According to The New York Times, Walmart’s pricing is aggressive and the delivery charge is low which makes it already more attractive than some competitors like PeaPod and Fresh Direct.

The interesting part of this conversation, however, is the fact that no matter the offer, grocers who have tried this before found that consumers prefer to come into the store.  Supervalu made a go of online delivery and it didn’t work out well.

Currently, the mass merchandiser is just testing the program out of a San Jose, CA store.  But it will be interesting to watch what unfolds.  Surely, Walmart’s foray into this market will lead to best practices for the future of online delivered groceries.

Retailing in general and food retailing in particular is in a strange position: Retailers own the physical store space, they attract shopper traffic to the store and they provide store services necessary to complete sales transactions. 

Yet, despite all that retailers do to facilitate transactions, they are strangely dependent on brand owners for promotional activity and for their profitability. Nowhere is this more true than in supermarket retailing, so let’s focus on that. 

Supermarket retailers, of course, undertake advertising campaigns to boost store traffic. These campaigns generally come in the form of item-and-price messages and image impressions, whether by means of print, broadcast or internet. But these efforts are paltry relative to the advertising muscle flexed by brand owners. And for good reason: Manufacturers are far more revenue-productive than retailers, so they are well able to pour funds into advertising. Consider these measures: Four strong supermarkets and four leading consumer packaged goods (CPG) manufacturers have nearly equivalent revenue, in the aggregate, but the CPGs produce more than nine times as much profit and have about 15 times the market value per dollar of revenue as compared to the retailers. 

More fundamentally, advertising by CPG companies is aimed at boosting brands, not retailing venues. As a result, brands’ advertisements boost brands across the entire range of supermarkets and other retailers in consumers’ catchment area, so no one store benefits particularity, since all benefit. That situation underscores why all stores are essentially required to have heavily advertised brands in their product range. Retailers must offer what shoppers seek.

 There is a commonality between advertisements mounted by stores and brands, though. The common element is that messages appearing in paid media — whether print, broadcast or internet — are removed in time and place from the actual time and place that shoppers make buying decisions. How could it be otherwise? After all, print, broadcast and internet messages appear in many places, but none are anywhere near the point of sale, nor do they manifest at the time purchasing decisions are made by consumers.

 Conversely, and to the upside, there’s in-store media of many sorts. All of it resides at the point of sale. Indeed, the store itself is doubtless the most powerful sales medium that exists because the messages it projects — whether intentional or not; whether negative or positive — occur precisely where shoppers are making their buying decisions. And, although a few consumers make shopping lists and adhere scrupulously to them in picking product, the vast majority are susceptible to in-store influences. Fully 70% of shoppers make numerous buying decisions while in the store.

 Those decisions are driven by factors such as the introduction of new items, cross merchandising, alternative-product offers and reduced-price activities. Each of these decision drivers work only in with the use of in-store media. In short, it’s next to impossible to overestimate the power of in-store media.

 Now let’s return to a point previously made: Supermarket retailers tend to allow others to control messages, and this is also true of in-store messages. To be sure, some retailers have programs that include shelf-talkers, store graphics and other devices to influence buying decisions at the point of purchase. In the main, though, retailers depend on manufacturers to provide in-store messages, and they reap manufacturers’ payments to install in-store messages, or permit manufacturer-paid third-party providers to do it.

 Moreover, most in-store messages, whether produced by a manufacturer or a retailer, involve cents-off offers for specific brands, or perhaps for store brands. Such messages do little to promote incremental sales. Instead, those messages are more likely to spark brand-purchase swapping, a situation that does nothing to drop revenue to stores’ bottom line, and which may accomplish the reverse. 

 What’s needed, then, is an in-store media form that lifts shoppers’ eyes above the fray of cents-off marketing and that encourages incremental purchasing with each shopping trip. Ideally, such media would focus on retailers’ most profitable products along with those products that differentiate one store from the next in shoppers’ minds.

 What are those products? Clearly, those products are store brands and perimeter departments; in fact, perimeter departments are in many ways de facto store brands because consumers view most product categories there — meat, dairy and produce — as retailers’ own brands.

 In response to that need, Miller Zell (MZ), an Atlanta-based retail-marketing firm, has developed an in-store marketing initiative. It’s called Direct Selling Media (DSM).

 Here’s how DSM works from the shoppers’ perspective: As shoppers proceed through the store, they encounter multiple ideas in the form of product messages. Each of these messages contains unique, unexpected and welcomed ideas with products that have been combined in a simple idea or recipe. The idea is completed with an appealing photograph of the finished product and also contains photographs of all product packaging that makes up the idea. So, as shoppers approach each of the meal components, they’re prompted to select incremental product. The effect is to cross-merchandise products and categories without having to reset a store to gain physical adjacencies.

