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Insights into Action: A Retailer Responds: An Interview with Mark Heckman of Marsh Supermarkets
The research and insights of this book were tested in the crucible of the supermarket aisle, but we turn now to an experienced retailer to reflect more deeply on how these approaches can be put into action. In this closing interview, Mark Heckman, vice president of marketing of Marsh Supermarkets, discusses how he took the insights of the book into the trenches of retail. Marsh, which was the first grocery store in the world to use electronic scanners to ring up purchases, operates more than 100 supermarkets in Indiana and Ohio.
What are the most important things to keep in mind when implementing changes in the retail format, such as those described in this book?
Heckman: It’s a “walk, don’t run” environment. Pick out a couple of things to try. For most retailers, it isn’t going to be a revolutionary process. It’s going to be an evolutionary process. We try to get some small wins at first. We try to keep a few simple things in mind when we design these stores. You need to keep the front ends open and free; you need to make sure that there are a lot of different options for shoppers to diffuse themselves throughout the store. Design a right-hand store whenever you can, as opposed to a left-hand store. Make sure the displays in the aisles are facing toward the rear because most of the traffic is coming from the back to the front. In one store, we removed a “stock-up” center aisle that created a barrier to the center of the store. By taking out this obstacle, we improved the flow of shoppers into the center.
Pay attention to operations. We try to keep our layouts pretty clean; we don’t junk them up with shippers and other kinds of displays that an awful lot of retailers do. I think when you talk about the way a store is laid out with its permanent fixtures, its gondolas and its end caps, and its departments, sometimes a very clean and workable layout can be rendered totally useless by poor operations clogging up aisles.
It’s amazing to me that after we built a few new stores based on these concepts, I’m starting to see people using these principles as conventional knowledge. It doesn’t have to be revolutionary changes. It can just be: Use these basic principles and just prove to yourself that they work because they will. You are not going to turn the world upside down overnight. You are looking for incremental advantages.
What have been the results in the stores you’ve redesigned?
Heckman: These stores have achieved double-digit sales increases. We have seen increased penetration of private label and center of store categories, and increased overall basket size. The stores have also done well on qualitative measures. Customer satisfaction and intent to return have both increased. At the same time, the exposure of pallet drops and end caps have sustained our low-price image.
How are retailers beginning to implement new designs, such as serpentine or inverted perimeter approaches (discussed in Chapter 3)?
Heckman: Some supermarkets are trying to invert their stores a bit to get more activity into the center of the store, to populate some of those categories that aren’t getting as much attention as they used to. In some cases, this is because fewer people are buying those categories, because of consumer trends. In most cases, there are so many other kinds of retailers selling those categories that the supermarkets do not dominate those categories the way they used to. I would also tell you that trying to classify formats gets tied very neatly into different kinds of retailers that are available to the consumer. The retailer is starting to look at a supermarket differently or use it differently than before.
How do retailers decide whether to take new approaches?
Heckman: I think one of the things that are pushing stores to provide a little bit more of a quick, more convenient shop is the fact that they can’t win at being the biggest. You can’t be all things. I think retailers like Marsh and others have figured out that we shouldn’t try to be the biggest. We should try to be the most convenient or the fastest or whatever that “-est” is. So, I think that’s driving us to look at our stores a little differently because consumers are looking at us in a different light than they used to.
When you talk about the retailer that can pull off a serpentine store, I think it has to be a lot more unique and a lot more of a specialty orientation than other stores because it would only attract a shopper who is prepared to browse. That format would actually be conducive to success only for a shopper who can spend time to really sniff the roses, so to speak. I think it works at Stew Leonard’s and Central Market because the shoppers have a more casual mindset when they come into those stores.
In my opinion, what supermarkets are doing is trying what works willy-nilly. You are going to get a lot more tweaking of what works than you are radical departures. What do you think?
Heckman: This is where it is important to have stores within stores—what you are calling the “compound store.” If the compound store is successful, I think then the next question is: Where are these departments vis-à-vis each other, and what is the optimal layout of the departments? Then you almost have two sets of dynamics. You’ve got the overall positioning of the stores within a store and then what happens to the customers when they get in those stores within a store. How do they shop, and how is that different depending upon what the category is or where the store is or where that department is?
At Marsh, are you moving in the direction of an inverted store (as discussed in Chapter 3)?
Heckman: We have done some things of that nature. We have two stores that are called “circle stores.” Essentially, we have inverted those stores in relationship to where the classic departments are in a perimeter-oriented store. We’ve taken most of the perishables and the theater of the store, and we’ve put it right front and center in the middle of the building. We then pushed all the aisle departments, the traditional center store departments, into perimeter shops, categorized by the function of that shop, such as household cleaning, frozen foods, meat, or dairy. Those kinds of things are in alcoves. The center of the store focuses on produce, international foods, the varieties, the organics, and those kinds of things. People really have an opportunity to see the specialty nature of that format, and that can be the draw. If they need to go into any of those perimeter departments, they know where to go because those are smartly called out. With that said, it took customers a long time to figure this out.
