Merchandising Features / Trend Features

An Attractive Alternative

September 13, 2012
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KEY POINTS


Costco is adding more private-label perishables.



Prepared deli foods and produce are prominent attractions.

Supermarkets remain key competitors.
 

 

The move by non-traditional food retailers to use perishables as powerful shopper lures is becoming increasingly widespread.

Drug, dollar and convenience outlets are all expanding their offerings in a quest to increase shopper visits.

But perhaps the most influential non-supermarket perishables merchandisers are club stores, which are leveraging larger package sizes and attractive pricing to become stronger grocery magnets.

 And the U.S.’ largest warehouse club operator, Issaquah, Wash.-based Costco Wholesale Corp., continues to bolster its offerings as it solidifies its position as a top perishables alternative.

With about 600 worldwide outlets, more than 430 domestic locations and 64 million cardholders, Costco is a major food retailer with an operating strategy of offering a broad range of high-quality products at prices that are consistently lower than shoppers can obtain elsewhere.

Food accounts for about 21 percent of Costco’s overall net sales, trailing only sundries which generate 22 percent of sales.

Perishables, meanwhile, are playing a bigger role in Costco's activities. Private-label Kirkland Signature-branded items that were rolled out in 2011 include Greek yogurt and organic beef patties.

Among recent co-branded initiatives was the launch of chicken breast with Foster Farms and Cinnabon cinnamon rolls.

Kirkland Signature products account for 15 percent of items carried by Costco and generate 20 percent of dollar sales. The company reports that it has the capability of increasing that to 30 percent over the next several years.

Perhaps the most prominent fresh offerings are the chain’s prepared foods and produce.

The deli in a suburban Chicago-outlet, for instance, is offering such fresh items as Salmon Milano with Basil Pesto Butter; Flank Steak with Lime Cilantro Marinade; Asian Wrap with Rotisserie Chicken; Rotisserie Chicken Leg Quarters; Spinach Salad with Poppy Seed Dressing; Apple Walnut Salad with Balsamic Dressing; Rotisserie Chicken Greek Pasta Salad; Calzone with Pepperoni Sausage and Sauce; Cilantro Lime Shrimp; Quinoa Salad; Chicken Alfredo; and Caesar Salad.

Most of the offerings are merchandised in packages of between 1 and 4 pounds.

The extensive array of produce includes six kinds of tomatoes in packages of between 2 and 5 pounds: Cocktail on the Vine, Heirloom, Grape, Orange Cherry, Beef Steak, and Roma on the Vine.

There also are five types of apples in bags: Fuji, Red Delicious, Gala, Pink Lady, and Braeburn; and three types of pears: Forelle, Bosc and Apple.

Among the other fruits are large packages of raspberries, green grapes, blackberries, blueberries, peaches, apricots, sweet red cherries, plums, nectarines, mangoes, oranges, limes, kiwi fruit, lemons, bananas and strawberries.

Fruits sold individually include watermelons and pineapples.

Unlike traditional supermarkets which typically have attractive produce displays, Costco selections are marketed in boxes in the middle of the sales floor, with refrigerated items sold in an adjacent chilled room.

“Floor plans are designed for economy and efficiency in the use of selling space, the handling of merchandise, and the control of inventory,” Costco reports. “Because shoppers are attracted principally by the quality of merchandise and the availability of low prices, our warehouses need not have elaborate facilities."

Costco’s strategy is proving successful in attracting shoppers who might otherwise purchase specific perishables at conventional supermarkets, analysts say.

Indeed, Jim Wisner, president of Wisner Marketing Group Inc., a Libertyville, Ill.-based supermarket marketing, consulting, research and education firm, says many retailers are “leaving a lot of money on the table” by not copying Costco and selling perishables in larger-size packages for value-oriented shoppers.

“You see more of that occurring in the center store,” he notes. “Operators need to think about what triggers a destination trip to Costco.”

He recommends that competitors stand at a Costco checkout and observe the items in shoppers’ baskets.

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Recent Articles by Rich Mitchell - Perishables Buyer

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