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To Doubters of Supermarket Model, Take That!

To Doubters of Supermarket Model, Take That!

It’s a common perception in the media and among investors. Supermarkets are middle-of-the-road retailers, and the middle is dying. It’s repeated so often that it seemingly must be true, right?

Not if Kroger Co. [5] has anything to say about it. 

David Orgel, Supermarket News Editor-in-ChiefThe biggest conventional supermarket operator recently had some pointed remarks about this, and its perspective is worth hearing. 

“The fact of the matter is, the full-service grocery industry in the United States is very healthy,” Michael Schlotman, Kroger’s chief financial officer, said during a presentation at an investor conference [6]

Schlotman wasn’t just altruistically defending the industry; he understands that negative perceptions can paint all operators with the same brush. 

Why is there a disconnect? Part of the reason, he said, involves how investors operate. They compare companies like Kroger to competitors, but they only closely follow public ones. Those aren’t always most reflective or best of class. As a result, excellent, privately held operators like Publix [7], Hy-Vee [8] and Wegmans [9]may fall below the radar, so the true health of the industry isn’t being measured. 


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There’s definitely some validity to this, but Schlotman’s other point was even more compelling and may help put to rest some of the tiresome commentary about the decline of the middle. He said all this talk about the need to be upscale or downscale — or anything else but in between — doesn’t wash with reality. And, in my opinion, we need to be broadcasting that message to a wider audience than just investors. 

“Just being high end isn’t an automatic ticket for success,” he said. “Just a value proposition isn’t an automatic formula for success.” 

There’s a reality check for detractors!

So is there another formula for success? It comes back to the oldest rule in the book.

Read more: Supermarkets 'Doing Just Fine,' Says Kroger CFO [6]

“The formula for success, no matter how you go to market ... is are you giving your customer what [they] want,” he said. 

That may seem obvious, but it’s an important reminder, especially for outside observers who don’t live in the industry every day. 

Serving the customer is really the only relevant goal. It’s irresponsible for anyone to contend there’s no future for middle players, as long as they aren’t middling players. If they excel, there will always be a place. That is, as long as the focus is on differentiation and a deep understanding of shoppers.

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