms, Stew Leonard’s and the Kroger Signature stores, he added.

One of the biggest changes is going to be “the integration of frozen cases within the center store—not like the standalone frozen department, but certain aisles where you will see themes, where you address unusual needs and solutions that you begin to tie together, not only in traditional dry groceries, but in the perishable and frozen groceries.” For example, there already are instances of expanded pet departments incorporating frozen and chilled pet foods; there could be concepts such as an “Italian experience” with pastas, sauces and related frozen products in the same aisle or area of the store.

Although some non-perishables departments might vanish entirely into the online ether, frozen categories will always be in stores because of the challenge posed by shipping. “Some very specific frozen products can be shipped by online sellers; others won’t be,” Blischok said.

It’s an Omni-Channel World

It’s now an omni-channel retailing world, where the customer wants to have a seamless shopping experience in-store and online, in person, by mobile device, or by using a home computer. In this environment, supermarkets need to address their already tight margins along with the increased service needs of their consumers. “Technology is going to become an enabler to help improve the shopping experience, as well as the ability to improve the cost-to-serve model in the stores,” Blischok said.

Smartphones are creating complete price transparency, and retailers “need to use technology to up their in-store experience, to up their targeting, to up their pre-shopping, and to up how they help people shop the stores,” he said. For instance, if a customer comes in with 20 items on a mobile shopping list application, the retailer can use it to personally welcome that shopper and provide him or her with a geo-map of where the products are in the store, which in turn needs to be addressed by store design.

“From a retail perspective, technology is probably going to be the greatest enabler of change in terms of how you contact the consumer, how you stock the stores, how you interest the consumer in your store directly, and how you serve that consumer as they are in the stores,” Blischok said.

Summing up, he said: “Your store design has to tell the story of high quality at an effective price. So the way that you display and the way that you light, the way that you communicate things such as fresh or frozen, the way you communicate product attributes is critical.”

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