From The Fall 2002 Issue of Natural Grocery Buyer

Segregation vs. Integration

Retailers, manufacturers square off over opposing merchandising strategies

Joseph P. Lewandowski

The terms organic and natural are hardly foreign to consumers. But attracting customers to new products touting those qualities is still challenging for grocers.

The key to attracting customers to alternative products, say major grocery store executives, is convenience and selection. Make it easy to find new products, and people will buy them.

Two major U.S. chain operators use slightly different merchandising techniques to show off their natural and organic products. Both techniques stress convenience and, apparently, have contributed to increased natural products sales. But neither a focus on convenience nor selection is particularly innovative, says a national store design expert, and as competition among stores grows, traditional grocers must get more creative.

Safeway, which operates 1,800 stores in 20 states, is having success with the store-within-a-store concept, says Greg TenEyck, a company spokesman.

"Our customers like to be able to see these products separately and be able to choose among them," TenEyck says.

The concept, implemented during the last two years, is in place in only 200 of the chain's outlets. But it is so successful, Safeway will continue applying the strategy as it remodels stores and builds new ones. Most of the "internal stores" handle nearly 1,500 SKUs, so the merchandising effort is significant. In support of the concept, fruits and vegetables also are separated into organic and nonorganic varieties in produce sections.

"We like the store-within-a-store. We'll be doing that more and more," TenEyck says.

In Safeway's other stores, natural products are placed in appropriate sections throughout. Safeway also owns outlets that operate under regional banners such as Tom Thumb, Randalls, Dominick's, Genuardi's, Vons and Carr's.

TenEyck would not provide sales figures, but says natural products sales are robust and the company expects continued growth. "That's not a surprise," he adds. "As the population ages, older Americans are attempting to be more preventive in their health care and are eating more healthy foods."

Throughout The Store
At most King Soopers, a subsidiary of Kroger that operates 123 stores in Colorado and Wyoming, natural products are placed throughout the stores, matched with similar conventional products. The naturals, however, are given separate shelf space set off by signs reading "Sooper Naturals," so customers can easily differentiate them, explains Donna Giordano, vice president of sales and marketing.

To help customers, color strips on the floor, shelves and signs readily identify natural and organic products. The idea is to put products where customers expect to find them and give them a choice. For example, organic cereals are right next to the Cocoa Puffs.

"We believe this is more customer-friendly; everything is right there. It makes it easy for customers to find these products, so it's easy to shop," Giordano says.

This merchandising technique gives King Soopers stores flexibility to quickly provide more department shelf space as product offerings and demand grows.

King Soopers also clearly identifies its natural and organic meat, dairy and produce products within the traditional sections.

The chain started stocking its shelves in this manner five years ago, but "the trend has really accelerated during the last three years," Giordano says.

T.J. McIntyre, category manager, for the Simply Organic brand at Frontier Natural Brands says given the choice, he would always shelve Simply Organic products right up against the conventional brands.

"We want to be shelved right next to the competition, without a doubt. In the stores where we have the scan data, we sell between five and eight times more per store when we are shelved inline, " he says. "The store within a store concept prevents organic from realizing its potential."

Simply Organic has 70 SKUs in six different categories. Products include quick side dishes, including Alfredo Noodles, just-add-meat dishes like Cheeseburger Macaroni and Beef Lasagna, sauce mixes, like the powdered spices used to make taco meat, and a full line of organic spices.

Innovative Placement
Although setting naturals apart works for big players, a national retail design consultant believes smaller stores would benefit from more creative overall design. Lyn Falk, Retailworks Inc., in Cedarburg, Wis., acknowledges the store-within-a-store concept can work, but building a separate department is costly and takes up valuable floor space.

"It's expensive, for example, to display several different kinds of spaghetti in a separate area," Falk says.

She recommends taking a lesson from Whole Foods Market Inc., the upscale chain that has raised store design to high art. With their soft lighting, colored walls and innovative displays, Whole Foods stores offer an atmosphere that's "alluring," Falk says.

"That's the art of interior design. It sends hundreds of subliminal and overt messages; it's very sensory," she says. "Whole Foods has created an experience that relates food to the psyche, the body, the spirit."

In comparison, most mainstream grocery stores feel harsh, Falk says. The lighting is bright, walls are white and the layout unimaginative. Instead of placing a store-within-a-store, she suggests grocers develop numerous destinations to attract shoppers.

Again, using Whole Foods as an example, she points out the store's olive bar, cheese display, bread shop, cafe and prepared foods area. Samples are readily available, and the displays aren't typical shelves and cases.

"They're orchestrating their products," Falk says. "In regular stores you're buying packaging. In Whole Foods you're buying contents."

The overall store experience is likely to be more important to baby boomers who will soon be retiring and have more time for shopping. Stores such as Whole Foods present a European market feeling. And anyone who's visited a European market knows there's no reason to hurry.

Separating products certainly seems effective and customer-friendly, but giving shoppers reasons to linger may provide more than a pleasant shopping experience—it might mean extra profits.