June 12, 2007
BrainTrust Query: What’s Holding Back Innovation of the Supermarket?
By Bill Bishop, Chairman, Willard Bishop
While a number of leading retailers are becoming more customer-centered and, as a result, generating relatively stronger same-store sales, there’s a lingering concern in some quarters that supermarket retailers are still not as good as they need to be when it comes to spotting and adopting innovation.
This position is supported by the fact that supermarkets were late to embrace the natural and organic trade, while Whole Foods, Wild Oats, and a number of other operators were quicker to pick up on the popularity of this class of products.
The position is also supported by the typical reluctance of supermarkets to be first in implementing new technology – a trend technology suppliers find to be a very challenging “Catch 22.”
As an example, let’s consider a food retailing innovation that’s experiencing strong growth in many areas of the country: the meal-assembly kitchen. This is a niche business that’s growing up between traditional grocers and fast-food/casual dining carryout. It’s also a business that caters to customers who are “short on time and long on home-style cravings,” according to a May 20 article in the Daily Herald, a publication of the northwest suburbs of Chicago.
The article featured Julie Duffy, founder of Dinner by Design, based in Grayslake, IL, with 56 franchises operating in 12 states. Ms. Duffy explains that her company is built to serve shoppers who “don’t want to go through the shopping, chopping, and mopping” typically associated with a home-cooked meal.
Dinner by Design culinary experts develop and test recipes that are regularly posted on monthly menus followed by all of their franchisees.
Recently, Dinner by Design partnered with Kraft and Sara Lee, which provides them with additional promotional dollars as well as broader exposure.
Beyond the practical benefits of this innovation, there are the social benefits. “This is the new-age quilting bee,” says Duffy.
Five-year old Dinner by Design generates 70 percent of the company’s business through its website, which is logging more than 40,000 hits per day. And, Dinner by Design, in fact, is not even the largest of these businesses, even though in 2006 their current revenue topped $8 million done with just 21 employees.
Dream Dinners, for example, follows the same premise in its network of 260 franchises across 33 states.
This so-called “make, take, and bake” retail food business seems to be an innovation that’s long overdue for careful evaluation and testing by traditional food retailers. It’s on trend with meal solutions for one of the most coveted demographic segments of the food business. So far, there have been only a few tests to integrate this concept into the supermarket, such as Publix Apron’s Make-Ahead Meals stores in two Florida locations. (See RetailWire 5/18/07 – Publix
Opens Make-Ahead Meal Assembly Stores) But certainly, the opportunity hasn’t generated broad attention.
Discussion Questions: Respondents are asked to focus on just one of the following
questions:
- Do you see meal assembly as an innovation with the potential to be
adopted by food retailers? If yes, why? If no, why not? - What is it about
the way food retailers look at innovation that tends to discourage them
from embracing it? - What needs to be done to accelerate food retail industry
adoption of innovations? What can be done by progressive food retailers?
What can be done by developers/marketers of innovations?
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Human nature: people like to do what’s familiar and people don’t like to fail. Supermarket executives, like most other retail executives, are risk averse. Most supermarket companies only do something new after they’ve seen others do it profitably. The meal assembly business is growing, but like anything new, people want to see if it’s a fad and they want to see the shakeout. Investors don’t reward innovation for its own sake. They want to see sustained profit growth. True innovation requires a portfolio strategy: trying multiple new concepts all the time, to see which ones are winners. There might only be one winner in dozens of new concepts. The goal is to make the single winner so valuable that it wipes out the losses of all the losers.
Grocery isn’t obtusely ignoring trends and innovation. Grocery is inherently geared for an archaic model of American life.
After WWII, only 25% of women were working outside the home. They had the time to shop, cook, serve and clean up. Grocery, in large part, was geared around this model.
Today this model has changed, but grocery hasn’t. The number of women at home and working are reversed: 77% of women work outside the home. But grocery has largely remained the same.
Younger women are pushing back against the “second shift” which is largely a phenomenon of the Boomer generation. Millennials don’t cook, they assemble (with a few exceptions).
Shopping and eating are converging. More than one in five meals were prepared with the car’s power window (Harry Balzer). A Just-in-time mentality around meals is emerging, driven in part by real-time information and the ubiquitous purchase opportunities of the internet and mobile devices.
Grocery’s expertise for many years seems to be in the area of operational efficiency rather than real innovation.
Can grocery keep pace with consumers’ changing lifestyles? The answer lies in having a clear eye on change and the willingness to shape-shift into offerings that are smaller, more immediate, more ubiquitous and to a greater degree of “finish” than ever before.
This is a key question that has haunted the traditional supermarket business for years. Most of the innovations noted in the article as well as other food retailing/food service enhancements have not originated in traditional food retailers. I believe there are a number of reasons why this is the case: 1. Food retailers have been slow to recognize the need to develop a differential advantage, 2. Heavy reliance on consumer packaged goods companies to provide a flow of funds that do not necessarily translate to providing an enhanced shopping occasion, 3. Inordinate focus on competing with Wal-Mart on price, 4. A somewhat risk avoidance thinking which reinforces the ‘goal of being first at being second’.
In order to be a successful innovator, supermarkets need to focus on the front door, the customer, solving customer problems when it comes to food shopping and meal preparation. In addition, supermarkets should be constantly scanning the environment for innovation successes, borrowing, adapting, and adopting these innovations to fit their target market and stores.
