March 27, 2007
Giant Tells Customers to DIY
Customers may want departments such as floral and service seafood but not all stores can support the labor overhead associated with delivering that level of service.
Giant Food has found it is facing that very situation and has responded by turning 55 seafood and 62 floral departments in “low-volume stores” from service departments to self-service centers. The company has looked to reduce costs while it touts low prices in the markets it serves.
Many of the chain’s competitors, such as Safeway, have gone in the opposite direction by moving to more service-oriented operations as a means to differentiate themselves in the marketplace.
Giant spokesperson Barry Scher told The Washington Times, “The food industry has changed, and many of our competitors have moved from this particular model.”
By going to more of a self-service operation, Giant is banking that it can keep stores stocked and laid out to make it easier for customers to take care of themselves.
Jim Hertel, managing partner of Willard Bishop, said Giant and others are not alone in seeking out a new position in the current competitive environment. “Midtier, traditional supermarket operators … can find themselves in a quandary,” he said.
“It’s real clear that the decision to go into a service facility [to prepackage goods before coming to the store] or do self-service has got an awful lot to do with the brand image you’re trying to create,” Mr. Hertel added.
Mr. Hertel said “fresh-format” stores, such as Whole Foods or Wegmans, want to be known for service and freshness, so they have improved their specialty departments. Discount chains, such as Wal-Mart, have gone Giant’s route and made their specialty counters self-service.
Discussion Questions: Is Giant Food’s move to self-service in low-volume stores a positive in markets where so many of its competitors have a high service profile? Will Giant’s focus on self-service reduce costs enough to allow it to support a low-price position?
BrainTrust
Recent Discussions
Discussion Questions
Poll
Jim Hertel is right. The mid-tier is getting squeezed and will continue to get squeezed for the foreseeable future. I don’t know if walking away from service makes any sense unless you plan on always being the lowest cost competitor.
Many customers are willing to trade off service for lower prices, however, Giant will need to maintain prices that provide incentive for customers to serve themselves. In addition, quality and freshness will help shoppers decide the “value” Giant provides with their self service offerings.
With seafood being a category so sensitive to freshness, I can not see a pre-packaged program having much success. The net result will be to tarnish the store’s image to a level that will offset the few sales Giant is able to retain. The right answer is to walk away from the category in those low volume stores.
If you are unable to do something well, better to not do it at all.
I agree with many of the comments both in the article and in this discussion. Giant finds themselves in an unenviable position. If placed in the same situation, I might be asking myself if some of these stores are even worth keeping open, but I think we also have to assume Giant may have done that. If they do contribute enough to remain open, then moving away from any form of differentiation on traditional service in these areas seems risky. I mean, what are you really left with, besides perhaps a more convenient location?
Isn’t it refreshing to see management actually managing their stores. Evidently, some of Giant’s markets do not produce enough profit to support floral and seafood departments. Remember–the purpose of a business is to produce profits. In this case, management found a service level the store could support and adopted it. Their consumers can still have floral and seafood, but not at a heightened service level. This would seem to be the logical approach and solution. Many in the grocery industry should watch and learn. It may work out and it may not but Giant will have the experience an may determine that this is a situation that might be expanded to produce more profit in the stores that can currently support floral and seafood departments but don’t really need them. Let’s watch this one!
The bigger idea that Giant is acting on is customizing offerings for different types of shoppers. For some stores full service is not only profitable, it is mandated to meet the needs of shoppers seeking easy one-stop high quality selection. With other shoppers, satisfaction can be achieved by merely carrying a reasonable product line with fair prices.
This approach raises two great challenges:
1) How does a chain like Giant differentiate themselves as a brand with different offerings in different stores? Marketing campaigns across stores types get much more complex in this environment.
2) Which offerings are right for which stores? The answer is rarely so simple as offering more in high volume stores. We’re seen many categories where item and category-level performance are not correlated with store volume but rather some unique combination of shopper and competitive dynamics.
While store-level customization is the way of the future, developing and executing the right plans in the right stores will raise the bar for collaborative category management between retailers and manufacturers.
I think there are 2 issues here–price and image. If they are charging the same price for self-service items that other chains get for high-service items, they would have an issue. A lower price, on the other hand, could be seen as giving shoppers value–they could market this. As to image, I’m not sure how self-serve fits with Giant’s positioning. I think this would be a critical factor.
Essentially, grocery operations have already gone in this direction. When was the last time you saw a butcher or a baker at the grocery store? We now have case ready meats and breads baked fresh (elsewhere).
What about self-scan checkouts and ATMs? Research studies show that many shoppers actually prefer to scan and bag their own groceries.
As others have said, this goes back to the image and position that the retailer wishes to take in the marketplace. Giant, like most traditional grocery retailers, is caught in the middle between higher service and lower price operators.
