April/May, 2014

From the Editor

Experiential Delis Trump Online Every Time

Sharon Olson is unfailingly incisive, and her piece in this issue, page 19, which focuses on opportunities for delis to sell Millennials, is par for the course. Sharon subdivides the cohort brilliantly by age and life stage and then identifies differential eating preferences that stand as marketing opportunities for supermarket delis. There is not a supermarket chain in the country that couldn’t profit by close attention to this data and analysis.

Indeed, the focus on Millennials is doubly important as they are more likely than older buyers to feel comfortable shopping online. Fresh Direct in New York has expanded to Philadelphia, and Amazon Fresh has opened in Los Angeles with a promise of expanding in California and elsewhere. The threat this poses to supermarkets has not been well publicized. Supermarkets are high fixed-cost businesses, and small reductions in sales can translate into big reductions in profits.

Even when retailers do the online offer themselves, it often is an independent profit center set up in competition with the retail store itself. One can easily imagine enough sales moving online to push thousands of retail stores into the red.

Fortunately, though one can buy goods online, it is very difficult to create communal experiences online, and in this the deli not only holds the edge, but indeed can be and should be the flag carrier for the whole supermarket.

Walk into one of the premier deli/foodservice operations such as Wegmans on the East Coast or Mariano’s in Chicago or Whole Foods in London and some things stand out:

1.Great Food
Here is a shocker, but the Number One requirement is that the food is good, as good as one will find in most restaurants and better than the food available in many small town restaurants. Having food that people —whatever their age — enjoy when they eat it is enormously important, really a prerequisite to success.

2.Interesting Assortment
Category management, done in an unsophisticated way, can be the death of a supermarket. Remember that every car dealership has a red sports car in the window, even though the vast majority of sales may be blue sedans. A focus on what people buy is useful but offering a wide variety of interesting foods is crucial.

Part of the issue is that we now have a fragmented society, whether looked at through a prism such as age — the Millennial piece — or looked at by income, education, ethnicity, propensity to travel or a thousand other metrics. This means that certain foods, though not best sellers, are the key to attracting a market segment. Beyond this, though, it is the immersion into a fresh and varied world of delicious foods that creates the experience online shopping simply can’t create.
Just as the exotic red sports car draws them in — and then they buy the practical blue sedan — so the fragrant Moroccan lamb, seasoned with mint, draws the attention — and then they buy the rotisserie chicken they know the kids will actually eat. Seeing the specialty dish, though, is what keeps them coming to the store.

3.Social Space
Most of the successful deli/foodservice operations now incorporate seating. Sometimes it’s a big space for everyone to gather after getting their food — this is typical for Wegmans — sometimes it is a variety of specialty spaces – say a wine and cheese bar or coffee and juice bar. Once again, this creates an experience that online just can’t match.

There has been a bifurcation in the U.S. retail deli scene. Where some retailers have moved deli up to an incredible foodservice offer that stands as the retailer’s calling card, attracting people — young and old — to the venue, other retailers have allowed their offers to stagnate, with innovation only coming from the manufacturers of meat and cheese for slicing and a few packaged salads, with a rotisserie or pizza program thrown in.

America isn’t like that anymore. Just as we went from everyone watching three TV networks to everyone watching who knows what on hundreds of TV cable channels and, now, Internet TV, so the culinary habits are dividing.

In fact, although research on broad trends is important, the most important research is on each retail store’s customer and prospect base. There is no one right assortment because there is no standard customer base. Are you located in a retirement community in Arizona or a border with first generation Mexicans in Texas? Do you serve the Orthodox Jews of Brooklyn or the large Mormon families in Utah, or is this a heavily Asian PhD crowd near a great coastal university? The one thing that is certain is that just as each clientele is unique, to optimize sales and profits, each assortment must be unique.

No matter how valid a retailer’s understanding of national trends, all retailing is local, and offering a uniform assortment against diverse demographics is a recipe for failure. Recognizing the extraordinary diversity of our shopper base, with each store having a unique profile of age, income, education, ethnicity and more, is the recipe for success. DB