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Supermarkets strike back
Stop & Shop will give you a 'shopping buddy,' Marsh woos shoppers with personalized service.
June 21, 2005: 3:29 PM EDT
By Parija Bhatnagar, CNN/Money staff writer
With Stop & Shop's
With Stop & Shop's "shopping buddy," customers can keep a tally of their purchases; order deli items without waiting on line; scan and bag own items for a quick checkout and browse through recipes.
Marsh's prototype store features an unconventional layout where
Marsh's prototype store features an unconventional layout where "mini-shops" selling specialty products surround an inner courtyard.
Customers at Marsh's experimental store can grab a cup of coffee at a coffee bar located in the store's center and carry on shopping.
Customers at Marsh's experimental store can grab a cup of coffee at a coffee bar located in the store's center and carry on shopping.

NEW YORK (CNN/Money) - Gadgets? Glamour? Good service?

After being whipped by Wal-Mart on price, grocery chains like Stop & Shop, Marsh and Safeway are coming up with other tricks to keep customers interested in their stores.

"We conducted a survey of 1,146 consumers last September where we asked them if they would pay more for groceries in a pleasant shopping environment and 45 percent said they would," said Candace Corlett, retail analyst with retail consultancy WSL Strategic Retail. "That's surprising, because we do live in a Wal-Mart world where consumers are exceptionally price savvy."

One of the hallmarks of supermarkets has been that shoppers want to get in and out as fast as they can. But smaller chains like Stop & Shop, Wegmans and Whole Foods (Research) are showing the big boys that there is a bigger payoff in keeping customers in stores longer.

Here's a look at how grocers are innovating between the aisles:

Futuristic food shopping. Slap a touchscreen PC tablet onto a regular shopping cart and what do you get? Apparently, something called a computerized "shopping buddy." Quincy, Mass.-based supermarket chain Stop & Shop is trying it out.

Developed by IBM, the shopping buddy is activated with a Stop & Shop card. Among its cool features: Pulling up customers' past shopping history; helping shoppers find specific products and allowing customers to remotely order deli items without waiting in line.

The shopping buddy is equipped with a scanner that lets shoppers save time by scanning items as they add them to the cart, bag the groceries themselves and head to the self checkout.

Robert Keane, spokesman for Stop & Shop, said the company is currently testing the buddies in three stores with plans to expand to 20 stores this year. "Customers who've tried it once are willing to try it again," he said but declined to comment on the cost of the device.

"The shopping buddy is an interesting concept but it's essentially an experiment," said George Whalin, an independent retail consultant. "The future of traditional supermarkets isn't that good right now and companies operating in the channel have to find ways to capture the consumer's attention."

No doubt, supermarkets are one of the harshest battlefields in retail. Profits are razor thin. Industry observers say the typical food retailer makes a penny on every dollar of sales compared with almost 10 cents on the dollar for Wal-Mart.

Leveraging technology, whether it is to engage consumers or to improve the business and cut costs, is a "pretty good way to compete," said Whalin.

Grocery gone glamorous? Indianapolis-based grocer Marsh Supermarkets (Research) is trying to break the supermarket stereotype with its three new prototype stores. For instance, there's a "welcome kiosk" where shoppers are greeted with an electronic directory that dispenses daily specials when they swipe their Marsh loyalty card.

The layout is different, too. Located around the perimeter of the store's center are specialty "boutique-like" shops that sell produce based on a theme, such as a wine store, natural foods, tobacco as well as a reading center.

Safeway (Research), the nation's third largest grocery store chain behind Kroger (Research) and Alberston's (Research) , recently launched a $100 million marketing campaign bearing the slogan "Ingredients for Life."

To reposition itself as a more upscale market, Safeway has been remodeling its stores based around the "lifestyle" format and adding niche items like higher-margin natural and organic foods to the mix. Other features include full-service meat counters and bakeries, sushi and olive bars.

Quickest way to customer's heart? Good service: Publix, H-E-B and Wegmans get high marks from industry watchers on that point.

Privately held Wegmans, based in New York, runs a small operation of only 65 stores. But industry watchers cite it as an example of a grocer that's getting it right with the customer.

"Their food selection is top-notch and their employees are very helpful," said Dan Bagan, industry analyst and publisher of Supermarket News.

They obviously also look after their employees well. For the eight straight years, the company was ranked among Fortune magazine's Top 100 companies to work for.

According to Corlett, picking the customer over price will be one of the hallmarks of the post-Wal-Mart world, "More than just service, it's the respect, rapport, ambience that engages customers so that price becomes the last thing on their minds as they walk around stores."

Bagan agreed.

"True differentiation is a very visceral thing with customers," he said. "If a store starts to look, feel, and act like Wal-Mart, it is a Wal-Mart. That's when it's in trouble."

Instead of managing their business quarter to quarter with an eye on Wall Street, publicly traded food retailers have to take a longer-term view. "This is not simply a good thing. It's necessary for their survival."  Top of page

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