In response to #2, the supermarket industry was founded by a group of spirited entrepreneurial pioneers who worked hard to develop new services, better ideas and values for the American consumer of the first half of the 20th century. They introduced air conditioned stores, self service, frozen foods, extended hours, nucleus deli and bakeries, stamps and other consumer incentives, imaginative promotions, animated displays, an endless stream of new products, and eventually (a generation later) the UPC.
They worked hard to produce a Sense of Theater and Friendliness in their early stores where, like CHEERS, “everybody knows your name.” 0h, these were very proud men and they were extremely competitive, which continually drove their ingenuity. Nothing was considered too costly to deliver something new to the consumer since they owned their own stores.
Then these entrepreneurial retailers slowly left us. Their companies were passed on to their next generation, which were not as hungry, competitive and driven (with a few exceptions such as Danny Wegman and Publix), or their stores were sold and became public.
Being public, Wall Street began to set new standards for food retailing performance in the USA. This began to transfer the entrepreneurial nature of food retailing into a more logistical focus. Many chains went into a Productivity Trance and became Linear rather than Conceptual Thinkers.
Innovative thinking began to give some ground to productivity retailing. This opened up a wide horizon for imaginative people outside the industry, people not primarily concerned with overview requirements from an army of stockholders. This created openings for Dream Dinners, Dinner By Design, Whole Foods, Trader Joe’s and other current day innovators. And so a new Passing Parade of Innovation is marching in front of us. As Bill Bishop suggests, it’s time for chain retailers to comparatively match the magic of food retailing’s originators.
Like most traditional industries, supermarkets are reluctant to change with the times. Consumers clearly want options with regard to their meal preparation. The question is whether supermarkets are well positioned to provide these options.
During the last number of years, we have seen a more adventurous and demanding consumer opt for new ethnic flavors and fresher, even organic foods. Supermarkets have lost many of these shoppers to non-traditional outlets.
Prepared fresh foods are a similar issue. While some supermarkets have done well with meal solutions, most have missed the mark, offering consumers poor choices and underscoring the impression of supermarkets as low service commodity providers.
Supermarkets must try to recapture the consumer image as the “place for quality fresh food” before they will be successful as a meal assembly location.
How about Publix’s very successful fresh sandwich kiosks in the South? Roche Bros. in the East, has a great fresh and busy hot food kiosk–food made right there in a wonderful old fashioned spotless kitchen that is visible to the customers.
Problem is that the food is perishable and out of date quickly–it’s hard to keep fresh mac and cheese looking that way for long! All ripe for high shrink numbers unless the plan is calculated carefully.
There’s a lot of money in good prepared hot food–busy working parents quickly doing the food shopping after work and then going home and having to take more time to make supper abound.
It takes time to implement and tweak something like this and most supermarkets don’t want to take the risk of short term loss.
I would think the internet could help out here–an online limited menu, ordered from work and with your ‘loyalty card’ number as a ‘hold’ would be a great thing and could be marketed as making life easier for our customer families.
Steve Needel reports “…meal assembly stores are shutting their doors in lots of places.” This is a great piece of learning. Have others observed this in their work and if so, what are the reasons behind the closures? Is it a weakness in the fundamental concept or simply poor execution of a franchise?
As long as you have supermarket executives with the mindset of a Steve Burd, you will never have innovation. It took losing a ton of money and almost being ousted to make Burd realize that Safeway’s generic supermarket model, based on purchasing power instead of consumer needs and wants, doesn’t work. And supermarket management mostly comes from people who grew up working in and then managing stores. They are not consumer centric and they are not marketing savvy, for the most part. The reason Whole Foods, Trader Joe’s and Wegmans do so well is that they focus on the consumer and make the shopping experience fun and interesting.
The charm of meal assembly stores is that they are small, personal, social and use fresh ingredients as well as interesting recipes. Will they last? I don’t know, but if the supermarkets did this, in order to squeeze out the most profit, they would be making deals to use [prepackaged meals manufacturers]–which defeats the purpose.
My wife recently had to get a gift for my daughter’s Girl Scout leaders and considered the local Dinner by Design knockoff. She asked me to look at the prices, which were exorbitant even for our upper middle class area. Why, she wondered, would anyone want to pay $35 per entrée and then have to prepare it themselves? Wouldn’t they prefer to eat out, or at least just do take out? And, are Americans that poorly trained at cooking that they need such services to help them with the basics? Personally, I don’t see much of a future for these offerings. Supermarkets will pick up the opportunity and force down prices to a point where they aren’t commercially feasible.
BTW, she decided to get them a gift certificate to a local restaurant instead.
Supermarkets are too “male”; that is, they are too analytical and too scientific in their approach and the result is dullness. They look at each shelf as a “profit center” and continually fail to see and benefit from marketing opportunities that exist in their space and the need for creating ambiance, fun, “buzz,” activity, freshness, and newness in their environments every day. There is an over focus on distribution and margin (of course they are important…but…) and lack of appreciation on the importance of new products and services as well as differentiation and competitive advantages to be gained through evolving constantly with consumers and the rest of the retail world.