 The DSM system is particularly effective for high-margin store brands and perishables. That’s because in-store vendor materials are usually absent from those categories. However, selected branded goods could be added to the product mix as needed to fulfill the cross-merchandising strategy and boost total-category sales.

 DSM does more than promote increased sales; there also are intangible benefits the program hands retailers: Chief among them is the gratitude of shoppers who recognize that a retailers has shown them a new and simple means to fulfill their quest for meal solutions. The program also gives store associates talking points useful for engaging consumers.

 Further, DSM’s operational aspects are effortless from retailers’ viewpoint. That’s because the installation of the graphics needed to power the DSM program is entirely the responsibility of MZ, which has a team of installers that will travel to a store group to put up the graphics, and change them periodically. In-store execution reaches unusually high levels: Between 95% and 100%.

 MZ requires a fee-for-service from retailers for DSM, but it also offers a guaranteed-sell feature: During a pilot evaluation period, if the sales lift of promoted categories fails to more than cover the cost of the program, MZ reduces its fee accordingly — down to zero — so virtually no risk accrues to retailers.

 The sliding-fee structure means DSM is a program that is established with the means to measure performance, a feature that’s commonly lacking with any messaging or advertising initiative. Here’s how that’s done: MZ encourages retailers to install the program in a certain group of stores and to hold back installation in a group of similar stores, thereby forming a control group.

 After a time, it’s easy to measure the category-sales performance of the DSM-enabled stores by comparing like-to-like periods and by comparing to control stores. DSM’s performance is measured by category sales because product similar to featured product may be selected by shoppers; it’s category lift that counts.

 MZ did a test installation in ten stores with a regional grocery retailer. Product featuring in those stores produced sales lifts of categories and products that were impressive: 127% up in frozens, 80% in oatmeal, 55% in eggs, and much more.

 Retailers: DSM is a proposition that’s guaranteed to lift category sales. It permits you to take control of your own store and its invaluable promotional potential. Why not try it?

Expected to be released in November, this should prove an interesting review. According to the press release, the aim is to “engage in research to develop a 360-degree perspective on successful industry practices and key shopper marketing challenges.”

Miller Zell has long said that in-store communications and marketing programs have greater impact on incremental sales than traditional forms of advertising. However, it will be interesting to see how Booz defines the “360-degree perspective” for shopper marketing. From our perspective it includes everything from signage to fixtures to environment and lighting.  Every aspect of the shopper experience is creating  a connection with the brand and should be deliberately considered as part of the marketing plan.

The latest reports from retailers who previously served as industry benchmarks are a somber reminder of the state of things. Starbucks is losing 43 kiosks that were located inside northeastern Stop & Shop and Giant grocery stores due to under performance. On the other hand, fast-food has gotten competative with McDonald’s, Wendy’s and Burger King all vying for the attention of the newly frugal.

Barney’s, the 86 year-old high end department store, may be back on the market.  According to Bloomberg, the retailer was acquired by a Dubai government-owned firm in 2007 and is now being eyed by Canada’s largest grocer. Debt and declining sales are pushing the company towards bankruptcy. Sak’s and Neiman’s have similarly struggled in recent months. Meanwhile, JC Penny’s invaded Manhattan and Sears is retooling the sales floor.

Here’s the question.  Are the days of rapid and massive growth over? Is that good news?? While consumers are becoming conservative savers, should retailers practice the same behavior? If so, how do they compete with middle market rivals who have been waiting for their big comeback?

Click here to watch shopper report

To say that marketers are facing a huge challenge right now is understating the obvious. Nevertheless, just as shoppers are being coached to diligently manage their budgets and stay out of stores, marketers must be reminded to stay focused on the goal of not only motivating shoppers to purchase, but keeping them engaged with the brand.

Marketers must be creative and direct with their messaging. Inside the aisle of the store presents the most direct opportunity to sway the customer one way or another — a captive audience with plans to spend. However, use of in-store communications must be strategic, creative and well-planned to catch the shoppers’ attention.

While Miller Zell’s recent study shows that more people are making shopping lists, we also found that shoppers are still receptive to the right in-store influencers. A recent news story by Georgia’s favorite consumer advisor, Clark Howard (watch the report above) advises shoppers to avoid being influenced by in-store communications, increase coupon use and stick to the list. Good advice, but if this is what you’re facing as a marketer, how do you adjust to communicate with your newly focused shoppers? Are your in-store communications compelling enough to deviate from the list and add your item to the basket? Does your strategy keep your shopper loyal to your brand when they’re in the aisle? What is your strategy for winning the battle at the point of decision?