By Lisa Bernard-Kuhn, The Cincinnati Enquirer
CINCINNATI -- In a test of a one-stop-shopping strategy, Kroger, the country's largest grocer, is adding clothing to its lineup of essentials at a Marketplace store in Mansfield, Ohio.
It's the first time in Kroger's 129-year history that it has offered a dedicated apparel section.
"In order to stay competitive, we have to listen to our customers and change to keep up with demand," said Jackie Siekmann, a spokeswoman for Kroger's Columbus, Ohio-area stores. "We understand that we are experts in grocery, and we're not going to lose sight of our core values."
The test will be watched closely by hundreds of independent and national grocers, said Nate Filler, CEO of the Ohio Grocers Association.
"There is only about a 1% profit margin in the grocery business, so the best thing you can do is increase traffic in the store," he said. "Other grocers will be taking note to see if this is a trend they will eventually need to pick up on."
Should the test prove successful, it could help Kroger regain market share lost in recent years to retailers such as Walmart and Target, which have expanded their offerings to include food and groceries. Since 2005, more than 120 million square feet of grocery space has been built outside of traditional grocery stores, according to Booz & Co., a Phoenix-based retail consulting firm.
"It's a broad and bold experiment, and I think anything Kroger can do to capture more of the household spend across multiple categories is really critical," said Thom Blischok, chief retail strategist at Booz.
But selling apparel is no easy business, and getting buy-in from Kroger customers used to the mostly grocery set-up will be a challenge, industry experts say.
"The downside could be that customers walk in and say, â??Why are they selling this stuff?' " said Phil Lempert, a Santa Monica, Calif.-based grocery and retail analyst. "Kroger is not a stupid company. They understand consumers better than any other supermarket. But do they understand what it takes for someone to buy apparel and food in the same trip?"
Kroger executives think so.
"We know this concept can be successful, and we've seen it work in other markets," Siekmann said.
Kroger is borrowing strategy and products from popular West Coast grocery and retail chain Fred Meyer, which it acquired in 1999.
"We took some of their top-selling products, but we know what works best out west in Portland (Ore.) may not be true here," Siekmann said. "That's why we're testing the concepts in one store first, so we can tweak the product lines as needed."
The new apparel section includes nationally branded shoes, jewelry, outerwear and undergarments from Levi, Carhartt, Carter, Skechers, Hanes and Maidenform, among others.
Kroger will officially unveil the newly remodeled Mansfield store Friday.
Karen Short, an analyst with BMO Capital Markets, says the move is encouraging. But she warns that expanding beyond apparel could be a reach too far for Kroger.
"I'm happy to see them get rid of high-ticket inventory like furniture and replace it with apparel because it is a lower-risk proposition," she said.
"This is a test, and I think that's one of the things Kroger is well focused on, testing to see what works and what doesn't to make sure no one gets complacent."