As a jumping-off point, here are some observations about supermarkets being “late to embrace the natural and organic trade:” First, no long-term studies have ever proven the benefits of consuming natural and organic foods rather than “regular” foods, so grocers are slow to devote unpaid-for space to them. (Plus, no long-term studies have proven the advantages to the environment of growing natural and organic foods.) Second, responsible grocers could not justify displaying stumpy little “organic” produce items for twice the price. And third, in order to meet its deadline of last Friday, June 8, for doing so, the USDA authorized nearly forty NON-organic products to be awarded their USDA Organic stamp of approval. I’d say that grocers are saving their “embrace” for something real and meaningful, not another “Atkins-Approved” flash-in-the-pan. (And yet, Safeway continues to push real products off their shelves in favor of their desultory “O” brand.)
To the point(s) of this discussion: Why does the retail industry need to accelerate adoption of innovations (that’d be point #3)? Why is this a necessity according to some? Those who are making the most noise about supermarkets adopting innovation more quickly are those whose paychecks come mostly, if not entirely, from businesses observing supermarkets, not from supermarkets themselves. When you work inside a supermarket company, nothing is more closely monitored than the razor-thin margins upon which you depend. Irresponsible fad-chasing is sometimes tolerated but never rewarded. They simply can’t afford to consistently champion new causes just because the pundits think they should.
I couldn’t resist responding to a second (thus outlawed) of the three topics listed above: Meal Assembly. Anyone remember Automats? Being raised in Kansas, I only knew of Automats from old movies staged in New York City, but I always wanted to eat there. Automats presented a wall of locked, glass-windowed doors, behind which were displayed various meal items “from soup to nuts” or, more contemporarily, “from salad to dessert.” They were like restaurant buffets without the sneeze screens. Grab a tray and coast up and down the window-wall seeking your preferences. Insert coins in the proper slots, open the little door, extract the dish from within, and add it to your tray. Meal Assembly 101.
Today’s Meal Assembly initiative (I use the term, initiative, loosely), is yet another attempt to blur the line between food purchasing and food preparation. This has long been a strong point of the food preparation guys (restaurants) because of their take-home and delivery services. Boston Market came the closest, in my estimation, to closing the gap between purchase and preparation of real food (not so-called fast food). Supermarkets have been so-so in their attempts to close this gap from the opposite direction, so now pundits believe that a middle-man is required. All hail the “Make, Take, and Bake” (MT&B) revolution! (Do you think Papa Murphy’s Take & Bake Pizza should collect a royalty from this movement?) Also, Hispanic bodegas and Chinese restaurants have provided this service for decades. Does that count?
MT&B is just a shiny new moniker affixed to a very mature service. Research will show that the “new” MT&B services referenced here will derive the majority of their business from customers’ special occasions. We used to call them caterers.
Sob, sob, sob, cry, cry, cry. What else do supermarket retailers have to do to comfort the “spoiled” cellphone instant everything consumer? Actually pick up the fork and spoon and feed them?
Everyone in the industry is trying something new. A&P Fresh, Bloom, Publix, are all changing the way supermarkets serve their customers’ prepared food needs. If you can’t make a prepared meal from the Tabletop area at Bloom, you better start heading for either the “all you can eat” buffet or the nursing home.
A&P offers in its family of banner stores a monthly booklet, “Easy Solutions,” that provides it customers with just that, tasty, quick, and easy prepared food recipes featuring the products advertised in the pamphlet.
With the large homes of today, they come equipped with pantries, yes more than one, along with kitchens and food preparation areas which rival most restaurant kitchens. With all that stainless steel and cooking surface, if a person can’t come up with a meal, something is definitely wrong.
Our Moms and yes, our Dads, had far less inventions available to them to prepare meals. Somehow, we all ate tasty, freshly prepared meals and cuisine with an Italian, German, Polish, African, Southern, Mesquite, etc. flavor. Gnocchi and ravioli, greens, stews, soups, baked chicken, baked pork, etc were the results of diligent home cooked dishes prepared from fresh ingredients.
Yes these “prepare a bunch of meals” places have a niche. But hey, didn’t our Moms kind of already do that? It was called, making something extra, and freezing it (leftovers) for another meal.
This is one of the better subjects discussed in a while. Each store owner has to evaluate their own market, and decide what innovations will work for them. As a small independent in a rural poor area, our customers want DEALS. Many of them still cook for their families, and look around for the best values.
A Whole Foods or Wild Oats or Wegmans could not survive here because our income levels cannot rise up to support these wonderful concepts.
We started an internet e-mail ad service over 3 years ago, and we are still getting people to sign up for it every week. Free recipes that are simple and delicious are shared, and people appreciate the fact that we are a custom meat shop and provide cooking tips with any cut of meat they need.
A scratch prepared deli is a niche any store can beat the big chains with. The commitment must be in added labor, but the profit potential is there if the salads, and entrees are delicious and value priced!!! Innovation must come from within your gut, and pursue it with vigor!!!
The comments have all been very helpful in getting at one of the major challenges facing the grocery business, i.e., how to more systematically innovate at a time when, as Gene Hoffman has observed, most of the entrepreneurs have left the business, and Joel Rubinson observes that the silo nature of category management limits innovative thinking across the business.
This situation seems to call out for a portfolio strategy similar to the one mentioned by Mark Lillian.
In building out the approach, a retailer would dedicate certain funds in an innovation budget that would not be subject to pre-test ROI analysis. This by itself should make it a lot easier to field-test more innovations.
The portfolio approach also assumes most of the innovations tested will fail but that the ones that succeed will more than pay for the entire process. That’s the big idea.
Are there retailers you see who are following this type of portfolio approach to innovation? If so, who? If not, should retailers be working to implement this idea?