How do shoppers react to these new formats?
Heckman: It was such a radical departure from how they were shopping in any other supermarket, or any other Marsh store for that matter, it took time. Once they have gone through a three- or four-month period where they stay with you, they start to like it. As a matter of fact, our sales in those two stores have dramatically jumped up without really any improvement or any adjustment in the layout. It’s just a matter of consumers getting comfortable. Customers that do shop those stores actually say they like it better because it helps them stay on task. Once customers learn the store, there is not only a lift, but also it actually becomes an exit barrier. Once they learn the store, they like the store, and it becomes a positive point of differentiation for them.
On the other hand, retailers want to promote that incremental shop, that incremental item in the basket. We haven’t done a lot of detailed empirical work on this, but we have found out that our basket size is still fairly large because they’re in areas that are conducive for large basket shopping. Our concern there is that we just don’t get as much impulse shopping because we have compartmentalized things.
Those formats got quite a bit of press when they were first launched back in 2002 or 2003. We’ve decided not to build any more of those. First of all, we haven’t been building a great many new stores, period. We’ve been upgrading and remodeling the ones we have. But we also felt that format was just too radical for folks to make the adjustment. We were just afraid that, because retailers need such an immediate return on their investment, we didn’t have the time. If we were a Stew Leonard’s or we even had the reputation of an HEB Central Market for specialty, we could probably get away with those kinds of formats.
Shoppers will hang in there to learn the new store formats?
Heckman: Exactly. And again one could weigh the merits of the fact that maybe they’re not impulse buying as much as they would in other formats. But if it attracts customers, and it increases your customer count, perhaps you could drive your business without thinking you have to cross-merchandise these departments as heavily as we do in some of the other stores.
Are you comfortable with the idea that customers become shoppers only within the walls of the store?
Heckman: As long as you include what goes on in the vestibule. There’s another initiative going on with the folks that manage all the things that happen on the other side of the checkout. They call it the “fifth wall.” You’ve got four walls where they shop for groceries. Now there’s a fifth wall where there’s a place to get your DVDs, change your coins into cash, use an ATM, or those kinds of things. But clearly within the four walls, a consumer becomes a shopper; there’s no dispute about that.
You’ve looked a lot at pre-shopping, which we have not considered in the book. How do people decide what store to shop at, and what kind of metrics do you look at outside the store?
Heckman: We do know how folks select stores, and that varies somewhat from big box formats to more traditional formats, all the way down to convenience stores. The dynamics change for each one of those kinds of stores. Consumers look for geographically convenient rooftops. In urban areas, there typically are three or four supermarkets for every three or four square miles just because there is a demand for that many. You try to put yourself in a “first right of refusal” position to as many conveniently located households as possible. The first right of refusal’s very important in our business, and that means that you drive by us either coming from work, going to work, or coming from home to anywhere you go. You have to drive by us to get to somebody else. We feel like if we have first right of refusal to, say, 60 percent of the geographically convenient trade, then if we get our fair share of that—and our fair share is the lion’s share—then that store has a chance to be successful. If you’re not getting your fair share of that business, you’re probably going to have a problem with that store because that means they’re rejecting you, even though you’re more convenient to them.
Now, convenience means a lot of different things. It can mean that I’m driving by you and it’s only a mile from my house, where brand X is two miles from my house. Convenience also means that I can get into your shopping center easily. I can get in and out without spending an hour doing so. The parking lot is laid out well; it’s safe, clean, and well lit at night. Upscale people tend to shop in upscale locations; they don’t necessarily like to drive into areas that aren’t on par with where they live. But more downscale or midscale shoppers don’t mind shopping up. They’re more likely to do that than the other way around.
Can you shed some light on what are the half dozen most important metrics you use?
Heckman: The most obvious ones are measurements of sales volume, but we also look at item count. Particularly in times of inflation, you want to make sure that your business isn’t being driven by just inflation as opposed to items being purchased. So, we look at item counts and average unit price. We measure dollars per square foot and sales area per square foot to talk about how productive our stores are relative to how big they are. That’s a metric that a lot of the industry uses to normalize production between chains. Nielsen certainly uses that metric a lot to extrapolate sales volumes. The other big number that most retailers look at is comparative store sales or same store sales year on year. We also look at overall gross margins and our bill out.
One measure we are using is how many seconds it takes for each store to generate a dollar of sales. They run anywhere from 30 seconds to 120 per dollar. What do you think about this measure?
Heckman: It would be a very useful measure if you could effect change and remeasure it to see if you are making headway.
Do you have your own shopper segmentation scheme at Marsh?
