Supermarkets should take more targeted approach

Canadian grocery store chains need to adopt more targeted means of attracting customers, or risk losing business to niche players that can cater more effectively to shoppers' tastes, warn retail experts. ...

Canadian grocery store chains need to adopt more targeted means of attracting customers, or risk losing business to niche players that can cater more effectively to shoppers’ tastes, warn retail experts.

‘Supermarkets are not at the forefront of being able to mine customer data properly,’ says Charles Knight, a partner in retail practice at Toronto-based consulting firm Arthur Andersen. ‘It leaves a huge opportunity for smaller independents.’

In a recent study entitled ‘International Trends in Retailing,’ Arthur Andersen retail consultant Michael J. O’Connor applauds U.S. mid-size grocer Wegmans for its efforts surrounding the launch of a New Jersey store. Rather than blow the launch budget on mass media advertising, it distributed 35,000 videotapes to carefully selected homes. As a result, reports O’Connor, the shop remained crowded all week.

‘Today, competition is severe, and a general approach lacks focus,’ he writes. ‘For this reason, there is great waste in advertising.’

Adam Finn, a professor in business at the University of Alberta and former director of the Canadian Institute of Retailing and Services adds that big Canadian grocery chains are lagging behind their U.S. counterparts when it comes to direct marketing.

‘I think they can do a better job,’ he says. ‘They have a lot of information because of loyalty cards, but I don’t think they fully exploit the data they have access to.’

Finn says U.S. supermarket chains have recently shown interest in leveraging loyalty card programs to encourage the customers they want, and discourage those they don’t.

‘If you look at traditional grocery store retailers, a small proportion of customers provide most of the profits – because they buy items at full price,’ he says.

It’s a concept that seems all but lost on Canadian retailers.

Toronto-based grocery chain Loblaws, for example, continues to focus largely on broadcast advertising. According to Geoff Wilson, vice-president of industry and investor relations for Loblaw Cos., the retailer doesn’t intend to move drastically toward direct efforts because it wants to be all things to all people. ‘We have multiple banners, which we believe can target the whole market.’

Similarly, The Great Atlantic and Pacific Company of Canada, which operates the A&P, Dominion and Ultra Food & Drug banners, continues to invest heavily in television, as it has for many years, with Dominion’s ‘We’re fresh obsessed’ campaign, according to company spokesperson Bill Sheine.

That said, the chain has boosted efforts in one-to-one marketing, thanks to data it has collected as an Air Miles sponsor. For instance, Dominion’s year-old Baby Club program mails members a $20 gift certificate when they purchase a certain value of infant products.

‘It seemed appropriate to reward young families who shop in our stores on a regular basis,’ says Sheine. ‘It was successful, so we’re going to continue to grow it.’

From a cost standpoint, the Baby Club approach is more effective than mass media advertising, says Arthur Andersen’s Knight. ‘You don’t wind up communicating with someone [who] would never be interested in your category,’ he says.

While there’s no evidence to suggest that small, independent grocers are leveraging their databases to a greater degree than national chains, they are in a better position to cater to local preferences, according to Sandra Singer, vice-president of member services and communications at the Toronto-based Canadian Federation of Independent Grocers.

‘Independents are more versatile because they don’t have to be dictated to by any corporation or through any franchised arrangement,’ she points out. ‘They’ve realized they can grow market share through effectively marketing to their communities.’

Geared toward health-minded folk, the Austin, Tex.-based chain Whole Foods will enter the Canadian market with a 25,000-square-foot store in Toronto’s tony Yorkville district by the end of 2001. Having generated $2 billion in sales last year, the 120-store company targets college-educated, above-average-income condo dwellers, according to Whole Foods’ vice-president of marketing, David Smith.

‘We do all of our positioning in-store,’ he says. ‘We traditionally don’t advertise.’

Instead, the shop, which will house a café, plans to host in-store events with celebrity chefs and offer cooking courses.

In its displays, meanwhile, Whole Foods uses placards that tell shoppers about the farmers who harvested certain products. ‘We feature the people we work with,’ says Smith. ‘It’s key for our target market, which is more discerning.’

Similarly, Urban Fare, an upscale grocer based in Vancouver, with a second location in Edmonton, promotes itself by organizing culinary presentations at the B.C. Home Show, and inviting cookbook authors to demonstrate their recipes at kiosks in the middle of their store.

‘Our customer is 32 to 55, and very affluent,’ explains Urban Fare marketing manager Irene McGuinness. ‘It’s about lifestyle. We’re finding that, thanks to The Food Network, our customers are more knowledgeable [about food] than they were five years ago.’

Urban Fare not only caters to customers who want to cook at home; it also includes a restaurant, which helps establish a ‘great ambience,’ says McGuinness.

Independents have more flexibility when it comes to their retail space and can offer a unique atmosphere that appeals to their local clientele, according to Singer.

Still, she admits that the big chains, probably in an effort to compete with the smaller players, have realized the importance of an attractive in-store environment.

‘Loblaws, she says, has gone a long way toward creating an inviting and more upscale environment.

Geoff Wilson says the goal of the new look – featuring fruits and vegetables piled high on tables sprouting umbrellas – was to give Loblaws, which recorded sales of $20.1 billion in 2000, a ‘market feel.’