As I know this is a difficult direction for an anchored industry and its business model, every innovation in business is predicated on the culture in the company…being able to try something different, and most importantly, think outside of the industry norm. This doesn’t mean going for the “grand slam”; but to have executive management support in discussing and testing opportunities…e.g.: meals, better service to patrons, and/or respect for the rank and file.
Combine this cultural shift with consumer centric penetration throughout the company, and any industry member has the opportunity to bring innovation to its business! A big Hmmmmmmmmmmm….
Dinner by Design et al succeed precisely because they take the drudgery out of grocery shopping (meal planning, ingredients finding, cart2belt2carschlepping, draggroceriesintothehouseandputthemaway ordeal) and makes it social and fun–plus there’s no “whoops, I forgot to buy one critical ingredient and now I have to go back to the store and do the whole thing all over again.” I love to cook and I like to shop and I HATE going to the grocery store. I think a grocery chain that tried to do the dinner by design concept would find itself limited by these perceptions as well as unable and unwilling to devote the square footage necessary to make it fly.
Grocers with their low margins have struggled to embrace new concepts and struggled to make higher cost ones work. So many of these concepts fly in the face of what they do from an operational, systematic and organizational standpoint that it’s hard for them to switch gears. Legacy systems make the problem worse.
Grocery shopping is a miserable experience from the moment you enter the store. Grocers should start there, with customer-centric efforts before they worry about grocery substitutes.
I have to disagree. I think supermarket retailers are very innovative and constantly coming up with new ideas. Sure, those big publicly held vanilla chain stores are slow off the mark but even they eventually catch up to where they are only a few years behind.
As far as meal assembly goes, I still see that as something for soccer moms who live in wealthy urban areas who care more about themselves and their careers than taking care of their husbands and children. I grew up with mom and grandma cooking wonderful meals from scratch every day, spending a good bit of time preparing them properly then cleaning up afterwards. Perhaps when a supermarket can actually match the quality of a home cooked meal with actions and not words, meal assembly will catch on in flyover country.
As much as the 15+ year old category management has contributed to incremental profitability for retailers, it is a product-centric way of thinking largely based on sales analysis that tends to limit innovation. It discourages focusing on the various lifestyle themes that cut across numerous categories and form the basis of branding strategy for the retailer (“store as brand”) in favor of SKU sales analysis. Breakthroughs like Whole Foods and Trader Joe’s (and Tesco’s Fresh and Easy?) come from thinking of shopper/consumer segments and then aligning the whole store as touchpoints on that brand strategy. A merchandising perspective that relies on managing each product category as a separate business to maximize has a tough time aligning to that breakthrough way of thinking.
Granted, there are some exceptions, however, the food channel for the most part is very cautious by its own nature, often to a fault. My observation is that management operates from a protective position to avoid losing profits. This is hardly a trend that promotes innovation. With so many outlets now controlled by large chains and conglomerates, innovation is often left to smaller businesses and niche retailers. The larger chains are driven more so by defensive postures to protect the bottom line.
There are many reasons which hinder grocery innovation. I’ll cite just three obvious obstacles: cost; speed; time.
Unless the operator knows what he/she is doing, innovation can be extremely costly in investment and in misdirection. Since society is changing so rapidly, the grocer is forever shifting to accommodate the moving target. How can you respond to the needs of your customers when they change their shopping behaviour almost regularly? Time is another operator problem: Since managers spend an overwhelming percentage of their time on execution, they have little time to research, plan, innovate.
We’ve had the first part of this discussion before–the meal assembly business is not nearly as interesting to people as it first appeared to be. Don’t want to use the word fad here, but meal assembly stores are shutting their doors in lots of places. I think Publix’s Apron approach–here’s an interesting recipe and all the ingredients are available in one place–provides a happy medium; new meal solutions with no extra cost.
There are a number of reasons that that meal assembly is not the rage in every supermarket.
1. It is a different business model than a supermarket. The skills needed for the host, the source of supply (food service) the labor costs and the site rental costs are all different.
2. The cost of entry is low and locations are going up and going under as quickly as dandelions on my lawn.
3. The quality of meals that have lost their chill on the drive home and then slowly frozen in the family refrigerator are not always as good as the taste tested and flash frozen products from the supermarket frozen food case.
4. The quilting bee analogy is not quite accurate as foodies feel restricted in a meal assembly program and non-foodies (after their “motherly guilt” is either salved with a few meals or insulted by their family who did not fully appreciate their sacrifice and criticized the mystery meat) decide to go back to the four basic food groups: eat out, take out, canned and frozen.
5. If the quilting bee analogy really flies one will expect to see church groups getting into the game and start cooking circles. Most churches already have kitchens with food preparation areas. It would be a low cost form of fellowship for them. Think of church circles preparing for the elderly ala meals on wheels, specialty cooking for diabetics or allergies; groups for newly weds and new mothers. Church basements could be big in meal assembly.
6. Like the small health clubs the commercial meal assembly will be in a perpetual state of recruitment as customers drop out for reasons of satisfaction or alternative solutions.
7. The supermarket solution will will be a prepared “to cook” single meal similar to the pizza “take and bake.”
Interested to see the strength of a response that we may be misinterpreting caution for resistance, but in the final analysis, how much does it matter given the issues before us in the industry?
Look at all the reinforcement grocery executives and managers going for this risk-averse, industry-focused, organization-centric approach: their compensation packages enforce it, their pals in the industry are all the same way, they read industry magazines and books that all enforce the same ideas.
