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Room for everybody.

Whenever a particular store format gets "hot," there is a tendency to become overly excited and to magnify its significance. That seems to be the case with super warehouse stores today.

These stores are certainly impressive, both in concept and in execution. They work on extremely thin gross margins, chalk up enormous weekly sales volume, and obviously have a shattering effect on their local trading areas. Even so, we think it's premature to regard them as an all-conquering force on the supermarket scene.

Viewed in a realistic perspective, super warehouse stores are simply another step in the continuing evolution and refinement of grocery retailing. A welcome and desirable step, to be sure, from the standpoint of achieving notable logistical, operational, and merchandising efficiencies--but, nevertheless, no more than a transitional development.

As a matter of fact, the super warehouse format itself is not yet standardized. Roundy's Vince Little, who knows as much about the subject as anyone, makes the point. He draws a distinction between disciplined super warehouse units, which he believes will prosper, and "Super-Duper-Double-Shammy" warehouse versions, which aren't likely to succeed.

It remains to be seen exactly where and how a given store crosses over into double-whammy territory. One clue might be the addition--always tempting--of a little frill or something "extra." That can be disastrous for super warehouse units because the sales volume needed to break even is so enormous. When costs go up, even more volume is needed. If it isn't forthcoming, margins have to be raised--and there goes the ball-game. Anyhow, it's clear that the characteristics of the ultimate super warehouse store are yet to be determined.

Meanwhile, the other major store formats are also undergoing change. Convenience stores are turning into super convenience stores with wider selection and more perishables. Conventional supers are converting into neighborhood outlets, stressing all-out friendliness and maximum personal service, while taking advantage of modern technology. Superstores are growing larger to fulfill an even broader range of customer needs in an increasingly pleasant shopping environment. Combination stores and family centers are expanding the scope of one-stop shopping.

The industry as a whole is entering a period of precision and exactitude, both in reaching out for defined types of customers and in gearing up to satisfy their individualistic requirements. In the process, retailers and distributors are making much greater use of organized research. Indeed, the substantial extension of research activities--and the more sophisticated analysis and application of the findings--enable grocers to "know the customer" better than ever.

At the same time, scanning and related information systems make it possible to control internal variables and run a better store, regardless of format. One of the offshoots is renewed interest in Direct Product Profit studies. This percept originally surfaced in the 1960s, but was generally ignored because it seemed too complicated. Now the required data gathering and interpretation are relatively easy, and DPP is starting to make important contributions.

What's happening is that operators of each and every format are learning how to serve customers more completely, while running their stores more skillfully. They are increasingly able to identify and accommodate the wishes of specific population segments and subsegments.

Given that consumers are likely to become even more diversified in their demands, and that grocers will react appropriately, we shouldn't expect any single format or operating strategy to spread-eagle the field. Instead, it is more probable that a widening variety of store styles, including specialized hybrids and mutations, will come into being in the years ahead.
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Title Annotation:warehouse stores and other store formats
Publication:Progressive Grocer
Article Type:editorial
Date:Sep 1, 1984
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