Published on: November 13, 2018by Michael Sansolo
I have to imagine there are countless MNB readers who think Kevin and I have fallen into the role of Cassandra of Greek mythology, offering prophecies of doom that no one wants to believe.
We write frequently of the mounting challenges in the industry including competition, changing consumer attitudes and weaknesses in store operations. So ignore us, but consider the words of Fred Morganthall, the recently retired president of Harris Teeter and executive at Kroger. Maybe he’ll convince you and even give you some hope.
Morganthall delivered an excellent keynote address at the Private Label Manufacturers Association (PLMA) convention, currently underway in Chicago. He identified three mounting challenges to the industry that are coming together to form something of a perfect storm.
Start with e-commerce, which, Morganthall explained, may be small today but is growing rapidly and will be fueled by powerful companies and changing demographics. Layer on top of that the growing presence and power of extreme-deep discounters like Aldi and Lidl, with the latter’s arrival making the former tougher than ever. And lastly there is the challenge of prepared meals and meals-away-from home.
All three forces are likely to erode traditional sales in years to come and that means you ain’t seen nothing yet. (Which, as it happens, is the theme of the PLMA show.)
Morganthall wasn’t all gloom and doom. He reminded the audience at PLMA that the industry has been through similar storms in the past, starting in the 1930s when the first supermarkets decimated the traditional industry. Companies like Kroger, Safeway and A&P closed thousands of stores at the time only to bounce back, with two of them still powerful today. Likewise, the industry found ways to evolve and survive changes from combination stores, super warehouse stores, supercenters and more.
But, as he pointed out, survival isn’t guaranteed. To get past the storm companies need to focus heavily on core consumer needs and serve those basics better than ever. That includes understanding that convenience is both location and ease of shopping, it includes making sure stores are operating at peak conditions with an emphasis on in-stock conditions and training managers and teams to be more customer friendly than ever.
In other words, to use a phrase that we’ve been using here on MNB, you have to bring your A-game.
“We need to do what the customer wants,” he said, and that begins with talking to the shopper. Specifically, he cited Amazon Go and its elimination of the checkout. Morganthall cautioned the industry not to simply pooh-pooh the innovation and instead recognize how attractive it is to shoppers and to put emphasis on finding and using the same technology.
The path to the future starts with understanding what these new players are doing so well, and then making sure to match or beat those competitive advantages. For instance, he talked about Aldi and the misunderstood quality of the company’s private label offering, something obviously of interest to the Chicago crowd. Aldi’s own brands, he said, are incredibly high in quality. When combined with the company’s low prices, those private label lines make them a very dangerous competitor. He said that challenge is to both retailers and their national brand suppliers, who also need to recognize the improved quality of private label to make sure they are innovating and improving at a faster pace.
That same emphasis on quality needs be storewide, including produce and meat, which, with price, are the qualities shoppers most evaluate in a store.
In other words, winter is coming. Simply behaving as we always have will not be enough. But first, we have to listen to the words of someone as knowledgeable and experienced as Morganthall to accept that indeed a storm is upon us and then get working.
Michael Sansolo can be reached via email at email@example.com . His book, “THE BIG PICTURE: Essential Business Lessons From The Movies,” co-authored with Kevin Coupe, is available on Amazon by clicking here. And, his book "Business Rules!" is available from Amazon by clicking here.
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