Heckman: We do segment our shoppers by their spending and frequency. We have a loyalty card, and we have identified loyal elites, infrequent and occasional shoppers, and a couple of other classifications. We don’t have to infer. We can look at coupon usage or we can look at the percentage of sale items that populate a particular shopper’s basket, and we can segment against that. If we are going to communicate to a couple of groups of shoppers, if one is going to be more price sensitive than the other, we’ll communicate to those folks a little differently than we might communicate to another group. Brands take a different tack. They might want to talk to a retailer’s best shoppers just because these shoppers are in the store more often and more likely to see the offer. Beyond that, they differentiate between loyalists and switchers. We also target life stages—college students, moms with kids, or senior citizens.
Retailers do not have a lot of time or a lot of firepower to devote to this. We don’t have a team of horses to put on projects. I’d like to have a person who was dedicated to managing two or three customer segments. So, we do the best we can. With loyalty cards, the bar is now too high. If it’s just about discounts, it’s very difficult to engender loyalty through your card.
Are you doing something distinctly to serve quick trippers?
Heckman: We are. We certainly offer categories of products that are conducive for shoppers to come in, get their meals for that evening, and get out quickly. We do not have them consolidated in a quick-trip store within a store. Some retailers have gone to the point where you’re walking into almost a convenience store inside their store. We do have convenience areas toward the front of the store, and that’s particularly true in our larger stores. But they aren’t necessarily positioned so that they’re right next to the home meal replacement center or they’re right next to categories of products that people tend to buy on short trips.
Is there a brand/retailer partnership?
Heckman: Brands have figured out that if they get a display in the store, almost any promotion they run with that retailer pays out because of the incremental lift they get from the exposure to display. It really goes right back to the principles that you’ve been preaching for a number of years that you have to get that conversion process.
Brands have got to reach the shopper. The preponderance of people stay on the perimeter of the store. If you can get a display in the store, and brands know this, they’ll pay a premium for that, and they basically wrap up almost all of their promotions around the concept.
Retailers tend, almost to a fault, to let manufacturers dominate their stores with displays just because manufacturers have figured out that’s what drives their sales, and so they’re ready to pay the retailer almost real estate rental for different end caps. We have a number of different contracts throughout our store. If you walk through our store, you’ll see fixed end caps and fixed displays, and the same thing holds true for almost any major retailer in the country. You see Wal-Mart doing it with various brands. Target’s been doing it for years with brands of clothing. That kind of exposure gets the sales that brands need. I think there’s been some progress made where retailers and brands have figured out a way to get along and to mutually benefit. But when it comes down to what the brands’ ultimate objectives are and the retailers’ ultimate objectives are, the brand wants to sell more of their own products, and the retailer wants to sell more of that category’s product. It’s only when those two objectives converge is when you have success.
A very progressive company did some research that showed shoppers don’t like to put heavy things on top of light things. That was their total focus. But if shoppers pick up the product early on, then I’ve got nothing else to sell these folks in the store. What happens if folks don’t shop the entire store; what happens to the efficiency of my displays if the category is presented early? They didn’t think through any of that. They just kept it on a very singular train: “Shoppers told us this, so let’s do it.” There’s so much more to it than that.
What shoppers tell us is sometimes a very poor source?
Heckman: They lie to you sometimes. They can’t tell you, but they can show you.
I think shoppers would love to spend a lot more money in stores, but they can’t figure out how to do it. I think there’s a huge amount of unfulfilled shopping out there. What do you think?
Heckman: I do think that’s true. I don’t think a shopper has a conscious mindset that says: “I’ll be disappointed if I don’t spend a lot of money here.” I think most shoppers are consciously thinking that they want to be able to save money. Even the most affluent folks like to save. But at the same time, if you offer them something, if they see something that strikes their fancy, it’s a lot more fun. You never hear anybody get back from the store and say: “I went to the store today, and I bought everything on my list. Wow, was that fun!” They usually say: “I went to the store today, and I got everything on my list, but there were three things I didn’t expect. They had salmon on sale or they had something that looked so good I had to have it.” It’s always about that incremental purchase, something that has invoked their sensory program, something they weren’t expecting that made their shopping trip successful.
The clubs are successful because they do have the element of: What do you have today that you didn’t have yesterday? Traditional retailers can do that as well with promotion and visual merchandising.
What are you doing with new technologies?
Heckman: We are doing text messaging, and we are certainly doing an awful lot online to help the shopper prepare for their trip from the website. We use text messaging to send them the top offers. As we evolve that program, eventually it will be customized offers. Shoppers are relying a lot more on online and electronic programs to help them prepare themselves so that once they get to the store, they can be as efficient as possible. Some programs, for example, help shoppers prepare their lists by putting the items in the order of how they’ll encounter the products in the store. We’re trying to do that, and we’ve had an awful lot of requests for that. Making the store shopable doesn’t have to begin at the store. It can begin online by getting somebody to look at the ad online before they get to the store. We’ve set up a special website for a brand-new store where you can look at the store map and you can look at different photographs of the different displays in the areas of the store. You can get a feel of the store even before you walk in.