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Content Guy's Note: We thought this piece from the folks at was particularly interesting because it provides a European perspective on issues and trends occurring here in the US.

    While it remains fair to say that for the bulk of US grocery retailers‚ business is
    still taken up by the sale of grocery goods, stores are now stocking an increasing array of non-food goods and customer services alongside their mainstream grocery offer in attempt to broaden their customer base and maximize sales and margins. Here are some specific areas in which we are seeing development:

    o Private label: In the USA, as in Europe, retailers are busy developing segmented own-brand ranges that are targeted at different ends of the market. For most retailers‚ general own-brand strategies have consisted of
    two-tiered or three-tiered product ranges, comprising standard and premium
    lines, or economy, standard and premium. For example, Kroger has implemented a three-tier program comprising FMV (For Maximum Value), Kroger and Private Selection.

    o Ethnic formats/products: Recent Census Bureau estimates have revealed that Hispanics are now the largest (and fastest-growing) minority group in the USA, and there have been a number of initiatives by US grocery retailers as they attempt to capitalize on this demographic trend. Examples in 2002/03 have included Albertsons rolling out its Super Saver format, Nash Finch opening several Avanza units, H.E. Butt reportedly planning to open an
    outlet in Houston targeted at Hispanic and African American shoppers and Kmart introducing cosmetics and accessories endorsed by Latin pop star

    o Organic/natural lines: Another way in which grocery retailers are attempting to bring themselves a degree of differentiation and a wider consumer base is through the introduction of product ranges and in-store areas devoted to 'natural', environmentally friendly and organic lines. Clearly, it is specialists in this field such as Whole Foods Market and Wild Oats that are leading the way, but research showing that around 40 percent of organic foods are purchased in conventional supermarkets. For example, Weis Markets has introduced dedicated organics areas instore; Wegmans has rolled out Nature's Marketplace departments; Well for Life areas group together up to 200 natural and organic products in Raley's stores and Kroger is rapidly expanding its Nature's Market instore areas. This is a trend that is likely to intensify.

    o Food-to-go: Food retail and foodservice are becoming increasingly blurred, and grocery operators are having to become providers of food rather than sellers of food. This evolution is manifesting itself in a number of ways.

    One fairly low-risk and low-cost being taken by a number of retailers is the
    installation of third-party foodservice units within a retailers store, e.g.
    Stop & Shop/Dunkin‚ Donuts, Wal-Mart/McDonald‚s, Target/Taco Bell, Giant
    Eagle/Starbucks. This strategy enables retailers to enhance their shopping
    experience without expending too much capital or labor costs in addition to
    being able to capitalize on a brand that is already well known. US food retailers have also added their own foodservice facilities into their stores, varying from fairly typical food counter and café areas (e.g. Giant Eagle's The Kitchens and Hy-Vee's Kitchen) to full service upmarket restaurants (e.g. Wegmans' Tastings).

    Perhaps the most common approach, however, is to combine food retailing with foodservice and offer hot or prepared foods that can be consumed instore (with seating areas) or at home. There are numerous examples of this approach, a selection including Stop & Shop's Boston Market, pizza ovens at P&C, food-to-go counters at Harris Teeter stores and Café on the Run departments in HEB's Central Market stores.

    o Instore banking: Following events in late 2002, which saw the collapse of instore banking agreements between retailers Winn-Dixie and Safeway and the Canadian Imperial Bank of Commerce (due largely to financial problems experienced by the bank), there has been a shadow of doubt over the
    sustainability of the proliferation of banks within US supermarkets. Even so, it remains a valid comment to suggest that nearly all significant grocery and mass merchandise retailers have instore banking partners operating in some or all of their stores. Most have chosen not to emulate Safeway's choice of opening own-branded (Safeway Select) bank departments, but instead have let one or more banking partners establish a presence within stores.

    It is also worth noting that regulatory issues have prevented Wal-Mart from
    acquiring an existing bank in order to introduce its own financial services.
    Another observation is that the relationship between grocery retailing and
    banking is not as advanced in the US as it is in Europe; in the UK, for example, Tesco is able to offer its consumers Tesco-branded savings, loans, investments, mortgages, insurance, credit cards and bank accounts. Although the banking arm is operated as a joint venture with a high street bank, it is marketed as an extension of the Tesco business, an effective brand-building and loyalty-generating exercise.
KC's View: