MATCHING STORE TYPES to MARKET NEEDS to BETTER SERVE the CONSUMER by Stephen C

MATCHING STORE TYPES TO MARKET NEEDS TO BETTER SERVE THE CONSUMER by Stephen C. Goff Market Research and Planning Manager Nash Finch Company Minneapolis, Minnesota

Failure to recognize the role of could be understored for another. the consumer has led to a number of mar- Then again it depends on the type of ket disasters. Stresses that a store store we are talking about. Convenience image preselects its customers. stores in their site location ignore the location of supermarkets. Ware- You know I’m going to challenge house Food Markets in their site loca- you with a lot of information today, tion ignore the location of convenience but none of it will work for you unless stores and supermarkets. you try it and use it. Site location is a fun and important part of research. The type of store determines type Let’s explore a couple of concepts first: of analysis:

WHAT ARE THE TYPES OF RETAIL FOOD Convenience Store STORES WE HAVE IN OUR ARSENAL FOR FOOD Specialty Store DISTRIBUTION TO SERVE THE CONSUMER? Hypermarket Wholesale Grocery Large Prototypes (Are All Valid Concepts) Hypermarche (European) Family Centers Every firm develops its proven proto- Combination Stores types and style or if you want to get Supermarkets fancy-marketing mix. Super Stores Warehouse Food Stores Firms, in their minds or on paper or both, have developed models (con- Small Prototypes sumer acceptance and behavior models and the type of store combination of Convenience Store services> product> and departments to Food Specialty Shops serve the consumer.) Limited Assortment Stores In chatting with my friend Bill Overstores: Applebaum, whom I consider the Father of Site Location, Bill mentioned he We hear the word overstored a lot thought to cover the subject “Matching in the retail site location field. Over- Store Types to Market Needs to Better stored is relative to many definitions. Serve the Consumer” we should take a What is overstored city to one firm 3 hour time period. This morning we’re

February 76/page 58 Journal of Food Distribution Researc going to take 1/6 of that time. So buying. One key to success today is let’s get going. store loyalty. Marketing research provides the means of learning what Today ‘thereseems to be a polar- kind of filter a store performs and ization of success in prototype stores what kind of market segment it serves. into two areas: mass merchandisers and small store prototypes like con- If a retailer knows this, he can venience stores, specialty food stores, properly select location type and and limited assortment stores. The other physical aspects. He can also mass merchandise stores include hyper- select merchandising aspects and marche, family centers, combination operating strategies. stores, jumbo supermarkets and food warehouses. A General Foods study of the food industry recently revealed something Each one of these successful for us we already knew...location and working prototype stores including the store type planning may be more impor- conventional supermarket appeal to dif- tant to the profitability of a business ferent segments of the population by than good execution and control. satisfying different sets of consumers’ Market needs and consumer needs are wants and needs. related. What kind of store type can match market and consumer needs is a Retail firms today have this great valid problem for food distributors. choice of types to choose from in their arsenal of tools, in selection of store We have come a long way in site type. Considerations in order to make location research through the guidance a selection of store type must be of leaders that some of you know and feasible for the corporation and must one of whom you met yesterday--Bill consider competition and of course the Applebaum. consumer. Alert managements today are working to understand and serve con- Bill Applebaum’s contributions sumers. and books on site location have coined and guided our industry. Things are happening quickly today. The Institutional Life Cycle of Retail Charles Hardy, USDA Agricultural Firms has sped up. From department Economist, in February 1975 relates to stores which took 100 years to reach us that his survey work shows that their maturity, we now have catalogue consumers are satisfied with the food showrooms which are estimated to reach products purchased for their house- maturity in 10 years. (See Exhibit A.) holds, but only 70% of today’s shoppers are satisfied with the food stores they The retail environment is con- now shop most. stantly changing and retailers must use new and proven research techniques to - Price is an obvious source of survive these changes. To select a dissatisfaction. marketing strategy and store type a retailer today should know his store and - Also, availability and reliability what kind of customer it serves. Retail of product and shopping information are stores act as filters, attracting and cited. serving some customers, while others are not attracted or may browse without What are we going to do about that?

>urnal of Food Distribution Research February 76/page 59 Exhibit A. The Concept of the Institutional Life Cycle: Acceleration of New Retailing Innovations.