I’ve been going to grocery industry conventions since the early 1980s, and except for changes in terminology and technological change at the micro-level, these conventions are exactly the same now as they were then — they talk about the same ideas, they use the same approaches, and they are based on the same assumptions.
It seems we all make the assumption that senior management controls these grocery organizations, large and small. Our data doesn’t support this view. Senior management is controlled by the information in these organizations, because they make their decisions based on that information. And they don’t control the information. The System does. The System controls senior management. A good example is the go-getter junior analyst at (grocery chain name withheld); as they moved up the chain in the organization, they became more cautious. By the time they arrived on the senior management team, they were a different person — resistant, protective, non-active. It is more than simply organization “culture.” Much more.
The answer? Middle managers. Right. Middle managers. Middle managers, in our database, have a much clearer view of the organizational problems than senior managers, because their information is less filtered.
“But middle managers have no power.” Right. But neither do senior managers. They are all controlled by the System. What middle managers have, though, is frustration. FRUSTRATION. And with that frustration, they can disrupt the System, which will disrupt the Senior Team Status Quo.
We have seen this happen numerous times. Most organizations don’t believe it can happen, so middle managers seldom look into this idea. But to interested readers, I have a case study I can share with you about how it works and why.
It seems to me that food retailers would adopt more innovative solutions if they were in closer touch with their customers. It’s too easy to distance oneself from customers.
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Human nature: people like to do what’s familiar and people don’t like to fail. Supermarket executives, like most other retail executives, are risk averse. Most supermarket companies only do something new after they’ve seen others do it profitably. The meal assembly business is growing, but like anything new, people want to see if it’s a fad and they want to see the shakeout. Investors don’t reward innovation for its own sake. They want to see sustained profit growth. True innovation requires a portfolio strategy: trying multiple new concepts all the time, to see which ones are winners. There might only be one winner in dozens of new concepts. The goal is to make the single winner so valuable that it wipes out the losses of all the losers.
Grocery isn’t obtusely ignoring trends and innovation. Grocery is inherently geared for an archaic model of American life.
After WWII, only 25% of women were working outside the home. They had the time to shop, cook, serve and clean up. Grocery, in large part, was geared around this model.
Today this model has changed, but grocery hasn’t. The number of women at home and working are reversed: 77% of women work outside the home. But grocery has largely remained the same.
Younger women are pushing back against the “second shift” which is largely a phenomenon of the Boomer generation. Millennials don’t cook, they assemble (with a few exceptions).
Shopping and eating are converging. More than one in five meals were prepared with the car’s power window (Harry Balzer). A Just-in-time mentality around meals is emerging, driven in part by real-time information and the ubiquitous purchase opportunities of the internet and mobile devices.
Grocery’s expertise for many years seems to be in the area of operational efficiency rather than real innovation.
Can grocery keep pace with consumers’ changing lifestyles? The answer lies in having a clear eye on change and the willingness to shape-shift into offerings that are smaller, more immediate, more ubiquitous and to a greater degree of “finish” than ever before.
This is a key question that has haunted the traditional supermarket business for years. Most of the innovations noted in the article as well as other food retailing/food service enhancements have not originated in traditional food retailers. I believe there are a number of reasons why this is the case: 1. Food retailers have been slow to recognize the need to develop a differential advantage, 2. Heavy reliance on consumer packaged goods companies to provide a flow of funds that do not necessarily translate to providing an enhanced shopping occasion, 3. Inordinate focus on competing with Wal-Mart on price, 4. A somewhat risk avoidance thinking which reinforces the ‘goal of being first at being second’.
In order to be a successful innovator, supermarkets need to focus on the front door, the customer, solving customer problems when it comes to food shopping and meal preparation. In addition, supermarkets should be constantly scanning the environment for innovation successes, borrowing, adapting, and adopting these innovations to fit their target market and stores.
In response to #2, the supermarket industry was founded by a group of spirited entrepreneurial pioneers who worked hard to develop new services, better ideas and values for the American consumer of the first half of the 20th century. They introduced air conditioned stores, self service, frozen foods, extended hours, nucleus deli and bakeries, stamps and other consumer incentives, imaginative promotions, animated displays, an endless stream of new products, and eventually (a generation later) the UPC.
They worked hard to produce a Sense of Theater and Friendliness in their early stores where, like CHEERS, “everybody knows your name.” 0h, these were very proud men and they were extremely competitive, which continually drove their ingenuity. Nothing was considered too costly to deliver something new to the consumer since they owned their own stores.
Then these entrepreneurial retailers slowly left us. Their companies were passed on to their next generation, which were not as hungry, competitive and driven (with a few exceptions such as Danny Wegman and Publix), or their stores were sold and became public.
Being public, Wall Street began to set new standards for food retailing performance in the USA. This began to transfer the entrepreneurial nature of food retailing into a more logistical focus. Many chains went into a Productivity Trance and became Linear rather than Conceptual Thinkers.
Innovative thinking began to give some ground to productivity retailing. This opened up a wide horizon for imaginative people outside the industry, people not primarily concerned with overview requirements from an army of stockholders. This created openings for Dream Dinners, Dinner By Design, Whole Foods, Trader Joe’s and other current day innovators. And so a new Passing Parade of Innovation is marching in front of us. As Bill Bishop suggests, it’s time for chain retailers to comparatively match the magic of food retailing’s originators.
