Supermarkets are in Trouble

Why Don’t Supermarkets Have Brands?

By Tom Dougherty

A maze. Branding a supermarketIt may come as a surprise to the category of supermarket chains to learn that almost to a fault, none of them owns a brand. They think they do, but they do not. The proof, as they say, is in the pudding. That is why we have so much consolidation in the supermarket category. Branding a supermarket must be difficult business as so few get it right.

The only reason to invest in the building and maintaining of a brand is to increase your preference or increase your margins. Against that acid test, supermarket chains come up sucking hind teat. There are a few major exceptions, and we will disclose them as we proceed, but the battle for supremacy in the supermarket gambit has come down to location, location, location.

Look around at your own neighborhoods and you will quickly see the reality of the situation. Supermarkets, like their poor stepsisters the pharmacy chains, are in a rush to build more and more stores. They realize that in order to dominate a local market, they need to be the closest purveyor to the shopper’s home. That is not exactly the pure definition of a brand is it?

The Supermarket Business Model Tells the Story

They recognize this fact in their bones which is why their business model has them scampering to build new stores as close as possible to developing residential areas. Yet, they pretend to themselves (and their stockholders) that they have a brand. To Harris Teeter, Kroger (which just acquired Harris Teeter as supermarket consolidation continues), ACME Markets, Lowes Foods, A&P, Pathmark, PUBLIX, GIANT, Win-Dixie and the Piggly Wigglies of the word I have a short and pointed warning… Watch Out! Wegmans is coming!

harris teeter Branding a supermarketHarris Teeter (recently ought by Kroger), for example, believes they have a brand. They believe they are “the upscale choice” but deep down they recognize the fallacy in that claim as they build more and more stores in more and more neighborhoods. They realize that their brand is not a destination, and that aside from the “brand” of habit, shoppers will not ride by a competitor’s store on a regular basis to shop at a Harris Teeter. They know that their store does not represent a “destination” — there is no sense of arrival, no sense of specialness and therefore no REAL brand.

Wegmans is a Juggernaut

Branding a supermarket is what Wegmans doesWhat makes Wegmans so formidable? They learned their brand lessons well and when branding a supermarket are playing brand hardball. Borrowing on the specialty marketers like Whole Foods, Fresh Market and Bread & Circus, and the upscale brands of Four Seasons and Ritz Carleton, they recognized that brands that differentiated the customer enabled these brands to become destinations.

Branding a supermarket as an experience and entertainmentThey became a magnet for those seeking specialness, specialty, high quality foods, and experience — within a geographic area. When the shopper believed they were a more discriminating shopper (what we call a Brand face), these shoppers were willing to inconvenience themselves by traveling a greater distance to satiate that self-identifying need.

They would also be willing to pay higher costs for that same self-identification. Remember that brand, the kind of brand that makes a category player a destination, is not a description of the store, it is the self-description of the customer — who they believe they are. The greater the store’s ability to satiate that self-description, the more powerful the brand. Does the Harris Teeter or Publix shopper believe they “have arrived” when they shop?

Do they see themselves as smarter, mores discerning and erudite? Not according to Harris Teeter or they would not need to build a new market every 1.8 miles! Wegmans HAS a supermarket brand.

Look More Closely

Wegmans took the lessons from Fresh Market and Starbucks and recognized that the modern grocery shopper wanted to have an experience when they shopped. They believed that shoppers wanted to have access to and be surrounded by “the world of fine choices” even when they were simply shopping for Campbell’s Soup.

Whole foods has an idea when Branding a supermarketThe baby boomers, Gen-x and Gen-y customers believe the shopping experience should be as entertaining as utilitarian and that the yearning for discovery was woven into the fabric of their being. Does it cost more to create a Wegmans than it does a Lowes Foods? You bet it does. It requires an investment in brand, brand management, architecture, interior design, customer anthropology, and world-class buyers.

However, these costs are dwarfed by the short-term solution of the escalating construction costs of duplicating sores in repeated markets within saturated residential areas.

The Supermarket Category’s Problem

Why then, is the supermarket category so stale and delinquent in its own space? It is not because they lack talented people or smart planners. It is because they have bought into an old and stale idea of brand. They have come to believe that they can differentiate themselves from the competitive set by restating generic category descriptions like fresh, quality, selection and fair prices. They think they can OWN a position that is the providence of the entire category… like, “the beef people.”

Where is the Future?

What does this mean for the future of the category? It means the stakes are being raised because the category is demanding more. The real problem for the major players can be found in the existing store space. The sooner they invest in their brands, the better for their shareholders because an investment in today will ultimately cost less than a forced investment tomorrow. Experience and discovery has as its table stakes; larger more open square footage, broader specialty departments, and an understanding of the preceptive fabric of the target audience.

Supermarket brand desertThis means existing store locations may be inadequate in the future. Bigger is not necessarily better, it is only better when bigger incorporates entertainment, discovery and experience. These are the hallmark of the busy and demanding shopper of today, as well as the shopper of tomorrow. Will a Starbucks coffee bar differentiate your brand? Not on your life.

Instead of adding a Starbucks coffee bar to your offering, ask yourself why the customer wants such an addition? Who that shopper believes they are and what other offerings might satisfy those beliefs. The answer to these questions might lead the chains to build Wegmans copies.

However, without the brand knowledge and management of a Wegmans, they will simply seem like artifice and be nothing more than pretenders to the throne. Wegmans has brand permission and that permission should spell fear in the souls of other chains and even the specialty retailers like Dean & DeLuca, Whole Foods, and Fresh Market.

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