THE INSTITUTIONAL LIFE CYCLE

Early Growth Accelerated Maturity Decline Development

.. .“ Market Share ,“ .. .,, ,.’ ----- .-’ ‘. Profitability Time

Time Period Required Years Required Retailing to Reach to Reach Institution Maturity Maturity

Department Store 1860-1960 100 Variety Store 1900-1950 50 Supermarket 1935-1965 30 Discount Department Store 1955-1975 20 Fast Food Service Outlet 1960-1975 15 Home Improvement Center 1970-1980 10 Home Furnishings Warehouse 1970-1980 10 Catalog Showroom 1970-1980 10

Source: Management Horizons Incorporated, Columbus, Ohio

February 76/page 60 Journal of Food Distribution Resear Failure to appreciate the central communicates to them that this is their role of the consumer has led to a num- kind of store. ber of marketing disasters. Some of our stores need image freshening. Some 11. Why do people shop? need new positioning in the food industry. Some are not serving the con- Personal Motives sumer properly. If we start with the premise that a store image preselects Role Playing its customers, then if we can determine Diversion what consumers want in a market and what Self-Gratification need gaps exist in the market, we can Learning about New Trends better determine which of our store Physical Activity prototypes would best fit the market. Sensory Stimulation This gets us into a heavy subject of consumer behavior. Social Motives

I. WY do consumers shop retail food Social Experience Outside the Home stores? Communications with Others Having a Similar Interest Forces of Influence: Peer Groups Attraction Status and Authority Internal Pleasure of Bargaining

Learning Television Com- Impulse Shopping Personality mercials Perception Service Rational Patronage Motives Attitudes Quality Preferences Price Convenience of Location Motivation Image of Store Variety of Assortment Technological Image of Company Quality of Goods Innovations Range of Services Offered Attractive Furnishings and Display External Price in Relation (value) Courtesy and Helpfulness of Sales Culture Personnel Social Forces Economics Emotional Patrona9e Motives Marketing Sociability Many things enter into the process. Individuality Pride People’s motives for shopping are a function of many variables. Customers The customer will go where he can shop in stores which carry the merchan- get the products and services he wants dise selections most appealing to them, most conveniently and at the lowest displayed in a manner that fits their cost available for the quality of goods concept of a comfortable place to shop, he wants. in stores in which the attitude and language of the sales personnel seem People may choose a store because fitting to them and whose advertising they are apt to run into friends there,

ournal of Food Distribution Research February 76/page 61 because they think buying there may There are many ways to measure enhance their prestige or because they store image. At the Nash Finch Company, are following the lead of some admired the most widely used method we have person they wish to emulate. chosen is Semantic Differential. (See Exhibit C.) Choice of a store may be influenced by how the customer sees his position Other recognized methods include: in the social structure or his social class. Some shoppers “would not be Staple Scale caught dead“ in a discount store and Guttman Scale others feel uncomfortable in plush sur- Customer Prototypes roundings. Ego considerations are again Q-Sort emphasized in a consumer’s choice of Projective Techniques stores. No one firm can cater to all seg- Exhibit B illustrates Engel’s ments of the market simultaneously and Store-Choice Processes. In general the be fully successful. In a competitive determinants are: location, depth and market system, the firms that under- breadth of assortment, price, advertis- stand the characteristics of their ing and word-of-mouth communications, markets and try to satisfy the particular sales promotion, store personnel, ser- needs and wants prevailing in these mar- vices, physical attributes, store kets can increase their probability of clientele. success. In markets today we are not dealing with different types of people, It is important today to do the but with differences in people’s values. traditional site location research such Demographic and nondemographic data is as: important to making decisions on store type. Socio-economic analysis of data Economic Climate is important: Population--Demographics--Density Zoning Income Traffic Flow Occupation Highway Plans Education Natural Barriers and Man-made Barriers Segmentation Index, analysis of Competition--Size, Depth, Strategies buying behavior must be made. All of Commercial Center Locations and these aid in understanding and position- Planned Expansion ing retail type selection. Visibility The retailer selects his price It is also important to collect strategy through the combination of ser- profiles of image competition and deter- vices offered to shoppers. The greater mine gaps in consumer needs. the number of services, the higher the price; conversely, the fewer the ser- Store Images vices, the lower the price.

Store image is a complex of meanings The other basic dimension that and relationships serving to characterize innovators are using to attract parti- the store for people. cular segments of shoppers is product

February 76/page 62 Journal of Food Distribution Resea Exhibit B.