Like most traditional industries, supermarkets are reluctant to change with the times. Consumers clearly want options with regard to their meal preparation. The question is whether supermarkets are well positioned to provide these options.
During the last number of years, we have seen a more adventurous and demanding consumer opt for new ethnic flavors and fresher, even organic foods. Supermarkets have lost many of these shoppers to non-traditional outlets.
Prepared fresh foods are a similar issue. While some supermarkets have done well with meal solutions, most have missed the mark, offering consumers poor choices and underscoring the impression of supermarkets as low service commodity providers.
Supermarkets must try to recapture the consumer image as the “place for quality fresh food” before they will be successful as a meal assembly location.
How about Publix’s very successful fresh sandwich kiosks in the South? Roche Bros. in the East, has a great fresh and busy hot food kiosk–food made right there in a wonderful old fashioned spotless kitchen that is visible to the customers.
Problem is that the food is perishable and out of date quickly–it’s hard to keep fresh mac and cheese looking that way for long! All ripe for high shrink numbers unless the plan is calculated carefully.
There’s a lot of money in good prepared hot food–busy working parents quickly doing the food shopping after work and then going home and having to take more time to make supper abound.
It takes time to implement and tweak something like this and most supermarkets don’t want to take the risk of short term loss.
I would think the internet could help out here–an online limited menu, ordered from work and with your ‘loyalty card’ number as a ‘hold’ would be a great thing and could be marketed as making life easier for our customer families.
Steve Needel reports “…meal assembly stores are shutting their doors in lots of places.” This is a great piece of learning. Have others observed this in their work and if so, what are the reasons behind the closures? Is it a weakness in the fundamental concept or simply poor execution of a franchise?
As long as you have supermarket executives with the mindset of a Steve Burd, you will never have innovation. It took losing a ton of money and almost being ousted to make Burd realize that Safeway’s generic supermarket model, based on purchasing power instead of consumer needs and wants, doesn’t work. And supermarket management mostly comes from people who grew up working in and then managing stores. They are not consumer centric and they are not marketing savvy, for the most part. The reason Whole Foods, Trader Joe’s and Wegmans do so well is that they focus on the consumer and make the shopping experience fun and interesting.
The charm of meal assembly stores is that they are small, personal, social and use fresh ingredients as well as interesting recipes. Will they last? I don’t know, but if the supermarkets did this, in order to squeeze out the most profit, they would be making deals to use [prepackaged meals manufacturers]–which defeats the purpose.
My wife recently had to get a gift for my daughter’s Girl Scout leaders and considered the local Dinner by Design knockoff. She asked me to look at the prices, which were exorbitant even for our upper middle class area. Why, she wondered, would anyone want to pay $35 per entrée and then have to prepare it themselves? Wouldn’t they prefer to eat out, or at least just do take out? And, are Americans that poorly trained at cooking that they need such services to help them with the basics? Personally, I don’t see much of a future for these offerings. Supermarkets will pick up the opportunity and force down prices to a point where they aren’t commercially feasible.
BTW, she decided to get them a gift certificate to a local restaurant instead.
Supermarkets are too “male”; that is, they are too analytical and too scientific in their approach and the result is dullness. They look at each shelf as a “profit center” and continually fail to see and benefit from marketing opportunities that exist in their space and the need for creating ambiance, fun, “buzz,” activity, freshness, and newness in their environments every day. There is an over focus on distribution and margin (of course they are important…but…) and lack of appreciation on the importance of new products and services as well as differentiation and competitive advantages to be gained through evolving constantly with consumers and the rest of the retail world.
As a jumping-off point, here are some observations about supermarkets being “late to embrace the natural and organic trade:” First, no long-term studies have ever proven the benefits of consuming natural and organic foods rather than “regular” foods, so grocers are slow to devote unpaid-for space to them. (Plus, no long-term studies have proven the advantages to the environment of growing natural and organic foods.) Second, responsible grocers could not justify displaying stumpy little “organic” produce items for twice the price. And third, in order to meet its deadline of last Friday, June 8, for doing so, the USDA authorized nearly forty NON-organic products to be awarded their USDA Organic stamp of approval. I’d say that grocers are saving their “embrace” for something real and meaningful, not another “Atkins-Approved” flash-in-the-pan. (And yet, Safeway continues to push real products off their shelves in favor of their desultory “O” brand.)
To the point(s) of this discussion: Why does the retail industry need to accelerate adoption of innovations (that’d be point #3)? Why is this a necessity according to some? Those who are making the most noise about supermarkets adopting innovation more quickly are those whose paychecks come mostly, if not entirely, from businesses observing supermarkets, not from supermarkets themselves. When you work inside a supermarket company, nothing is more closely monitored than the razor-thin margins upon which you depend. Irresponsible fad-chasing is sometimes tolerated but never rewarded. They simply can’t afford to consistently champion new causes just because the pundits think they should.
I couldn’t resist responding to a second (thus outlawed) of the three topics listed above: Meal Assembly. Anyone remember Automats? Being raised in Kansas, I only knew of Automats from old movies staged in New York City, but I always wanted to eat there. Automats presented a wall of locked, glass-windowed doors, behind which were displayed various meal items “from soup to nuts” or, more contemporarily, “from salad to dessert.” They were like restaurant buffets without the sneeze screens. Grab a tray and coast up and down the window-wall seeking your preferences. Insert coins in the proper slots, open the little door, extract the dish from within, and add it to your tray. Meal Assembly 101.
