April/May, 2012

From the Editor

Engagement Is Key To Future Deli Sales

Supermarket deli departments have evolved in such a way that there is almost a bifurcation between traditional sliced-meat-and-cheese deli programs, where the highlight in innovation is the fried chicken program, and more upscale, more diverse foodservice programs, with copious amounts of prepared foods, multiple food bars, wok stations, pasta stations, sushi programs, upscale sandwich offerings, etc.

This author facilitates a number of food industry share groups, including one for retail deli executives, and it is interesting to note there is a commonality between operators for retail produce or meat departments, whereas deli has developed so that the top operators are now almost in a different business.

Yet this progression — which has followed the industry trend in which some retailers pursue a low-cost/low-price model as Wal-Mart has done, while others have pursued a differentiator model in line with Target — is not likely to be sufficient to address the needs and desires of consumers in the decades to come.

There is a terrible temptation, because we sell the most essential of products — food — to think we have exhausted all ways of selling the products. Indeed, there is a tendency to focus too much on the day-to-day task of selling products instead of value-creation.

Ron Johnson left Target in 2000 and joined Apple as senior VP for retail to go on and build the wildly successful Apple store operation from scratch. The Apple stores defied conventional wisdom that computer-makers couldn’t successfully operate retail outlets and that computer sales would all move to the Internet. The stores currently sell over $40 million per store per year.

Mr. Johnson, now CEO of J.C. Penney, gave an intriguing interview with Gardiner Morse of the Harvard Business Review. In it, Mr. Johnson debunks the notion of a strict separation between online sales and sales through physical outlets: “In reality, what’s growing is physical retailers’ extension into a multichannel world. It’s not as though there’s a physical retail world and an online retail world, and as one grows, the other declines. They’re increasingly integrated.”

He may be speaking of the kind of integration where online retailers let people pick up at the stores and kiosks in stores allow customers to order products that aren’t stocked physically at store level. He may be talking about people feeling confident to order online because they know they can get product support or do a return at a local store. These are all issues relevant to food retailers.

At how many supermarket delis can I order my sandwich on my smart phone app and have it waiting for me at the store? Few stores have the volume to support a good kosher cheese program — but why can’t consumers order the product when they do their shopping and have it shipped to their homes or have it waiting at the store for pick-up with their next shopping trip?

Yet even these approaches seem too modest to define retailing in the 21st century. When Mr. Johnson is asked how a retailer can take the lead, he suggests a different way of thinking about retailing: “A store has got to be much more than a place to acquire merchandise. It’s got to help people enrich their lives. If the store just fulfills a specific product need, it’s not creating new types of value for the consumer… if a store can help shoppers find outfits that make them feel better about themselves, for instance, or introduce them to a new device that can change the way they communicate, the store is adding value beyond simply providing merchandise.”

A comparable idea would be for a deli to introduce consumers to foods that help them stay healthy or that offer new tastes or flavors and thus make them happy. Mr. Johnson goes on to explain how they rethought retailing at Apple: “We reimagined everything. We completely rethought the concept of ‘try before you buy’: You can test-drive any product, loaded with the applications and types of content you’re actually going to use, and get someone to show you how to use it. If you buy it, we’ll set it up for you before you leave the store. If you need help after that, you can come back for personal training. If there’s a problem, you can usually get it fixed faster than a dry cleaner can launder your shirt. We also reinvented the sales associates’ job… Apple store associates are not on commission, and they don’t try to sell you anything. They have one job: to help you find the product that’s right for you… All those things create value beyond the transaction.”

One thing that Mr. Johnson unwittingly points out is the crucial contribution service deli makes to the supermarket: It is the one place where consumers interact with people. In discussing the “Genius Bar” at Apple stores, Mr. Johnson makes a key point: “…the intuition there wasn’t simply ‘How do we best help people fix their computers?’ … Apple is in the relationship business as much as the computer business. And the only way to really build a relationship is face-to-face. That’s human nature. That gets at the essence of what retail stores have to be about: deepening connections with people.”

The deli department is the ideal forum for a supermarket to deepen its relationship with people. But too many retailers are too focused on selling more sliced meat to see the opportunity. DB