Evaluative Criteria I Perceived Characteristics of Stores (1) Location (Distance) (1) Location (2) Assortment Breadth and (2) Assortment Depth (3) Price (3) Price (4) Advertising and Sales - Store (4) Advertising and Sales Promotion Image Promotion (5) Store Personnel (5) Store Personnel (6) Services (6) Services (7) Other \

-iso:~Processes

m’=’’” ‘Y =

Diagram illustrates store-choice processes as presented by James Engel’s text on Consumer Behavior, Holt, Rinehart and Winston, Chicago, 1973.

ournal of Food Distribution Research February 76/page 63 Exhibit C.

GENERAL CHARACTERISTICS OF THE COhlPANY

Neither One Nor Extremlv 0u8te Slightlv The Other Slightly Quite E xtremdv rdl known !&OdlV —: —: —: —: —: unknown gmeratlv UW.911number of stores Inryenurnbe, of Mores operated bv company —: —: —: —: .—: r’ operated bv company long tiwn in cwmmunity —: —: —: —: —: —: —: short time m commumtv PHYSICAL CHARACTERISTICS OF Tf-IE STORE $rty —: —: —: —: —: —: clean unmtractitm dmmr —: —:— :—:— :—: attractive decor difficult to find my to find iaems vou want —: —: —: —: —: items you want dtff,cuft to mow msy to move through store —: —: —: —: —: —: —! through slore fast checkout —: —: —: —: —: —: dOW checkout CONVENIENCE OF REACHING THE STORE FROM YOUR LOCATION near by —: —: —: —: —: —: dtstanl dwt time required long time required to roach store —: —: —: —: —: —: —: to reach store cliff iculi drive —: —: —: —: —: —: —: ea$v drive difficult to fmd parking @ace —: —: —: —: —: —: —: easv to find pinking place convenient to other inconvonwnt to $tore$ f shop —: —: —: —: —: —: other stores I shop

PROOUCTS OF FE REO wide selection of different hmited sefectmn of kinds of products —: —: —: —: daffcrent k,nds of products fully stocked —: —: —: —: —: —: —: tmderstocked wtde~txfable products —: —: —: —“ —: —: —: dependable p,oducts high quality —: —: —: —: —: —: —: low qualtty numerous brands —: —: —: —: ‘ —: —: —: few brands unknown btanch —: —: —, —: —: —: w811known brands

PRICES CHANGEO BY THE STORE fow compared to high compared to offtw ttorm —: —: —: —: —: —: —: other stores high vafues for &values for money spent —: —: —: —: —: —: —: monev went Iarpo number of small number of items items tpaciallv priced —: —: —: spectally’ prtced STORE PERSONNEL Coultwus —: —: —: —: —: —: —: ducourteous cold —: —: —: —: —: —: —: frle”dly unhelpful —: —: —: —: —; —: —: helpful ●dequate number —: —: —: —: —: —: —: inadequate number ADvERTISING BY THE STORE uninformative —: —: —: —: —: informative unhelpful in planning helpful in pfanning purcha$es —: —: —: —: ~ —: —: purchases apfxaling —: —: —: —: —: —: —: unappealing beltavable —: —: _: —: —: —: —: mtdeadtncj freqtmn;lv seen by you —: —: —: —: —: —: —: mf,eq.endy seen byvou YOUR FRIENOS ANO THE STORE unknown w vow lrie”ds —: —: —: —: —: —: —: welf known tovourlr$ends Wllhkedbyvou, frimds —: —: —! —: —i —: —: dt$ltked bv vow friends poorly fecomnwnded wll recomt’mmded by bv vow friends —: —: —: —: —: —: —: vow friends num+rous friends shop there —: —: —. < —: few fmends shoo there

S1?M.4NTIC DIFII’[?l{IIXTIAL FOR PATRONAGE llESLii.kRCII; CI?N- EllALC~llA1\;\C:’i’ltlilS’lJ(:S 01: ‘llIE (“X)\ll>ANI. Rol)crt F. Kcl]y 011(1 Rofml(l Stcphmlwxl.““1’lm Smn:l]ltic Dillcrc~~[i:ll: Al) lnfom:itirvn Source for Jhigililll[ IM:iil l’:~tmnag(> AppuLls,” ]. *\fwkfiflg,’ vol. 31, p. 45 (OCt. 19(37). Reprinted I)y p!]-mission 0{ tlw pl]ldisltcr,