Today’s Meal Assembly initiative (I use the term, initiative, loosely), is yet another attempt to blur the line between food purchasing and food preparation. This has long been a strong point of the food preparation guys (restaurants) because of their take-home and delivery services. Boston Market came the closest, in my estimation, to closing the gap between purchase and preparation of real food (not so-called fast food). Supermarkets have been so-so in their attempts to close this gap from the opposite direction, so now pundits believe that a middle-man is required. All hail the “Make, Take, and Bake” (MT&B) revolution! (Do you think Papa Murphy’s Take & Bake Pizza should collect a royalty from this movement?) Also, Hispanic bodegas and Chinese restaurants have provided this service for decades. Does that count?
MT&B is just a shiny new moniker affixed to a very mature service. Research will show that the “new” MT&B services referenced here will derive the majority of their business from customers’ special occasions. We used to call them caterers.
Sob, sob, sob, cry, cry, cry. What else do supermarket retailers have to do to comfort the “spoiled” cellphone instant everything consumer? Actually pick up the fork and spoon and feed them?
Everyone in the industry is trying something new. A&P Fresh, Bloom, Publix, are all changing the way supermarkets serve their customers’ prepared food needs. If you can’t make a prepared meal from the Tabletop area at Bloom, you better start heading for either the “all you can eat” buffet or the nursing home.
A&P offers in its family of banner stores a monthly booklet, “Easy Solutions,” that provides it customers with just that, tasty, quick, and easy prepared food recipes featuring the products advertised in the pamphlet.
With the large homes of today, they come equipped with pantries, yes more than one, along with kitchens and food preparation areas which rival most restaurant kitchens. With all that stainless steel and cooking surface, if a person can’t come up with a meal, something is definitely wrong.
Our Moms and yes, our Dads, had far less inventions available to them to prepare meals. Somehow, we all ate tasty, freshly prepared meals and cuisine with an Italian, German, Polish, African, Southern, Mesquite, etc. flavor. Gnocchi and ravioli, greens, stews, soups, baked chicken, baked pork, etc were the results of diligent home cooked dishes prepared from fresh ingredients.
Yes these “prepare a bunch of meals” places have a niche. But hey, didn’t our Moms kind of already do that? It was called, making something extra, and freezing it (leftovers) for another meal.
This is one of the better subjects discussed in a while. Each store owner has to evaluate their own market, and decide what innovations will work for them. As a small independent in a rural poor area, our customers want DEALS. Many of them still cook for their families, and look around for the best values.
A Whole Foods or Wild Oats or Wegmans could not survive here because our income levels cannot rise up to support these wonderful concepts.
We started an internet e-mail ad service over 3 years ago, and we are still getting people to sign up for it every week. Free recipes that are simple and delicious are shared, and people appreciate the fact that we are a custom meat shop and provide cooking tips with any cut of meat they need.
A scratch prepared deli is a niche any store can beat the big chains with. The commitment must be in added labor, but the profit potential is there if the salads, and entrees are delicious and value priced!!! Innovation must come from within your gut, and pursue it with vigor!!!
The comments have all been very helpful in getting at one of the major challenges facing the grocery business, i.e., how to more systematically innovate at a time when, as Gene Hoffman has observed, most of the entrepreneurs have left the business, and Joel Rubinson observes that the silo nature of category management limits innovative thinking across the business.
This situation seems to call out for a portfolio strategy similar to the one mentioned by Mark Lillian.
In building out the approach, a retailer would dedicate certain funds in an innovation budget that would not be subject to pre-test ROI analysis. This by itself should make it a lot easier to field-test more innovations.
The portfolio approach also assumes most of the innovations tested will fail but that the ones that succeed will more than pay for the entire process. That’s the big idea.
Are there retailers you see who are following this type of portfolio approach to innovation? If so, who? If not, should retailers be working to implement this idea?
As I know this is a difficult direction for an anchored industry and its business model, every innovation in business is predicated on the culture in the company…being able to try something different, and most importantly, think outside of the industry norm. This doesn’t mean going for the “grand slam”; but to have executive management support in discussing and testing opportunities…e.g.: meals, better service to patrons, and/or respect for the rank and file.
Combine this cultural shift with consumer centric penetration throughout the company, and any industry member has the opportunity to bring innovation to its business! A big Hmmmmmmmmmmm….
Dinner by Design et al succeed precisely because they take the drudgery out of grocery shopping (meal planning, ingredients finding, cart2belt2carschlepping, draggroceriesintothehouseandputthemaway ordeal) and makes it social and fun–plus there’s no “whoops, I forgot to buy one critical ingredient and now I have to go back to the store and do the whole thing all over again.” I love to cook and I like to shop and I HATE going to the grocery store. I think a grocery chain that tried to do the dinner by design concept would find itself limited by these perceptions as well as unable and unwilling to devote the square footage necessary to make it fly.
Grocers with their low margins have struggled to embrace new concepts and struggled to make higher cost ones work. So many of these concepts fly in the face of what they do from an operational, systematic and organizational standpoint that it’s hard for them to switch gears. Legacy systems make the problem worse.
Grocery shopping is a miserable experience from the moment you enter the store. Grocers should start there, with customer-centric efforts before they worry about grocery substitutes.
