At Your Service: choosing which in-store services to add (and subtract)

Customers crave the convenience of in-store services.

Certain customer comments in the store’s suggestion box just stand out. For Melissa McPherson, operations manager at Pete’s Frootique, a specialty grocer in downtown Halifax, one of the more memorable comments was short and sweet: “I love Pete’s so much, I wish I could bring my bed here.”

One step inside Pete’s and it’s easy to understand why customers view it as a home away from home: cozy atmosphere, friendly staff and aisles of beautiful food. Setting the tone of the store, however, is the floral department, right up front. Complete with rows of vibrant grab ’n’ go bunches, greeting cards and gift items, this scented sanctuary is the perfect gateway between the frenzied outside world and the pleasant shopping experience Pete’s wants for its visitors.

Pete’s didn’t add the department just for effect. Selling flowers addresses something that is of critical importance to shoppers: convenience. McPherson admits managers weren’t sure what kind of revenue the floral area would bring in, but intuitively they knew customers would appreciate the option to pick up some flowers in the same place they buy their food.

That’s why so many grocery stores have branched away from selling just food to offering an array of extra services. Shoppers are so time-starved that anything a retailer can do to help ease their burden is welcome, says Frank Lovsin, co-founder of the Freson Bros. chain in Alberta. Freson’s list of services is, not surprisingly, extensive; the largest of its 15 stores offer key cutting, hunting and fishing licences, photocopies, rug cleaning, cafés, post offices, Western Union and floral arranging. “I look at all the extra services we offer as ways to help save customers’ time and alleviate their frustrations,”says Lovsin.

As Freson’s approach illustrates, there is an enormous palette of in-store services grocers can offer. But selecting the right ones is no easy task. All services have startup and operating costs, though some are greater than others. And returns can vary widely. Plus, to add a service, precious floor space must be robbed from other departments. Then there is the competition: does another nearby retailer already offer better value for this service than you could deliver?

Brooke Kynoch, co-owner of Safety Mart Foods in Chase, B.C., knows all about the thinking that goes into adding a new service. He’s boiled it down to two questions: first, is this a service customers can’t already get locally? Second, is it something the big chains don’t do well? If the answers are yes, Kynoch figures the chances of success are good.

There is more to consider than that, of course. What are the goals of the service? It should boost foot traffic. It should give a nice bump to profitability. We all know selling soup is a low-margin game. So a service offering should really come with fatter margins–preferably in double digits.

Steve Royer, creative director at Crossroads, an Illinois-based grocery consulting firm, adds one more vital point: a new service should be in line with the store’s image in the community. It should enhance the brand, not detract from it, he says. Royer has worked on in-store services at more than 200 stores and notes that, for instance, plunking a coin machine in an upscale grocery store just isn’t a good idea.

What else should you know? Plenty. We spoke to grocers across the country that have added in-store services (and in some cases later subtracted them). Their experiences and advice should come in handy.

Scent of a supermarket

Flowers are a great way to draw traffic into your store. Customers love that they can grab a bouquet as a host gift (or a get-me-outta-the-doghouse peace offering) on their routine visit to the store. “And it saves them a trip to a florist that could be near a different grocery store,” says Christy McMullen, manager at Summerhill Market, an upscale Toronto grocer.

Yet running a floral department isn’t, umm, all roses. Royer has seen many fail because the grocer didn’t know the floral business. “You need someone with expertise in that commodity,” he says. Summerhill, for instance, has a full-time florist. And when she’s not wrapping up daisy poms and mini-carnations, she lends her expertise to other departments by creating eye-catching displays.

The downside to floral departments is that they are labour intensive. Tending to the flowers is a lot of work, plants are easily damaged by cold and shelf life for cut flowers is only a week. It’s also tough for a supermarket floral shop to break into the lucrative funeral and wedding markets. “Especially with funerals,” says Lovsin. “People who own floral shops have allegiances with the directors.”
Meanwhile, when folks putter in their own gardens from June to August, floral sales suffer. McPherson estimates Pete’s floral sales drop 20% at that time. So how much does a floral department cost to run? An experienced full-time florist’s salary can run anywhere from $50,000 to $80,000. At Pete’s Frootique, the store’s 500-square-foot flower-and-card section is a grab ’n’ go format. They also take orders and do gift baskets. Running the floral market with a full-time supervisor, one full-timer and two part-timers costs $1,400 in wages each week, says McPherson.

The floral shop in the Freson Bros. in Grand Prairie, Alta., is run by a fulltimer. “It does very good business,” says Lovsin. “It gets good ROI–easily 20%.” At Kudrinko’s grocery store in Westport, Ont., owner Neil Kudrinko has four to six pails of delivered fresh cuts and generally sells a couple hundred dollars’ worth a week. A decade ago, shoppers didn’t want to spend more than $10 on a bouquet; now Kudrinko’s best sellers are $15 and $20 mixed bouquets. “I would never carry a bouquet under 10 bucks now,” he says. “You’re wasting your time.”