February 76/page 64 Journal of Food Distribution Resea assortment and an associated number of - Can your stores handle increased product lines. A narrow product assort- volume of from 20-100 percent without ment might be as few as 2,000 items from excessive customer inconvenience? . three basic product lines, as contrasted with a broad assortment of 20,000 items - Are your stores larger than from fifteen product lines. those of your principal competitors so that you can have additional depart- When the price and product assort- ments? ment dimensions are joined in a matrix, the basic strategies that innovators - Is your management truly ag- are following can be more clearly seen. gressive and prepared emotionally for In the center is the supermarket, the the possibility of conflict with dominant grocery institution. Sur- competitors? rounding it are the four primary challengers who are attacking with distinct- - Is your organization financially ively different approaches to satisfy capable of withstanding a prolonged shoppers’ demands. These challengers price war? are the discount store, the combination store, the hypermarket and convenience - Will your chains’s actions be stores and superettes. more or less ignored because its share of the market is relatively small? Executives of conventional supermarket chains are responsible for decid- - Do your principal competitors ing over the long run how best to re- have middle-sized stores that are mold and develop their future store rather run down and poorly merchandised? operating concept to meet the assault of innovators who have segmented the mar- - Are your primary competitors ket by appealing to shoppers prefer- unlikely to take harsh retaliatory ring lower prices, greater assortment, measures to counter a strategic move or more convenience. This task is es- on your part? sentially one of deciding in what box or boxes of the decision-making matrix the These are all questions that help firm wishes to be in order to more closely determine discount price strategy. satisfy the needs of certain groups of shoppers. Using one or more of the methods of measuring store image discussed The decision as to which basic above, and/or newer approaches such as pricing strategy to follow requires a the Fishbein model and nonmetric multi- careful analysis of several factors. dimensional sealing, the retailer needs to determine. - Are your store locations more accessible to larger numbers of shoppers 1. The specific evaluative criteria than those of your principal competitors? that consumers use in selecting the retailer’s general type of store. - Can your stores efficiently handle increased volume of from 20-100 percent 2. The relative importance of so that the average cost of doing bus- these evaluative criteria. iness will appreciably decrease?

ournal of Food Distribution Research February 76/page 65 3. How the retailer’s store is questionnaire work. We get returns of evaluated on each of these criteria. up to 65%. Unfortunately we need more time to do this subject justice, but we 4. How the ratings of the retailer’s will have a discussion period this store compare with consumers’ ratings morning. Development of strong mar- of their “ideal” store. keting information and analysis centers by retailers is essential. 5. For consumers that do not patronize or are infrequent patrons of TO make store type decisions w(: the retailer’s store, how the ratings have to access social trends--we have of the retailer’s store compare with to keep up to knowledge explosion. We ratings of the store the consumer have to use the services our industry patronizes regularly. provides us.

I believe that company policies Aids Like: today must be built on the base that customer needs and wants are the start- Progressive Grocer Produce Performance ing points for all efforts. Examination published in July of each year now gives a heavy user box score I believe the retailers should for each family group based on age of practice person-to-person education. shoppers and family, marital status, ethnic group, household size, occupa- I believe retail forms should tion, education, income and geographic establish consumer dialogues and regions. This is important to know. advisory boards to keep in touch with the consumer and his concerns. Studies on ethnic food likes and dislikes, and Working Women Vs. Non- I believe Don Perkins, Chairman of working Women Shopping Behavior, Use Jewel Companies, is right in saying the the Super Market Institute’s Informa- future of retailing belongs to those tion Service--to mention just a few. who perform as the buying agent for consumers. We have to be versatile to offer more than one store prototype. If the Retailers must provide for positive prototype doesn’t work, we have to be sincere conununicationand education for flexible enough to change prototype. the consumer. Jewel.does a great job in having many prototype offerings and has flexibility Information Gathering Techniques Useful to change one type to another. New for Determining Store Type examples of this are Jewel’s new Budget Stores. Consumer Advisory Groups Employee Advisory Groups and Remember: Individual Conferences Focus Groups - Stress communications and com- Questionnaires, whether they are municate with the consumer. mail, telephone, personal in- house/in-store. - Get your Marketing Information Systems in order and working for you. People enjoy giving advice. Much of the work I do is through mail

February 76/page 66 Journal of Food Distribution Resear, - Don’t let future shock catch ya! Investigate your competition: Keep abreast of what is going on. - Position the store (what makes - Interrelate your data--build your store different from other models--trace images and attitudes and stores?) adjust accordingly. - Set the image. - Be flexible and adaptable. - Adjust the mix. - Use formal and informal market research into consumer behavior and - Merchandise to your selected attitudes to support formal and tradi- segment. tional site location research data.

Today Marketing Position is Important

Marketing positioning involves identifying target marketing segments and developing a superior offer to these segments relative to competition.

Journal of Food Distribution Research February 76/page 67