I have to disagree. I think supermarket retailers are very innovative and constantly coming up with new ideas. Sure, those big publicly held vanilla chain stores are slow off the mark but even they eventually catch up to where they are only a few years behind.
As far as meal assembly goes, I still see that as something for soccer moms who live in wealthy urban areas who care more about themselves and their careers than taking care of their husbands and children. I grew up with mom and grandma cooking wonderful meals from scratch every day, spending a good bit of time preparing them properly then cleaning up afterwards. Perhaps when a supermarket can actually match the quality of a home cooked meal with actions and not words, meal assembly will catch on in flyover country.
As much as the 15+ year old category management has contributed to incremental profitability for retailers, it is a product-centric way of thinking largely based on sales analysis that tends to limit innovation. It discourages focusing on the various lifestyle themes that cut across numerous categories and form the basis of branding strategy for the retailer (“store as brand”) in favor of SKU sales analysis. Breakthroughs like Whole Foods and Trader Joe’s (and Tesco’s Fresh and Easy?) come from thinking of shopper/consumer segments and then aligning the whole store as touchpoints on that brand strategy. A merchandising perspective that relies on managing each product category as a separate business to maximize has a tough time aligning to that breakthrough way of thinking.
Granted, there are some exceptions, however, the food channel for the most part is very cautious by its own nature, often to a fault. My observation is that management operates from a protective position to avoid losing profits. This is hardly a trend that promotes innovation. With so many outlets now controlled by large chains and conglomerates, innovation is often left to smaller businesses and niche retailers. The larger chains are driven more so by defensive postures to protect the bottom line.
There are many reasons which hinder grocery innovation. I’ll cite just three obvious obstacles: cost; speed; time.
Unless the operator knows what he/she is doing, innovation can be extremely costly in investment and in misdirection. Since society is changing so rapidly, the grocer is forever shifting to accommodate the moving target. How can you respond to the needs of your customers when they change their shopping behaviour almost regularly? Time is another operator problem: Since managers spend an overwhelming percentage of their time on execution, they have little time to research, plan, innovate.
We’ve had the first part of this discussion before–the meal assembly business is not nearly as interesting to people as it first appeared to be. Don’t want to use the word fad here, but meal assembly stores are shutting their doors in lots of places. I think Publix’s Apron approach–here’s an interesting recipe and all the ingredients are available in one place–provides a happy medium; new meal solutions with no extra cost.
There are a number of reasons that that meal assembly is not the rage in every supermarket.
1. It is a different business model than a supermarket. The skills needed for the host, the source of supply (food service) the labor costs and the site rental costs are all different.
2. The cost of entry is low and locations are going up and going under as quickly as dandelions on my lawn.
3. The quality of meals that have lost their chill on the drive home and then slowly frozen in the family refrigerator are not always as good as the taste tested and flash frozen products from the supermarket frozen food case.
4. The quilting bee analogy is not quite accurate as foodies feel restricted in a meal assembly program and non-foodies (after their “motherly guilt” is either salved with a few meals or insulted by their family who did not fully appreciate their sacrifice and criticized the mystery meat) decide to go back to the four basic food groups: eat out, take out, canned and frozen.
5. If the quilting bee analogy really flies one will expect to see church groups getting into the game and start cooking circles. Most churches already have kitchens with food preparation areas. It would be a low cost form of fellowship for them. Think of church circles preparing for the elderly ala meals on wheels, specialty cooking for diabetics or allergies; groups for newly weds and new mothers. Church basements could be big in meal assembly.
6. Like the small health clubs the commercial meal assembly will be in a perpetual state of recruitment as customers drop out for reasons of satisfaction or alternative solutions.
7. The supermarket solution will will be a prepared “to cook” single meal similar to the pizza “take and bake.”
Interested to see the strength of a response that we may be misinterpreting caution for resistance, but in the final analysis, how much does it matter given the issues before us in the industry?
Look at all the reinforcement grocery executives and managers going for this risk-averse, industry-focused, organization-centric approach: their compensation packages enforce it, their pals in the industry are all the same way, they read industry magazines and books that all enforce the same ideas.
I’ve been going to grocery industry conventions since the early 1980s, and except for changes in terminology and technological change at the micro-level, these conventions are exactly the same now as they were then — they talk about the same ideas, they use the same approaches, and they are based on the same assumptions.
It seems we all make the assumption that senior management controls these grocery organizations, large and small. Our data doesn’t support this view. Senior management is controlled by the information in these organizations, because they make their decisions based on that information. And they don’t control the information. The System does. The System controls senior management. A good example is the go-getter junior analyst at (grocery chain name withheld); as they moved up the chain in the organization, they became more cautious. By the time they arrived on the senior management team, they were a different person — resistant, protective, non-active. It is more than simply organization “culture.” Much more.
The answer? Middle managers. Right. Middle managers. Middle managers, in our database, have a much clearer view of the organizational problems than senior managers, because their information is less filtered.
“But middle managers have no power.” Right. But neither do senior managers. They are all controlled by the System. What middle managers have, though, is frustration. FRUSTRATION. And with that frustration, they can disrupt the System, which will disrupt the Senior Team Status Quo.
We have seen this happen numerous times. Most organizations don’t believe it can happen, so middle managers seldom look into this idea. But to interested readers, I have a case study I can share with you about how it works and why.
It seems to me that food retailers would adopt more innovative solutions if they were in closer touch with their customers. It’s too easy to distance oneself from customers.