Over the past few years, grocers have innovated in a number of ways to attract more customers: varying store formats fit different needs and spaces; loyalty programs coupled with gas savings drive traffic; and in-store kiosks, smartphone apps and other new media applications appeal to consumers’ passion for technology.

Store perimeters too have undergone significant change as part of this effort. The traditional bakery and produce sections, which have been expanded with organic and whole-grain products, are now joined by banks, health clinics, restaurants and other departments designed to bring more shoppers through the door and entice them to spend more time and money. Self-service checkout stations symbolize convenience. These and other moves focused on the perimeter have been successful in generating growth – more than 8 percent in perimeter sales growth in grocery stores.

But lost in all of this is one fundamental fact: the center store, which generates 73 percent of total store sales and 77 percent of profit, is actually showing declines on a same-store basis. Management practices that are based on a product view of the market cause competition between similar products and categories. In fact, one can argue that disproportionate investment in the perimeter can actually create a drag on total store sales and profits.

The net result is the traditional center store has become vulnerable to value retail players. Shoppers are fulfilling some of their needs in retail formats based on a product’s price. So cleaning supplies once bought as part of the weekly grocery trip might now be purchased at mass merchandisers, club or dollar stores with lower prices. For the grocery channel alone, over a five-year period ending June 2010, this channel blurring and consumer switching trend equated to $23 billion in lost opportunity due to lost trips.

Winning Consumers Back is Mission Critical
So what can grocers do to win back some of those trips? It begins with a strong focus on true shopper demand and leveraging the total store, moving away from product-centric category management and toward consumer-centric shopper management. While price, convenience, variety and shopping experience all play important roles in determining where consumers shop, only through a better understanding and leveraging of shopper needs and missions can the industry align around demand, deliver against current and future shopper needs, and win trips.

A new model for winning trips and to drive shopper loyalty is by focusing on what Nielsen calls the demand landscape. This requires a focus on true shopper demand. Simply put, shoppers plan their shopping missions based on need. Once retailers understand customers’ mission in and around their stores, they can create solutions targeted to those shoppers.

Fulfilling mission-based shopper demand requires a shift from a category management approach to one that revolves around shopper management. Consumers typically buy combinations of products across the store.

Innovate and Renovate
Consumers have responded positively to some innovations. Think about the way stores are organized for the holidays. Many retailers stock all of the food common to that time of year/event together in one place. Around Thanksgiving, for instance, stuffing, cranberry sauce, pumpkin pies, festive decorations, tableware and other items related to that holiday are grouped in one section, making it more convenient for the shopper to stock up on the merchandise necessary to fully celebrate the occasion.

Why not extend that concept beyond the holidays? Think of these typical needs – taco night or birthday parties. No single department or category can deliver against those needs alone. So what about developing fully integrated meal or event-driven sections, or simply in-aisle displays that include assortment from across the store along with a written and video-driven recipe center. One major food manufacturer has done just that by grouping their products along with complementary items into focused end cap displays, leading to a 30-70 percent incremental lift.

Another way retailers can rejuvenate center store is by establishing other mission-driven store sections, such as pet, entertainment, home cleaning, alcoholic beverages, health & beauty and housewares. “Stores within a store” provide consumers with a destination where they can complete their missions.

One leading grocer created an open-air store within a store focused on pets to attract the large number of shoppers who indicated that their shopping trips always began with a stop to restock their pet supplies. While the concept is still in its early stages, it has already yielded some impressive results: total pet department sales were up almost 15 percent, with sales of supplies and accessories up a tremendous 73 percent. What’s more, the establishment of this store within the store has increased shoppers’ likelihood of purchasing from the store as well as the perception that the retailer cares about pets and pet owners.

The Opportunity is Clear
While some of these ideas may not be new, there still is tremendous opportunity for all. The store within a store concept has been attempted in many cases, to mixed effect. But many of those efforts have been category focused (e.g., office supply, toy and dollar store sections) rather than shopper-centric solutions.

The magic lies in tailoring solutions to your local shopper needs. Shoppers want solutions that span the entire store, and winning retailers will be those who are flexible and adjust formats to cater to their needs at a mission level, not simply category-by-category. That means striking the right balance between perimeter and center store.  At the same time, winning manufacturers will be ones who help retailers provide these solutions with an eye on the total store, not one product. This shift from category management to shopper management is one way to drive shopper loyalty and total store growth.

Private label dollar sales are being driven primarily by higher commodity pricing — especially in staple categories that are dominated by private brands. But in recent weeks, private label unit sales have also grown — a sign that consumers are starting to shift away from established brands in search of better deals.

Among private label food brands, flour (+35%), baby food (+33%), and fresh eggs (+28.2%) showed the largest dollar percent change during the 52 weeks ending September 6, compared with the prior 52-week period.  Unit sales for those products remained flat during the same period: flour was up 7.2%, fresh eggs dropped 0.9%, and pasta grew by 0.6%.

Among non-food private label products, soaps and bath products (+23%), cough and cold remedies (+18%), and hair care products (+18%) showed the largest dollar sales growth during the period.  Paper products, like paper plates, paper towels, and toilet tissue, and aluminum foil were the top-selling non-food private label items. 

Across categories, health and wellness-oriented private brands also showed significant growth, according to Nielsen.  Products claiming to be “natural” (+11.4%) or “organic” (+22.5%), lacking in trans fat or saturated fat (+30.5%), or containing “multi-grains” (+16.6%) or “antioxidants” (+15.8%) showed the largest dollar sales growth during the period.  Products that claimed to contain no calories (-0.6%) or to be caffeine free (-2.2%) showed the only negative growth. 

Among organic private label items, milk, eggs, and produce – like mini carrots and salad mixes — were the top-selling items.

View in depth private label sales data from Nielsen.

Learn more about private label sales in convenience stores.

Read more about overall private label trends in Nielsen’s “Consumer Insight” newsletter.