Supercenters need a taste of change and real local flavor - Editorial

Discount Store News, Feb 6, 1995 by Tony Lisanti

After an intense day of touring stores in southwestern Germany on the border of France a few weeks ago, I spent most of the train ride back to Frankfurt recalling the invasion of the hypermarkets in 1988. Remember, when Carrefour, Auchan and Wal-Mart's Hypermart USA burst on the retail scene generating more hype than almost any other new retail format? I though about how all those concepts were supposed to rewrite a chapter of retail history and how they're all gone now, but, still thriving throughout Europe. It was in retrospect a lesson that laid the foundation for the current supercenter growth.

Last week, Wal-Mart opened 23 supercenters and now has a total of 143. Kmart now has 70 supercenters and Target is ready to debut its supercenter format in a few weeks. It is without a doubt the most important trend in the retail industry. In the near future, The Big Three will likely open more supercenters annually than they will traditional discount stores.

Here are some observations about my visit to two major hypermarket operators in Germany, Metro's Real and Globus.

* Regionalization. While Metro exercises more centralized control, which is reflected in its "predictable" slick stores, displaying the latest in in-store technology with monitors broadcasting ads at checkouts, the smaller company, Globus, still clings to its more entrepreneurial approach that allows managers to do more local buying and merchandising. To insure long-term success, The Big Three supercenters must reflect local preferences, not headquarters mandates.

* Perishables. The whole notion of fresh foods must be closely evaluated. Globus goes to the extreme to guarantee freshness, for example, with its meats, altering ingredients to local tastes between stores that are about 20 miles apart. Overall, the demand for such products is likely greater in Germany than in the United States. Americans talk the talk regarding fresh products, but opt for convenience in the end. For example, one of the year's hottest new products is prepackaged salads. While they are still "fresh," it's slightly different than buying a head of lettuce This is a subtle, but key trend given the huge costs involved to run these departments.

* Services. Ancillary services are critical in order to build traffic, increase shopping frequency and insure store loyalty. In fact, the more services, the better. The entire perimeter of the Globus store I visited contained over a dozen specialty stores and restaurants and was one of the most exciting areas I have seen anywhere.

* Consumer Perception. Consumers recognize the discounters for price and value of general merchandise, but have yet to view the food side equally. The Big Three must win the trust of consumers and become as much a destination for food as they are for general merchandise.

* Vulnerability of supermarkets. With continued consolidation among supermarket chains (e.g. New Jersey-based Grand Union last week filed Chapter 11), many venerable chains are vulnerable to the aggressive price/value strategy of The Big Three as well as all the other benefits of a new supercenter.

* Convenience trap. The marketing message and mix of merchandise must be carefully evaluated in order to build regular shoppers who make large purchases, not convenience shoppers. The Big Three must boost average ticket, grab market share and force the mid-sized supermarket chains into the role of a "super convenience store."

* Commodity trap. Perishables are to food what fashion is to apparel. It's the point of differentiation that retailers must realize and unlike hard lines must be less driven by the "commodity" mentality.