Differentiate and CONQUER

If you think offering the right products at the right prices in the right location is enough to be successful these days, think again. That strategy might get you started in retail, but it won't protect you from the competition. "Today everybody competes at that level, and it's become table stakes," says Joseph Bona, president of the Branded Environments Group for New York-based branding firm CBX.

Increasingly, traditional supermarkets face competition on all sides–not only from other grocery stores but also from online merchants, dollar stores, drugstore chains, supercenters and warehouse clubs. As a result, of critical importance is a compelling point of differentiation, something that will impel shoppers to bypass the most convenient store on their way home from work and aim for the destination of their choice.

So how do you strengthen your appeal? To successfully distinguish your brand from the competition, devise and implement a differentiation strategy that will carry through to all aspects of your business, from store design to customer service. "Most people don't start off with a strategy," says Bona. "They come in, their stores are in decline or they're losing market focus, and they just want a new design. But design alone isn't going to save a business. Strategy and positioning are tied together and create a road map for everything else."

Where to begin

First, determine what sets your business apart from the competition. This requires retail leaders to "get back to the values of your company," says Colin Stewart, senior vice president at AMG Strategic Advisors, a division of Jacksonville, Fla.-based Acosta Sales & Marketing.

Then research your audience and prospects to determine what their perceptions of your business are. "A lot of benefits can come out of that basic research," Stewart says, such as determining why shoppers in certain departments aren't buying as much as you expected, Stewart says. "If you're going down this road, start with some foundational understanding of your shoppers and how they perceive you. Start with that baseline and continue to measure that over time."

For example, a supermarket chain that thought one of its strengths was its broad, well-priced assortment of frozen foods learned from customer research that in reality, shoppers thought the stores had a poor and expensive selection because its in-store navigation and signage made finding the items difficult. Stewart and his team worked with the retailer to reassign adjacencies and improve signage, and shortly thereafter customer perception did jive with reality, he says.

Your research also should include your front-line workers: store managers, department managers and cashiers. "Talk to them to get a better sense of the day-to-day business," Bona advises. After all, they know how each store actually works versus how it should work, and they are most often on the receiving end of shoppers' complaints.

'Retail is detail'

Your point of differentiation needn't be radically different from how you've been conducting business so far. In keeping the mantra, "retail is detail," often the key markers of your brand's differentiation are what Bona calls "little nuances that make companies unique."

For instance, CBX has worked with a small chain in Canada that for years escaped the attention of larger chains. Once the majors began moving into its territories, though, it felt the need to set itself apart. This small chain "had wonderful black-and-white pictures of the old stores [from] 50-plus years of serving the community, a tradition that the national chains couldn't meet," Bona says. The retailer's strong community reputation also was rooted in friendly service. "Their customers actually knew the owners and employees by name. Their sense of community was real; they lived it every day. Through storytelling we were able to elevate that to the next level," he says.

Beyond putting those old photographs front and center in the stores and emphasizing its decades of tradition in its marketing materials, the chain modified its store design, too. The stores used to butcher animals that the area farmers brought in–cattle from their farms, deer they had hunted. To emphasize this tradition of service, the stores now opened up their meat departments and "put the butcher on stage," Bona says. This also had the benefit of reinforcing the freshness of its meats and its above-and-beyond customer service.

Focusing on community is, for smaller and more localized stores, a relatively simple means of differentiating themselves from the larger, national competitors, notes Debbie Laskey, a Los Angeles-based marketing and brand strategist. "Consider focusing on the community partnership scenario: How does your smaller entity become an integral part of the larger community?" Laskey says. Sponsoring local Little League teams, marching in community parades and holding food drives for area nonprofits are all tried-and-true ways of differentiating your store as the hometown brand.

Localization, in fact, is one area in which mid-tier retailers tend to focus with great success when seeking to differentiate themselves, Stewart says. For Austin, Texas-based Whole Foods Market, which has more than 310 stores in North America and the U.K., it means sending store employees to visit local farmers and other suppliers and requiring two-thirds of a store's team members to approve of potential new hires before bringing them aboard.

It also can mean allowing store managers more latitude in selecting merchandise. At West Des Moines, Iowa-based Hy-Vee, which has 285 stores across the Midwest, decisions regarding merchandising and product sourcing are made at the store level. "Ideally I think every retailer would like to have store-level merchandising, but operationally you get into challenges," he notes. To make it possible, cluster stores into groups by merchandise mix, such as one cluster for stores in Hispanic markets and another for those catering to customers with young children.

Freshness often goes hand-in-hand with localization. In some of its more than 480 stores throughout the South, Jacksonville, Fla.-based Winn-Dixie displays produce in areas of its parking lots to create the appeal of a farmers market. Signage that details which parts of the country, or which local farms, supply particular products also reinforce the freshness theme.

Focusing on value and price is another potential area of differentiation, albeit one that's easier for larger chains with economies of scale to manage successfully than smaller ones. Boise, Idaho-based WinCo allows customers to buy items in bulk and has a self-bagging system that enables it to keep prices low and remain true to its value-focused proposition. It reinforces this messaging online by linking to blogs, such as "Fabulessly Frugal," on its web page and declaring on its Facebook page: "Our online community is dedicated to help you save money on groceries."

Walking the Talk

Creating a differentiation strategy means nothing if it's not implemented properly. And to do that, you need to communicate it internally and externally. "You have to take the time to train the staff and infuse your strategy into their culture," Laskey says. Providing incentives such as an employee stock ownership plan (ESOP), as Lakeland, Fla.-based Publix and WinCo do, can motivate everyone down to the front line to buy in to the corporate strategy. Likewise, Hy-Vee pays its store directors based on commission, Stewart says, which encourages them to ensure that employees are embracing the company's approach.

As for communicating the strategy to consumers, err on the side of simplicity. "Simplify your message down to what you want it to stand for," Stewart says. "If it's freshness, you want to use the word 'fresh' in all your communications–your signage, your circulars. Focus on one key message; you don't want to confuse people."

Failing to maintain that focus is a common pitfall. Coming off the previous decades, when the conventional wisdom was "bigger is better" and supermarkets tried to be all things to all people, consistently homing in on a narrower message can seem limiting and risky.

Trader Joe's, for one, has proven that big things can come from thinking small. The Monrovia, Calif.-based chain eschews most major, national brands–if you're looking to buy Coke or Pepsi, you won't find it there. Yet its 360-plus stores are almost always crowded, and not simply because they're a fraction of the size of standard supermarkets. "You really can't go in and do a full grocery shop," Bona says. "But there's always these new and unique products, a sense of discovery, a sense of fun." Trader Joe's communicates this in everything from the witty store flyers, which use vintage-style clip art instead of standard food photography, to the Hawaiian shirts employees wear.

"In an industry where you have small competitors and the big guys, you really need to stand out," Laskey says. "Little extras will bring someone in. You can't be everything to everyone. But whatever those keys are that make your brand different, you've got to use them."

Freelance editor and writer Sherry Chiger was editorial director of Multichannel Merchant magazine in the U.S. and Catalogue e-business magazine in the U.K. As editor at large for Penton Media, she produced the weekly Email Essentials newsletter and contributed to Chief Marketer magazine.