Supermarket Companies Seek Competitive Edge with Niche Market Stores and Specialty Services, According to New FMI Study

WASHINGTON, DC — March 20, 2006 — Food retailers are differentiating their businesses from fierce competition by launching target market-focused stores and expanding specialty services, according to the 2005 edition of the Food Marketing Institute (FMI) study, Facts About Store Development, released today.

“Shifting consumer behaviors and attitudes, shorter product lifecycles, new store concepts and competitive pressures from a broad range of retail formats are driving a fundamental change in the way food retail companies do business,” stated FMI Senior Vice President Michael Sansolo. “There is no longer a ‘one format fits all’ supermarket. Understanding the specific needs of your targeted consumers and delivering what they need are essential for success.”

Surveyed companies express a strong interest in developing niche stores in order to reach highly selective consumers and broaden market share.   They are experimenting with a variety of formats, even offering multiple store types in the same market. Gourmet/specialty is the most popular format, offered by 66.7 percent of companies, followed by natural/organic (50 percent) and ethnic (25 percent).

Food retailers are also relying more on specialty services and departments to attract and retain customers, according to the report. Notable trends:

• Space for cooking demonstrations is offered by 72 percent of new stores, which is being driven by consumers who have less cooking experience and consumers who seek to broaden their range of skills and view cooking as a special event.




• More than half of companies (53.7 percent) have a coffee bar in at least one store and slightly fewer (52.2 percent) have installed dollar aisles, addressing consumers’ dual desires for convenience and value.




• In-store pharmacies (55.7 percent) continue to be a popular feature. Besides serving as a cornerstone for consumer health and wellness programs, they have become integral in the marketing of health and beauty care products.




• One-fourth (25.4 percent) of companies offer gasoline sales and nearly one in five (18.3 percent) feature a conveniently located “quick stop” area where shoppers can purchase household staples and quick meals, which enhances one-stop shopping appeal.




• The addition of low-carb foods sections appears to be on the decline, with fewer than half (49.4 percent) of all companies now offering them.




• Other trends include:
  
  
     
     
  
  
     
     
  
  
     
     
  
  
     
     
  
  
     
     
  
  
     
     
  
  
     
     
  
  
     
     
  
  
     
     
  
  
     
     
  
  

  Common Features	Percentage of Companies Offering
  Magazines	95.5%
  Greeting Cards	94.0
  Deli	91.0
  ATM	85.1
  Fresh, Prepared Foods for Takeout	83.6
  Private Label Products	83.6
  Ethnic Foods Aisle/Section	79.1
  Floral/Plant Shop	76.1
  Fresh Seafood	74.6

  
  

Store Construction Trends

The report shows that remodeling is the construction activity of choice for food retail companies. Remodeled stores represented 5.7 percent of all stores (up from 4.9 percent in 2004), while new stores comprised 3.0 percent (flat at 3.1 percent) and store closings 1.9 percent (down from 2.5).

     
Nearly 60 percent of companies invested in the remodeling of at least one store. The reasons for making this type of investment include: a company policy to remodel stores after a certain number of years, anticipation of competition entering the market, and to meet the needs of a changing customer base. Of remodeled stores, 7.3 percent included expansions.

The median cost per major remodel was $44.00 per square foot.   The median cost of constructing a new store was $124.86 per square foot.

The typical supermarket size is 48,175 square feet, with 72.4 percent of the store dedicated to selling space, according to the report.   These stores carry a median of 45,000 items, have 10 checkout lanes and conduct 15,345 transactions per week.

Methodology

Data for this report was obtained through mail-in questionnaires sent to FMI member companies in the United States. A total of 77 companies responded, representing 4,208 stores.
     

To purchase Facts About Store Development 2005, visit the FMI Store at www.fmi.org/store or call (202) 220-0723.