The economy is weakening and consumers are in a tough spot. But you wouldn't know it from recent supermarket financial reports. Harris Teeter, Ingles, Ahold and Delhaize were among chains to recently unveil impressive financial results. Does all of this make supermarkets the safe haven during recessionary times?
Not completely, but supermarkets are naturally well positioned to survive a down economy because they offer one-stop shopping and affordable alternatives to restaurants (see related story, Page 1). Supermarkets are also in better shape because they've improved their game plans as some of their competitors have closed down, reducing overall square footage.
However, those advantages won't completely shelter them if the economy continues to falter. Grocers will still have to play block and tackle as each week brings fresh reminders of economic malaise. The government continues to report dismal economic numbers and the media is full of stories about people experiencing hard times.
Some of these stories quote “experts” who advise consumers to make substitutions on food products due to higher prices and to pay grocery bills in cash rather than credit in order to get a better handle on spending. Consumers, in turn, are quoted about how they switched to less expensive cuts of meat, among other strategies.
Food retailers don't need to overhaul their strategies but do need to find innovative ways to show shoppers they care. The highest profile (and probably most clever) case was Wal-Mart's recent announcement of its “economic stimulus” plan, a reference that evoked the Washington debate over tax rebates. Wal-Mart's strategy, which was timed to the Super Bowl period, included price cuts of 10% to 30% on snack foods, televisions, paper goods and other items, as well as no interest for 18 months on purchases of $250 or more with a Wal-Mart credit card.
Another notable campaign is a fuel promotion sponsored by Big Y, Springfield, Mass. The retailer's “$100,000 Fabulous Fuel Giveaway” contest will award home heating fuel and gasoline prizes to shoppers, who are entered when they purchase five of the retailer's private-label brands. The fact that Big Y's campaign addresses a commodity that's become so expensive for consumers — even though the retailer doesn't operate gas stations itself — shows a level of caring that shoppers can relate to.
There are plenty of other ways to react to this economy. Retailers can boost meal solutions by cross-merchandising; educate shoppers about the reasons for high prices; and play up the advantages of the one-stop shop, product variety and private-label savings. Stores that hold in-store cooking classes might consider an in-store credit/budgeting class to help customers manage their money.
If supermarkets don't reach out, others will. Supervalu recently reported that consumers are trading down to less expensive supermarkets, and the company's Save-A-Lot limited assortment format is launching new marketing initiatives to grab a bigger share of lower-income grocery customers. That's heightened competition in a zero-sum game.
Fortunately, supermarkets don't need to hire economists to develop fixes. They just need to play the role of grocer by tweaking strategies with customers in mind.