Supervalu Accelerates Hyperlocal Assortment Initiatives

Supervalu is accelerating a range of efforts to create "hyperlocal" assortments in each of its stores, including doubling the percentage of endcap and display space controlled by store managers.

"In Q1, our traditional retail store directors, supported by new tools and training, were given control over 25% of their display space," said CEO Craig Herkert during a conference call that took place in late July. "This increased to 50% earlier this month. Our store directors know the preferences of local customers, and additional empowerment allows them to respond in real time. Our expectation is that we will gradually increase customer loyalty and basket size as we are better able to provide store-specific offerings that meet the unique needs of our shoppers."

Herkert used the example of a Supervalu store in Herndon, VA that is "leveraging customer feedback and demographic information to adjust shelf allocation and better meet the needs of the surrounding Asian community, most of it of Indian descent," he noted. "While accounting for only 7% of the local population this segment represents a meaningful opportunity to the store, and in the past it had been largely overlooked."

The store team recently added eight linear feet merchandised specifically for the Indian customer, bringing in approximately 100 new items including Kingfisher Beer, curries and other cooking sauces. "The sales impact is incremental to the store's overall top line," said Herkert. "But more importantly, we are better meeting the needs of a fairly sizeable portion of the trade area, which can only help build traffic, basket size and customer loyalty."

Social Media's Role

Local store personnel are also using social media to keep in closer touch with the communities they serve. Supervalu is able to draw on an expanded range of local insights through an internal social networking site that includes a number of sub-groups. One is the College Stores group, representing the approximately 180 stores located in or around college campuses. "Now these folks can talk to each other real time, all the time, without any input from senior management," said Herkert.

Local personnel exchange stories and ideas on how to better merchandise to their consumers, in some cases with involvement from the headquarters merchandising team. "When they get involved they say, 'Oh guess what I can do, I can offer you something like a refrigerator for $100, with $100 in vendor coupons fully funded by the vendor,'" said Herkert. "And all of a sudden the stores are talking to each other. So social media has been a huge deal, and quite frankly, it's growing each and every day."

Addressing In-Stock Issues

Herkert spoke during a call discussing Supervalu's financial results from the quarter that ended June 18, 2011. Net sales of $11.1 billion represented a 3.7% decline from the same period the previous year, and same-store sales declined 3.9% during the quarter.

The retailer has been battling these financial trends on a number of fronts, including improving in-stock positions with the help of technologies to improve the way stores order product and manage their inventories. Herkert cited "great feedback" from store directors using these tools.

"In certain cases, some [store managers] who thought they had clear visibility of the store are now provided with new insights into operations, uncovering the root cause creating out-of-stock conditions," he said. "These new insights allow us to take corrective action and build sustainable processes to ensure conditions are not repeated."

During the most recent quarter, the retailer rolled out the new in-stock tools for perishable items to 353 stores and to 481 stores for non-perishables. "This represents just about one-third of our retail store fleet for perishables and just under one-half for non-perishables," he noted.

For related content see: Supervalu Tests Item-Level Tools to Battle Out-of-Stocks

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