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Case Study: Size matters

Seafood's variety sets it apart, but how much is too much?

Going overboard on product variety in the retail
    seafood case can lead to shrink. - Photo courtesy of Giant Eagle/Lisa Duchene
By Lisa Duchene
April 01, 2008

Shoppers have a wide variety of seafood options at the Stew Leonard's store in Danbury, Conn. A 40-foot fresh bar stacked on ice and 16-foot freezer hold about 50 to 60 species totaling more than 100 SKUs.

"[Customers] appreciate the variety," says Mike Reseska, the store's seafood manager. "They're trying different things. It's an image thing also. If a customer is going to shop our fish counter and they see four or five varieties of fish they never heard of, they're going to think, 'Hey, this is a real fish market. Look at that hamachi, look at the Chilean sea bass and the opah.'"

Like Stew Leonard's, every retailer must decide how many seafood products to display. Miscalculate and the department loses money. Plus, such a mistake will likely tarnish the store's image as a good source of fresh fish at a time when grocery stores want to be known for their perishables.

That's because going overboard on variety leads to shrink and, well, shrink stinks.

Shrink is a huge indicator that the breadth of products is too broad, says Joe D'Alessandro, senior director of seafood merchandising for A&P. Since every company budgets and accounts for shrink differently, there is no magic number.

Stew Leonard's carries one or two specials every week, like a niche oyster or Nantucket bay scallops. "There's an educated customer out there who knows seafood like it's the wine business," says Reseska. "And that's oysters. Different places and different tastes, all fascinating and unique."

For Reseska, keeping shrink in check starts with proper ordering, which begins with watching the weather. A snowstorm may cool sales while sunny weather bodes well for grill favorites like swordfish and salmon steaks. If there is too much of any one item, he'll cook it and hand it out as samples.

Yet, a large variety isn't for every grocer, especially those serving a demographic that is not seafood-savvy. (A middle to upper-class, educated demographic in a coastal region tends to be the most seafood-friendly.)

"You could look at a small case that had a relatively limited assortment in it and if it was the right assortment you could probably run a pretty profitable department with things turning quickly," says Jim Hertel, managing partner of Willard Bishop, a retail research firm in Chicago. "You may not be a destination for seafood but you're satisfying routine needs [and making money]."

Steve Lutz, executive VP of the Perishables Group, a fresh-foods research firm in Chicago, cites the "80-20" rule that about 20 percent of items make up the bulk of sales in any department. He advises retailers to make sure they are getting the top sellers right.

Just like the beer section's Budweiser and the produce department's bananas, the seafood department has shrimp, salmon and tilapia making up the bulk of its sales. Nailing those top three is paramount, says Lutz.

"You can't sell enough whitefish to make up for what you miss on salmon. You can't sell enough lobster to make up what you'd sell on shrimp," he says.

Providing a narrow mix of products has been a hot topic lately in food retailing, following U.K. retailer Tesco's late 2007 debut of its small-format Fresh & Easy, offering a total of 3,500 SKUs compared to the average 45,000 offered at a conventional supermarket. The Whole Foods and Giant Eagle supermarket chains are both experimenting with smaller-format stores (see Small Wonder, SFB March '08, p. 1).

But it's tough to determine the trend around variety in seafood product assortment.

On one hand, grocers carried fewer seafood SKUs in 2007 (248) compared to 2006 (303), according to the Food Marketing Institute, quoting research from Progressive Grocer . Bill Greer, FMI's director of communications, attributes the finding to an increasingly tailored product mix.

"There's a small margin of error in today's competitive marketplace," he says.

On the other hand, for precisely the same reason, seafood departments are expanding. Research conducted by Willard Bishop in 2007 showed 77 percent of senior supermarket merchandisers reported increasing the size of their seafood departments, presumably adding products.

When it comes to the breadth of product mix, retailers must first consider how committed they are to seafood, says Hertel, and decide its primary purpose: Covering the basics? Being known as the area's best source of seafood? Is it there solely for profit? Or can it lose money because it contributes to the overall store statement?

Next, advises Hertel, think about what you can manage. The most common mistake retailers make in their seafood departments is displaying a big assortment and expecting to make money on every item in the mix, he says. That leads to hesitating to toss fish that's not selling and the image-killing odor of shrink.

If the seafood department is intended to be an image-builder and destination, a broader variety - or at least the appearance of variety - becomes more important.

Consumer research from the Perishables Group suggests consumers decide product quality based on the appearance of the case. Eighty-two percent of consumers surveyed while shopping at a Northeast grocery chain named this as an important purchasing factor, followed by service and product selection.

Dorothy Lane Market, with three specialty stores in Dayton, Ohio, just added a free-standing display case full of whole fish. What doesn't sell is filleted and moved to another case.

Says Jack Gridley, Dorothy Lane's seafood merchandiser: "People see [the whole fish case] and it's like 'Wow, these people are in the fish business.'"

The retailer's seafood SKUs expand and contract in cycles, says Gridley. As Lent unfolds, there is a wide variety of items compared to the rest of the year. And the overall selection of products is greater and more specialized than a few years ago. Previously, it would have been unthinkable to bring in fresh sardines from Greece, as Gridley tries to do weekly. Variety, after all, is seafood's advantage over other proteins, he notes.

"I think people appreciate having more options," says Gridley, "and I think they appreciate the opportunity to try something new and different."

 

Contributing Editor Lisa Duchene lives in Bellefonte, Pa.

 

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