Food Forum: Getting smaller

After years of building big boxes, supermarkets are investing in smaller-format stores in response to evolving consumer preferences.

By Mark Lang

The supermarket is shrinking. The reason for the shift toward smaller-format stores is that they provide a number of benefits to retailers and customers.

The expanding footprints of retail stores, as well as overwhelming product choices, have made it difficult for consumers to find their way through stores, differentiate between brands and assess product quality, according to Raymond Burke, director of  the Customer Interface Laboratory and E.W. Kelley Chair of Business Administration at the Kelley School of Business at Indiana University.

He uses the term “shoppability” to describe the capacity of the shopping environment to transform consumer needs and desires into purchases. According to a paper written by Burke, “it is common for 75% to 85% of specialty-store shoppers and up to 95% of department-store shoppers to leave stores without making a purchase.”

Retailers such as Walmart, Tesco and Safeway see smaller-format supermarkets as an opportunity to respond to the changing preferences of customers who are seeking a more convenient shopping experience, including easier access, navigation, selection and transactions. Through a smaller-format strategy, these large-scale retailers hope to achieve better turnover, higher sales, lower expenses and higher profits. We may witness a significant growth of small-format retailers in the coming years. Recently, for example, Tesco’s Fresh & Easy Neighborhood Market and Walmart announced expansion plans for new smaller-format stores.

In a recent study, a group of Saint Joseph University’s Executive Food Marketing students—Naomi Fiordimondo, Gavin Mutter and Mike Rummel—and I performed an exploratory examination of smaller-format supermarkets. The research investigated whether there are differences in small-format retail strategies among retailers and, if there are, how the strategies differ. The study then examined which strategies are more effective at achieving a better shopping experience for customers.

Using a structured assessment instrument, we visited and examined several Fresh & Easy and Walmart Marketside locations in their Phoenix test market. These retailers were chosen as they are two of the most active regarding smaller-format supermarkets.  Although both subjects are similar in terms of store size at about 15,000 square feet, they differ in terms of retail format configuration. Marketside represents more of a smaller traditional supermarket, while Fresh & Easy represents a more non-traditional configuration. The structured assessment instrument used was based on Burke’s retail shoppability framework: transparency, affordance, relevance, convenience and enjoyment.

  • Transparency is defined as design and merchandising that helps consumers see and find desired products;
  • Affordance is the store’s effectiveness at communicating the unique benefits and value of each product;
  • Relevance is related to the availability of an assortment of products that fits with customers’ needs and desires;
  • Convenience relates to minimization of shopping time and effort; and
  • Enjoyment makes shopping pleasurable.

A comparative analysis was then performed to examine differences in strategies and determine whether a particular strategy is more effective in addressing customer expectations for improved shoppability.

Our research assessment found significant differences between the traditional and non-traditional small-format strategies. The overall assessment indicated better performance of the traditional Walmart Marketside design compared to the Fresh & Easy’s non-traditional store design across most shoppability dimensions.

Walmart Marketside performs better on the dimensions of transparency, convenience, enjoyment and relevance, but Fresh & Easy performs equally well on affordance.

Fresh & Easy’s modern, unusual retail setting does not seem to possess some important shoppability factors, compared to Marketside’s more traditional configuration. Fresh & Easy offers a limited assortment of products to their customers, instead focusing on quality private label products.

There is the possibility, however, that Tesco’s Fresh & Easy may be ahead of its time in terms of its innovations in merchandising and assortment and may, in the future, perform very well in the U.S. marketplace. This may be especially true in urbanized areas.

Mark Lang is a professor in the Department of Food Marketing at Philadelphia-based Saint Joseph’s University.

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