Shrinking Center Store, Expanding Opportunities (Part 1): Creating Destinations
Rajeev-sharma-1
Rajeev Sharma
February 8, 2022

The grocery store perimeter has evolved to become a key differentiator for retailers, helping them hold their ground against fierce competition from multiple store formats. However, for decades the “center store” has largely remained unchanged.

With the accelerated online migration of grocery sales in recent years, there is now an urgent need for grocery retailers to re-think their center store strategy. Transforming the physical store experience could be a critical factor in surviving the increasingly tough omnichannel competition.

In fact, more than 20% of all grocery sales is expected to shift online by 2025, with the center store categories feeling the most impact (Supermarket News, FMI/Nielsen Study). As the center store sales shrinks further, there is obviously a clear need for retailers to respond. At the very least, retailers need to adapt the assortment to align with the changing in-store trips. But a more strategic way of looking at the inevitable erosion in center store traffic would be to identify opportunities that can make up for the loss.

One such strategy is to design “destinations” in the center store that truly create memorable shopper experiences. The experiences don’t need to be like Disneyland for the stores to become a true destination and build shopper loyalty. It can be as simple as re-organizing, adding signage and relevant information to make it easier for shoppers to navigate, find products they need, explore new products, and enjoy the shopping experience.

Creating destinations is not a really new idea but in the current retail environment it must be in the shortlist of every retailer’s competitive strategy. It involves re-purposing the center store to make it more experiential and engaging, replacing the long aisles crammed with products and a confusing array of “categories”!

The big question is how to go about creating “destinations” in an objective manner, relatively fast and on limited budgets. Retailers cannot afford endless “trial and error” to arrive at something that really works for their customers. The answer is a principled approach, driven by data and analytics, based on measurement of actual in-store shopper behaviors. This allows for quantitative behavioral feedback that enables rapid evaluation and adjustment of strategies to converge on the winning ideas. After all, action speaks louder than words, so behavioral responses can really help in accelerating the physical store re-invention, minimizing the risk in making bold changes to the center store.

Even with the sophistication of using AI to track in-store behaviors, it boils to some simple basic questions and metrics that help in evolving destination strategies. It may help to first evaluate the “barriers to purchase” in key center store departments that are most vulnerable to online migration, such as Pet care, Baby care, Beauty care, etc. and others such as Alcoholic Beverages and Snacks that are notoriously hard to shop. In-store behavior analytics can help in the diagnostic process and guide solutions to address the issues such as shoppability, better product organization and optimal adjacencies.

Shopper insights and trends from multiple categories can be leveraged for evolving a destination strategy in center store. CPG manufacturers can play a key role in bringing innovative ideas since they are closer to the shopper trends in their categories. No matter which innovative destination idea emerges as candidates, there are three key metrics that can help in both diagnostics and evaluation of new layout ideas for center store re-invention.

First metric is exposure rate, what percentage of store traffic makes its way to the specific area. Clearly, any re-design that attracts more traffic is better, especially for unplanned/impulse sales.

Second metric is engagement rate, how many of the passersby stop and engage with the area. It takes a lot to “cut through the clutter” of a grocery store so any way to engage with a shopper allows them to consider a purchase and increases the chances of a sale.

The third metric is closure rate, or the percentage of engaged shoppers who purchased. This is perhaps is the most important one for objectively evaluating the shopper experience, along with other shoppability measures that help in evaluating how much time shoppers spend in navigating versus shopping.

There are plenty of opportunities to create good shopping experiences, given that the current bar in grocery stores is actually really low! As noted in the recent VM Nugget, the average conversion rate for a center store category is 54%; that is, 46% of the shoppers walk away after engaging with a category. Surely by organizing multiple currently defined “categories” into a solution center and following a need-based logic, much better conversion rates can be achieved. Increasing in-store conversion rates can directly make up for lower traffic and more importantly improve the loyalty, so shoppers keep coming back – making the store their destination (at least for the selected categories).

Obviously there is room for innovation – such as using digital technologies (interactive kiosks or mobile) to provide information to help with the shopping process. Relevant information at the right location can really make a difference. Digital solutions make it easier to align with the shoppers with fast changing preferences based on a multitude of trends.

There are also opportunities to buildup excitement with new (interactive) content or new products so that shoppers feel that it’s worth making a store trip. There could be trials and tasting stations built into the center store design so that shopper expect and look forward to a trip to that section of the store.

Finally, for all the technologies now available, human touch may still be the biggest differentiator in building a memorable shopping experience. Access to a store associate who can actually help answer questions (even with the help of digital information) can go a long way with shoppers especially for targeted “destination” categories. This may appear like a radical idea now given the current labor shortages and rising costs. However, by deploying emerging technologies such as frictionless checkout and robots it may be possible to free up the time for store associates to actually “help in shopping” – making purchase suggestions, answering questions, helping shoppers to find a product or just greeting them in different parts of the store. Anything that makes shoppers feel that the store actually cares about their needs can make a difference and create a true destination experience.

In summary, while the idea of creating destinations is as old as retail, using in-store analytics can greatly streamline and accelerate the process of picking winning ideas that are aligned with today’s shopper. Delighting the shoppers in some key “destination” categories can turn them into advocates. And with social media that advocacy can quickly amplify, providing an attractive return on investment for re-inventing the center store.

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