Wednesday, October 05, 2005

Grocery Stores

As if the margins aren't slim enough, grocery stores, and Discounters like Target and Wal-Mart, insist on having upwards of 50 checkout registers at the front of the store for decoration . When was the last time you had to wait in an incredibly long line at a grocery store, yet 85% of the cash registers remained unused? It happens to me 99% of the time I go to the store. It happened to me less than 3 days ago. It is ridiculous if you ask me. It is an epidemic shared by all the grocery stores.

I can only think of a few reasons they put so many cash registers in such stores:

1. To give customers the perception that they get a lot of business, so they need a lot of registers.

2. Because all their competition does, and we need to look like everyone else (great differentiation strategy, eh?).

3. For the once in a year sale-a-thon when they actually schedule a sufficient number of employees to man most of the registers.

4. Because Corporate feels like it.

5. Because they got a volume discount on buying more registers.

Seriously, Corporate, do you really think any of us (your customers) are really suckered into your ways? Whatever happened with efficient floor planning. Folks, having a long line of customers behind the few registers that are open is nowhere near efficient. And it pisses me off that I have to go into a store, such as
Albertsons, and then stand around waiting to pay for the milk that is freezing in my hand because my purchases are so nominal that I only used a basket. Even the so-called Express Lanes aren't much of an express anymore.

If these stores, including the
whore, would realize the level of untapped customer satisfaction capacity they have, and then unlock that capacity, they could leapfrog their competition in customer satisfaction and retention. After all, when margins in the grocery business are a paltry 3.4% anything to increase customer retention is valuable. Welcome to differentiation, a simple strategy many businesses fantasize and profess but few effectively execute on.

It's not that differentiation doesn't exist between competitors. Seriously, we live in the land of
differentiation, variety, and choices. But, many companies fail to effectively and properly educate their customers about what their Unique Value Proposition is. As a result, customers simply don't "get it" about the truly superior products. Because management fails to effectively communicate their Unique Value.

I am talking about an opportunity so simple, so inexpensive, so obvious, that when a company has the opportunity to effectively differentiate themselves, for essentially minimal cost, any decent, worth his/her salt, executive should jump on that train.

OK, now let's walk through my point step-by-step:

1. Executive management issues a decree that all grocery stores will increase the number of open registers during the 8 busiest hours of each business day. (In my experience, this means approximately 3-5 more registers will be open)

2. This decision will increase the daily payroll by a nominal $200-400. Which makes a monthly increase of $6,000-10,000. At gross margins of 26% in the industry, same store sales would need to increase approximately $24,000-40,000 to cover the increase cost of the additional registers. (and this is assuming a generous $8.50/hour wage).

3. Customers come to the store, and check out is quick, easy, and painless. They don't have to stand in line behind the fat lady that can't find her credit-card and is breathing restlessly because she just finished loading her eighteen 2-liter bottles of Diet Coke on the checkout belt. However, it is highly unlikely the customer will notice this increased speed through checkout immediately.

4. The customer now goes to a competitor who has not implemented this change, and they now are stuck behind the fat lady with the eighteen bottles of Diet Coke. They now recall how fast checkout was at the your store.

5. The next time around, the customer is willing to spend extra time driving back to your store, because they didn't have to stand around forever to check out.

6. Wammo!! You now have a loyal customer who will evangelize, on your behalf, about the wonderful, quick, customer-centric checkout experience they had at your store.

It's funny how a loyal customer will spend twice as much time travelling to the store they like, as opposed to the store that is most convenient. Arguably, the more customer focused the store is, the more convenient it is, regardless of travel distance.

Let's analyze my above, step-by-step direction. The true cost to the Executive is The Company. After all, they are competing in a commodity market. The Company is at stake! All they have to do is hire a few more employees to check people out. For crying out loud, how much does it cost to train someone to run a scanner, swipe a credit card, and get a signature?

Nada, Zilch!!!

What does it cost Corporate to then educate the market about their new strategy?

Nada, Zilch!!!

What's the return on investment?

A ton of more loyal business, boosting same-store sales, and having more satisfied customers.

Grocery stores are constantly trying to fudge their margins higher by mixing in a TV here, or sandals there. But, if they'd just focus on their core competency of providing food, maybe they could do something with that!!

To you Grocery Execs, I've got a little secret: The only reason we go to the grocery store is because we have to. Because we need to eat (well, here in America, our ever growing waistline suggests we want to eat, also). Because we can't buy food that will tie us over for the next year. Hence you Execs find yourselves in a commodity business.

So, how can you boost your business. You can't diversify the product offering. Every store has all the same brands, products, foods, etc. But you can diversify on the customer experience. And, if you aren't convinced about how important the customer experience really is, why not head over to learn about
Starbucks' rabid insistence and focus on their customers' experiences.

Folks, we live in the 2000s, not the 50s. Let's get with the efficiency program that actually increases customer interaction and satisfaction with the company. People are busy today but still need to go to the grocery store (unless, of course, you are Paris Hilton, then you just go to the nearest fast food).

. . . .Drive through grocery shopping, now that's a concept. (that didn't work)