June/July, 2006

From the Editor

Retail Identity Crisis

The senses so influence human beings that it’s hard to properly value intangibles. It might seem a no-brainer to select the tangible assets if you were given the choice of owning all the factories and tangible property involved in manufacture and distribution of Oreos or having just the recipe and trademark. Why give up countless millions in real property for, basically, two pieces of paper?

Yet the Oreo brand is far more valuable than all the factories because the brand “owns” the rights to shelf space in every supermarket and convenience store in America. And it does so because the brand “owns” space in the brain of every American.

Branding makes selling easy. A product or service is pre-positioned in the mind of consumers, disposing them to action and very difficult to dislodge.

Although we tend to think about branding in terms of manufactured goods, every retail store name is also a brand. And consumer awareness and perception can pre-dispose consumers on where to shop when.

When supermarkets were the only option and drew from a very limited marketing area, the store brand identity had to be broad and non-objectionable. One store might emphasize its meat department and another might let certain ethnic groups know they were welcome by carrying specific ethnic foods at holidays, but by and large, supermarket choice was so driven by propinquity that the goal of most branding efforts was simply to be unobjectionable. That is why one of the few supermarkets not to have an owner’s name on the building wound up calling itself “Safeway”, and that is why Safeway’s first jingle was Since We’re Neighbors, Let’s Be Friends.

Store branding has always suffered because supermarkets wanted to appeal to everyone. This is problematic because if you appeal to everyone, it is difficult to have a distinctive brand proposition.

New retail realities are forcing supermarkets to reexamine branding. The problem is obvious: Wal-Mart has successfully branded itself as the place for low prices. What positioning does that leave for conventional supermarkets?

Supermarkets have been catching on. Last year CEO Steve Burd announced Safeway was about to launch “a redefinition of our brand,” intended to deliver a message Burd said would distinguish Safeway’s shopping experience.

The new campaign, “Ingredients for life”, required substantial redesign of the stores, specialty features such as sushi and olive bars and the addition of in-store Starbucks kiosks — including cup holders on the grocery carts!

This generally well-received effort posed fundamental difficulties because Safeway still tried to be all-inclusive. In the very announcement about the effort, various Safeway executives couldn’t help but emphasize “a distinct identity behind proprietary offerings,” “the absolute best perishables in the supermarket segment,” “improvements in center store merchandising,” a focus on “narrowing the price gap with discounters” and, finally, “You’ll see us demonstrate how much better we are than our competition.”

Although admirable, this muddles the message. And branding is all about clarity. One retailer with effective positioning is Whole Foods. If Wal-Mart is known for low prices and Target is for the cheap-chic crowd, Whole Foods is good for you and good for the planet.

This powerful position rides baby boomers’ concern over health as the generation ages along with the younger generation’s concern for the world as a whole.

So it is shocking executives at Whole Foods would even consider messing it up. But the chain recently began running price-oriented ads in the New York City area. Some say it is competition from Trader Joe’s; others say it is Wal-Mart’s widely publicized move into organics that left Whole Foods executives biting at the bit to show they don’t deserve the “Whole Foods, Whole Paycheck” moniker.

Whole Foods can’t win this battle. Believing Whole Foods is “good for you” and “good for the world” means believing it wouldn’t cut corners as other retailers would. It doesn’t have to — its clientele is willing to pay top dollar for the most wholesome food, raised, processed, packaged, transported and retailed according to the highest standards.

Many true devotees of the “organic community” are not happy about Wal-Mart rolling out more organic product — even though the community acknowledges it will lead to a huge increase in organic food sales and consumption.

Wal-Mart has committed to keeping the cost of organic products just 10 percent over conventional. The fear is it will obey the letter of the law, but not the spirit — that the drive to reduce costs will lead Wal-Mart to take shortcuts and ignore non-codified organic interests. For example, organic standards say nothing about sourcing locally, but most members of the organic community see that as a basic precept.

If Whole Foods ever manages to convince consumers it offered bargain food or even food less expensive than competitors, consumers would also lose faith Whole Foods was spending the extra shekels necessary to do things right.

The positioning of Whole Foods is based on exceptionalism, a notion that it does things differently. Maintaining that impression depends on consistency of message, and promoting low prices is inconsistent with the message that this chain will spend what it takes to always, always do the right thing.

With Wal-Mart promoting organics and Whole Foods playing the price card, the danger is clear. Supermarkets have been crushed by a series of clearly targeted competitors — super centers, warehouse clubs, etc. Now the temptation will be for these specialized retailers to try to broaden their appeal to attract a wider customer base, thus leading to a confusing and undifferentiated message.

As Yogi Berra once said: “It’s déjà vu all over again.”  DB