Cashing out?

Cashiers don’t chime “cash or charge?” like the old days. With most grocery customers now paying by debit or credit, in-store bank machines are quickly losing their value. Just ask Kudrinko. He put an ATM machine into his store five years ago and was surprised at how quickly it paid for itself. For the first couple of years his annual take was roughly $1,500. But after his store started accepting credit cards three years ago, revenues fell to about $1,000 a year.

Kudrinko did away with the ATM when he realized he would have to invest in a new machine with incoming chip technology. Instead, he improved his chocolate bar display. “Why would you want your core business to suffer for, in that case, a marginal service that’s not really adding to the bottom line?” Kudrinko is now happy to offer a cash-back service at the tills instead.

But don’t discount ATM’s entirely. They can be successful in a store on the ground floor of an apartment building with lots of walk-by traffic or in a store in a small town with no bank. As Kudrinko says, “If you’re the most convenient option for people to take their money out, it’s a no-brainer to have one.”

Jumpin’ on java

You know the saying “Image is everything”? In the case of in-store coffee shops, it’s more like a consistent image is everything. If your brand is built on low prices and you drop in a high-end coffee shop à la Starbucks, it’s a confusing message to customers. Do you cater to discount shoppers or six figure–earning latte sippers? Choose an image and stick with it.

Royer thinks an upscale coffee area is a great way to attract more 20-somethings– if that’s the shopper you’d like to reach. Most young shoppers don’t make grocery lists or even know what they’re having for dinner when they step into a grocery store. “So putting in a coffee shop where they can sit and think is a good idea,” he says. You may have to step things up a notch to gratify this group, however, by installing a gas fireplace, nicer seats and tables, and maybe even WiFi access. But it can be worth it. “Younger shoppers are lucrative because of what they develop into,” says Royer. “You’re building brand loyalty with a generation that will become a 30-something shopper and have four mouths in the household.”

Coffee services aren’t just for generation Y. Older shoppers appreciate a place to sit down, too. During a recent store renovation, Safety Mart’s Kynoch doubled the size of his bakery and deli department and added a sit-down coffee spot. Whereas he used to see men sitting in their cars in the parking lot while their wives shopped, he now notices more of them in the coffee area watching TV or staring out the window. Best of all, his combined bakery and deli sales are up 15% in the last year.

Because people are in a grocery store so often, in-store coffee shops can become the unofficial community centre. That’s especially true in really small towns. “You want people to consider your store an extension of the community,” says John Scott, president of the Canadian Federation of Independent Grocers.

A coffee shop can also get you started on the way to offering a complete dine-in area. Pete’s Frootique has developed what it calls the “action bar,” complete with juice, salad and hot lunch foods. There’s room to sit 60 people (half of the customers take their food to go, the rest eat in). In six years, year-overyear growth has been an impressive 13% to 15%, says McPherson.

Running this operation takes roughly 20 part- and full-time staff on a seven-day rotation, plus a department manager who oversees the area (as well as a few other sections). McPherson estimates staffing the bar (including management) costs roughly $10,000 in wages each week.

The menu prices have required some trial-and-error experimentation. The salad prices, for instance, are based on container size rather than weight. The original price didn’t take into account customers who double up on the feta. “It took a while to figure out which price point would get us a decent margin,” says McPherson.

Read all about it

Grocers want ways to keep shoppers in the store a little longer. A comprehensive magazine program can help, says Jim Danahy, managing principal and CEO at Torontoarea retail consultancy CustomerLab. If you’ve got a solid vendor managing the category, monitoring sales and catering titles to your store’s demographic, the magazine department can act as what Danahy calls a “linger item.” Focus on niche magazines such as gardening, home decor, fashion and tness publications if your store has limited space. These can offer double the margins of general “top 50” magazine titles, he says.

Still, magazine sales on the whole have had a rough ride lately. Retailers we spoke with have seen a drop of anywhere from 5% to 30% from their historical sales levels. One reason may be temporary; in the recent recession, people cut back on discretionary spending, and magazines certainly fall into that basket.

But another problem is the Internet. Consumers aren’t reading print publications as much. Kudrinko remembers when he’d sell 100 or 200 issues of TV Guide each week. “ That doesn’t happen anymore,” he says. So why does he still stock any magazines? A lot of older women have been buying Women’s World at the store for 20 years, he says, and adds with a chuckle: “Oh my God, if I didn’t have it...I tell you, the wrath of the Women’s World customer...”

Which leads to perhaps the most important lesson about in-store services: which to add and which to ditch. “Even if something’s not profitable, but customers want it, I give it to them,” says Safety Mart’s Kynoch.

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