When Wal-Mart first began to roll supercenters out across the country, grocers had a very specific fear: Wal-Mart wouldn’t care about making money on food.
The logic was simple. Wal-Mart made its money on general merchandise, which has a far higher profit margin than food. Wal-Mart wanted to sell food, the theory went, to increase the frequency of visits to its stores. Once consumers were there, Wal-Mart would sell them highly profitable general merchandise. In a sense, food would be a kind of advertisement for Wal-Mart, something that brings the customer through the front door — the profit would be made elsewhere.
It was not a bad theory and, although, in the end Wal-Mart was able to keep its costs low enough to present a strong pricing offer and make a profit on food, the theory’s premise — that departments focused on high-frequency shopping can contribute value beyond profits to a multi-departmental retailer — is true.
It also implies a special role for the deli/retail foodservice operation of any supermarket.
After all, dry grocery purchases can be postponed almost indefinitely, and perishable departments may require a visit weekly or twice weekly in typical suburban settings. The frequency of purchase for lunch can be daily, and if a store offers a good breakfast program, it can get both lunch and breakfast business. Add take-home for dinner or in-store dining options and the deli’s foodservice operation has the potential to bring customers into the store daily or even more frequently.
Yet supermarket deli operations are consistently under-marketed; stores are not using their best weapon in building shopping frequency and consumer loyalty.
To read the rest of the story, please go to: Deli Business