Business and Operations
Thinking Outside of the (Big) Box
December 4, 2007 By Michelle Brisebois
Are there opportunities for you to enhance your current product line just a little bit?
Are there opportunities for you to enhance your current product line just a little bit? If you did spice things up – could you charge more? Would it make your products unique and keep your customers loyal? Would everyone in town talk about your specialty items, providing you with great word of mouth advertising? Accessorizing your products works much the same way that flowers in front of a house increase its market value. It’s all about the impression of quality. The need to have signature items goes beyond visual appeal or being creative. Signature products are the best defense against the biggest retail threats on the landscape right now – the big box stores, a.k.a category killers.
Category killer is a term used to describe a very large retailer specializing in one area of business. Think Best Buy for electronics or Chapters/Indigo for books and you can imagine the struggle that “Mom and Pop” electronics and bookstores have endured to keep pace with these huge competitors. The big box store concept has extended into grocery as well and the effect has been sobering for the industry.
According to AC Neilson U.S., super centres opened 826 more stores over the last four years, achieving 38 per cent growth and a total count of 2,175 units. The warehouse club concept extended by 193 stores or 23 per cent, topping off at 1,034 outlets. The casualty of this “uber store” growth was often the grocery store. AC Neilson U.S. also reports that in the grocery aisle, slow but steady erosion continued, as 1,175 food stores fell off of the charts, dropping the channel count by three per cent. In many instances, large food/drug combinations and supermarkets replaced the stores closed by national chains, independents and small chains. It’s the classic David and Goliath story. The giant faces the small contender and the small contender must triumph not by imitating the giant but by being innovative and flexible. Don’t go where the competition is – go where they won’t.
Fortunately for the baked goods industry, ours is one area where consumers will break away from the big box stores. AC Neilson also reports that “Super centre shoppers leave the fold to purchase high frequency categories like carbonated beverages, milk, bread and baked goods, but remain in the channel (Super centre) to pick up medications/remedies, hair care and oral hygiene products.” Our strategic opportunity as an industry is to have unique, niche products to target consumers who want “value” instead of “price” to be their motivating factor. Value and price are not the same. Value is a broader concept than just price. Price is part of the value equation but quality, image and uniqueness all may factor in as well. Big box competitors tend to compete mainly on price. Their economies of scale allow them to sell brand names at good prices. To achieve these economies of scale however, big box stores tend to carry a narrower range of products – it’s simply more efficient that way. Here is your opportunity to develop signature items that give consumers an alternative to the standard fare found elsewhere. The best news of all is that creating these signature products may be easier and more profitable than you think.
Starbuck’s is the industry master of turning commodities into signature pieces with little enhancements. As we rattle off our orders “I’ll have a tall, double espresso, mocha latte, extra dry with chocolate sauce,” the cash register chimes with each little add-on. The operator pays just a few pennies for that chocolate sauce yet the consumer is willing to pay 10 times more than the actual food cost because to them it’s a small indulgence in the middle of a hectic day – a mini, mental vacation. Research conducted in the U.S. asked consumers to indicate what price they’d be willing to pay for an unadorned coffee and slice of pie. Consumers were then asked to indicate what price they’d be willing to pay for the same items garnished with a brand of whipped topping. The research found that an item with a 1-oz. dollop of topping was rated as being worth anywhere from .88¢ to $1.27 more than the ungarnished item. The food cost for the 1-oz. of topping was 15 to 20¢ so you can see the profit that extra dollop provides. What unsung heroes in your ingredient stock room could be the “icing on the cake” for your balance sheet? Try a bit of streusel on your breads for a touch of sweetness. Nut consumption is rising since they are viewed as being a tasty and healthy snacking option. Are there items in your operation that could be topped with nuts, seeds or a sprinkling of cheese? Braided bread would add a twist to your menu – in more ways than one. Baking and Snack (April 2001) reports that additional ingredients incorporated in baked goods cause many consumers to believe products have an enhanced nutritional value. One consumer watch group reports that 95 per cent of Americans believe certain foods have benefits that go beyond basic nutrition. That’s a great selling feature for the bakers who include an extra ingredient or two in their products. Biscuits with chives and parmesan, focaccia with rosemary and maple scones with lemon verbena (an herb credited with de-stressing) and ginger are examples of exotic twists on otherwise ordinary bakery items. Your rapport with your customers will allow you to find out what items they’d like to see. A big box store can’t build that kind of “retail intimacy.”
Signature items will draw new customers to your bakery and your passion for customer service will keep them coming back. Innovation and communication – it’s really the small operator’s strongest weapons. It always helps to think “outside of the box.”
Michelle Brisebois is a marketing professional with experience in the food, pharmaceutical and financial services industries. She specializes in helping companies grow their brands. Michelle can be reached at OnTrend Strategies by e-mail at: brisebois firstname.lastname@example.org
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