Seafood will be difficult to move as a self service item. Unless the stores which go self service have low or poor seafood sales, the switch will hurt. Seafood sales will drop and these are items which are difficult to maintain and to discount or price low. Shoppers look for ways to prepare seafood and will buy less or buy fish varieties which are easy to use and avoid those which need explanation. Once that starts, shoppers will need a second choice for seafood and then Giant will start to lose some of their customers.
First of all, Giant will never have a “low price” position. I think Wal-Mart has taken that slot. Unfortunately for Giant, having “low volume stores” is becoming a trend for Ahold. It probably won’t be long until we see another Tops situation at Landover. Giant has not been able to keep its labor costs in line and has even gone so far as to support the Maryland “Wal-Mart bill” out of desperation. Just ask A&P what happens when you have expensive labor and low volume stores. You can retool and regroup all day long but the result is always the same–lower volumes and fewer stores.
There’s no doubt that lower-volume grocery locations cannot support full-service labor intensive staff in every high margin department. The alternatives: self service and selective staffing. For example, it might be worthwhile to have someone in Floral before certain holidays or on Saturdays, but not weekday mornings. Giant is being realistic. Every supermarket location in America can’t be Whole Foods Lite.
Fish is a dish that many wish wouldn’t be dished in a cello “pack-ish.” Yet flowers may have a different slant as
everyone enjoys touching a sweet-smelling plant. So we could
have a mixed bag here.
On balance, going to self-service with fresh items could be perceived as a “mark down” on “marked up” fresh items. So
why shouldn’t customers go to a Wal-Mart supercenter where
comparable self-service fresh items are probably cheaper?
Customers in a low-volume stores want the same “benefits”–at the same price–as those offered in giant stores. If they want fresh fish, they can either go to store that sells it “fresh” and unpackaged or they can go fishing somewhere else.
Nothing new with Giant Foods’ effort. It is that lost marketing tool, called “micro marketing.” Grocers do it in the grocery store center. Why not the service areas?
Have we forgotten, not all consumers/shoppers in the neighborhood are different than other areas surrounding a supermarket? Mass selling is over, and has been for 20 years, if not 30.
Brilliant idea? No, just another operations cost reduction.
And what is Giant Foods going to do for these stores’ shoppers,now? Or is service going away from the grocery Industry for many? Hmmmmmmmmmmmmmm
In smaller store locations, Giant has kept the seafood counter serviced where it is located next to the deli. There it can utilize counter staff to their fullest potential. But Giant has to be cautious of this. If a store is perceived as less “desirable,” because of a cutback in service counters, then some customers may abandon the store and shop the competition. Maybe these stores should either be closed, expanded where applicable, or turned into a EDLP format like A&P offers with its Food Basics banner.
I can’t see customers paying high prices for seafood when it is prepackaged. Floral may be different and self service may be an option. But with the price of seafood being as high as it is, self service may not be a viable option.
More Discussions
As Boomers ‘Age Out of Peak Purchasing,’ How Can National Brands Retain Interest With Gen Z?
According to a recent First Insight study titled “Is Gen Z Still Choosing Your Brand,” while…Is Supply Chain Volatility Here To Stay?
Can we expect an ongoing volatility to remain in terms of retail supply chain?Has Same-Day Delivery Become an Expectation Across Retail?
Are expectations around retail delivery speed in flux?
Jim Hertel is right. The mid-tier is getting squeezed and will continue to get squeezed for the foreseeable future. I don’t know if walking away from service makes any sense unless you plan on always being the lowest cost competitor.
Many customers are willing to trade off service for lower prices, however, Giant will need to maintain prices that provide incentive for customers to serve themselves. In addition, quality and freshness will help shoppers decide the “value” Giant provides with their self service offerings.
With seafood being a category so sensitive to freshness, I can not see a pre-packaged program having much success. The net result will be to tarnish the store’s image to a level that will offset the few sales Giant is able to retain. The right answer is to walk away from the category in those low volume stores.
If you are unable to do something well, better to not do it at all.
I agree with many of the comments both in the article and in this discussion. Giant finds themselves in an unenviable position. If placed in the same situation, I might be asking myself if some of these stores are even worth keeping open, but I think we also have to assume Giant may have done that. If they do contribute enough to remain open, then moving away from any form of differentiation on traditional service in these areas seems risky. I mean, what are you really left with, besides perhaps a more convenient location?
