Each year at the supermarket-industry convention in Chicago, the Food Marketing Institute presents its report on the state of the industry. I sat with several thousand chain executives and learned the facts -- and figures -- that make up this unusual scorecard.
There was a very positive report on how supermarkets are moving aggressively into prepared meals in order to win business back from fast-food and take-out restaurants. In the short space of three years, supermarkets offering freshly prepared foods went from 63 percent to 93 percent.
But in other respects the industry report card was gloomy. In a period of national growth and prosperity, supermarkets are not sharing in the results. Instead of sales rising with the economy, the institute reports that same-store sales -- a measure that tracks the sales of supermarkets from year to year, adjusted for inflation -- are down 0.2 percent. Alternate retail formats such as Boston Market, and pet supermarkets such as Petsmart, continue to eat into the supermarkets' business.
The Internet has raised the frightening specter of a new type of competitor -- the virtual grocer. The virtual grocer has a low-rent warehouse and cheap labor and can ship dry groceries to consumers anywhere in the country by express delivery in two days. And these virtual grocers on the Internet threaten to beat supermarket prices. Supermarket executives call the dry grocery aisles, from pasta to paper products, "center store." The virtual grocers on the Internet want to take the center-store business away from supermarkets.
There is also considerable anxiety among supermarket executives about the problems computers have in dealing with dates that start in the year 2000. The supermarket industry is heavily computerized, not only at the checkout counters, but also in its warehouses and its delivery systems. The grocery-product manufacturers are similarly dependent on computers at every stage of production and distribution. The fear is that unless year 2000 problems are fixed quickly, computer systems will start to malfunction or shut down entirely even before we reach the millennium.
Finally, the industry report card considered relationships with consumers. The report card started on an upbeat note: Last year, consumers gave their supermarkets an approval rating of 8.2 in a range from one to 10, the best of any retail group. But beneath the surface there was the disquieting news that of the younger generation of shoppers -- ranging from teen-agers to those age 25 -- just 29 percent gave supermarkets top ratings.
One of the most interesting parts of the report card was the presentation made by John S. Runyan, senior vice president of the Fleming Companies, one of America's biggest grocery wholesalers. He showed a video of shoppers being asked a series of questions outside a suburban supermarket.
Are the products supermarkets advertise the products consumers want? On the video the first question was "When was the last time you made a boneless chuck roast?" Shopper after shopper said none of them had made a chuck roast in months or years, yet supermarkets regularly feature chuck roast as a lead sale item.
The next question was "Do you read the supermarket advertisements?" Most shoppers answered no. One shopper who said yes was asked to look in her cart full of groceries and pick out the items that were on sale. She couldn't find any.
Finally, the shoppers were asked if they liked supermarket shopping. Supermarket executives were not amused by answers to this question. They ranged from "not particularly" and "it isn't one of my favorite activities" to a simple but emphatic "I hate it!"
How should supermarkets get back in touch with their customers? Mr. Runyan said that supermarkets should do more for their best customers. He gave this example: The best customers have to wait on long checkout lines while the customers who buy the least get express checkout service. His proposed solution is to put the best and fastest cashiers on the regular checkout lines and have fewer express lines.
Write to Martin Sloane at Supermarket Shopper, care of United Feature Syndicate, 200 Madison Ave., fourth floor, New York, NY.
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