Isn’t it refreshing to see management actually managing their stores. Evidently, some of Giant’s markets do not produce enough profit to support floral and seafood departments. Remember–the purpose of a business is to produce profits. In this case, management found a service level the store could support and adopted it. Their consumers can still have floral and seafood, but not at a heightened service level. This would seem to be the logical approach and solution. Many in the grocery industry should watch and learn. It may work out and it may not but Giant will have the experience an may determine that this is a situation that might be expanded to produce more profit in the stores that can currently support floral and seafood departments but don’t really need them. Let’s watch this one!
The bigger idea that Giant is acting on is customizing offerings for different types of shoppers. For some stores full service is not only profitable, it is mandated to meet the needs of shoppers seeking easy one-stop high quality selection. With other shoppers, satisfaction can be achieved by merely carrying a reasonable product line with fair prices.
This approach raises two great challenges:
1) How does a chain like Giant differentiate themselves as a brand with different offerings in different stores? Marketing campaigns across stores types get much more complex in this environment.
2) Which offerings are right for which stores? The answer is rarely so simple as offering more in high volume stores. We’re seen many categories where item and category-level performance are not correlated with store volume but rather some unique combination of shopper and competitive dynamics.
While store-level customization is the way of the future, developing and executing the right plans in the right stores will raise the bar for collaborative category management between retailers and manufacturers.
I think there are 2 issues here–price and image. If they are charging the same price for self-service items that other chains get for high-service items, they would have an issue. A lower price, on the other hand, could be seen as giving shoppers value–they could market this. As to image, I’m not sure how self-serve fits with Giant’s positioning. I think this would be a critical factor.
Essentially, grocery operations have already gone in this direction. When was the last time you saw a butcher or a baker at the grocery store? We now have case ready meats and breads baked fresh (elsewhere).
What about self-scan checkouts and ATMs? Research studies show that many shoppers actually prefer to scan and bag their own groceries.
As others have said, this goes back to the image and position that the retailer wishes to take in the marketplace. Giant, like most traditional grocery retailers, is caught in the middle between higher service and lower price operators.
Seafood will be difficult to move as a self service item. Unless the stores which go self service have low or poor seafood sales, the switch will hurt. Seafood sales will drop and these are items which are difficult to maintain and to discount or price low. Shoppers look for ways to prepare seafood and will buy less or buy fish varieties which are easy to use and avoid those which need explanation. Once that starts, shoppers will need a second choice for seafood and then Giant will start to lose some of their customers.
First of all, Giant will never have a “low price” position. I think Wal-Mart has taken that slot. Unfortunately for Giant, having “low volume stores” is becoming a trend for Ahold. It probably won’t be long until we see another Tops situation at Landover. Giant has not been able to keep its labor costs in line and has even gone so far as to support the Maryland “Wal-Mart bill” out of desperation. Just ask A&P what happens when you have expensive labor and low volume stores. You can retool and regroup all day long but the result is always the same–lower volumes and fewer stores.
There’s no doubt that lower-volume grocery locations cannot support full-service labor intensive staff in every high margin department. The alternatives: self service and selective staffing. For example, it might be worthwhile to have someone in Floral before certain holidays or on Saturdays, but not weekday mornings. Giant is being realistic. Every supermarket location in America can’t be Whole Foods Lite.
Fish is a dish that many wish wouldn’t be dished in a cello “pack-ish.” Yet flowers may have a different slant as
everyone enjoys touching a sweet-smelling plant. So we could
have a mixed bag here.
On balance, going to self-service with fresh items could be perceived as a “mark down” on “marked up” fresh items. So
why shouldn’t customers go to a Wal-Mart supercenter where
comparable self-service fresh items are probably cheaper?
Customers in a low-volume stores want the same “benefits”–at the same price–as those offered in giant stores. If they want fresh fish, they can either go to store that sells it “fresh” and unpackaged or they can go fishing somewhere else.
Nothing new with Giant Foods’ effort. It is that lost marketing tool, called “micro marketing.” Grocers do it in the grocery store center. Why not the service areas?
Have we forgotten, not all consumers/shoppers in the neighborhood are different than other areas surrounding a supermarket? Mass selling is over, and has been for 20 years, if not 30.
Brilliant idea? No, just another operations cost reduction.
And what is Giant Foods going to do for these stores’ shoppers,now? Or is service going away from the grocery Industry for many? Hmmmmmmmmmmmmmm
In smaller store locations, Giant has kept the seafood counter serviced where it is located next to the deli. There it can utilize counter staff to their fullest potential. But Giant has to be cautious of this. If a store is perceived as less “desirable,” because of a cutback in service counters, then some customers may abandon the store and shop the competition. Maybe these stores should either be closed, expanded where applicable, or turned into a EDLP format like A&P offers with its Food Basics banner.
I can’t see customers paying high prices for seafood when it is prepackaged. Floral may be different and self service may be an option. But with the price of seafood being as high as it is, self service may not be a viable option.