Retailers for the most part are expecting sharply competitive pricing this holiday season, although many are optimistic that new promotional efforts and a longer selling season will drive increased sales compared with last year.
“Thanksgiving is already showing itself to be more competitive than last year, because turkey costs have gone up but retails haven’t changed,” said Scott Karns, president and chief executive officer, Karns Quality Foods, Mechanicsburg, Pa. “It’s been one of those years where we are absorbing those costs at Thanksgiving, and it will probably be the same thing for Christmas.”
He’s hopeful, however, that pork prices will remain relatively low, allowing for more year-end promotions in that category. In addition, he said the longer post-Thanksgiving selling season this year — Thanksgiving occurs unusually early — will allow more time for gift shopping and for holiday parties before Christmas and New Year’s.
“We sell a lot of party trays, and we sell a tremendous amount of seafood over the holiday season for at-home entertainers,” Karns explained. “We’re cautiously optimistic that we’ll have good sales, with more time to sell product.”
Like many retailers, Karns said his company has had to respond to the economic pressures on consumers and the thrifty mindset that many shoppers have embraced for the last several years. This year for the first time Karns Quality Foods has deployed a “seasonal price freeze” on just over 1,000 holiday-related items, with prices locked in through Jan. 1.
“Lots of other stores do that, but it is a new adventure for us,” Karns explained. “Our marketing department thought it was a good idea for us to get some added exposure and make customers feel like they don’t have to be cross-shopping as much.”
Supermarket retailers said they will need to be more efficient in their own cost controls as they approach the holiday season.
Tom Leonard, president of Tom Leonard’s in Richmond, Va., said he anticipates that pricing will be as competitive as last year, but said retailers will also have to be careful to see that their pricing efforts are supported by internal efficiencies and can defend against being “cherry-picked” by shoppers.
“I don’t see anybody being less competitive on pricing this year than they were last year,” Leonard told SN. “The people who are going to go out for business are going to get it. And the people who are sitting back waiting for business to come to them will be very disappointed.”
Leonard said his store is approaching the season with an eye toward winning more regular customers behind a value proposition built around pricing and quality.
“We’re focused more on getting customers to come in the store and stay, rather than attracting one who’s going to come in and cherry pick you,” he said. “So our effort on merchandising is more overall than it is about just having a special on yams. We’re more about providing an overall value, and giving reasons for people to keep coming in, rather than saving 10 cents on one item.”
Pricing, he said, will be sharp and supported in part by buying better and more internal efficiency, he added. “I’d say the difference between last year and this year is that a lot of people, including ourselves, are running more efficiently and more effectively. We are doing a lot of partnering with suppliers, and have done much better in terms of sourcing and purchasing.”
Bashas' Looking to Price Aggressively'
Bashas’, Chandler, Ariz., said it expects turkey pricing to be lower this year in its marketing area.
“According to the Arizona Farm Bureau, the cost of a Thanksgiving dinner will be down about 5% this year, compared to what it cost in 2011,” Kristy Jozwiak, the chain’s spokeswoman, said.
“Metro Phoenix is commonly referred to as one of the most competitive grocery markets in the country, so it’s not surprising to see the cost of a Thanksgiving dinner is less expensive than the national average.
“Because we operate in the most competitive grocery market in the country, we’re always looking to price aggressively. This year’s holiday season will be no different.”
She said Bashas’ plans to match the turkey prices of its competitors.
Among Bashas’ holiday promotions this year will be clipless coupons that can be automatically loaded onto the chain’s loyalty cards, she said.
In addition, Bashas’ will offer gift-card deals for Black Friday — for example, buy $50 in participating gift cards and save $5 instantly; buy $150 in participating gift cards and save $20 instantly.
On Tuesday, Nov. 20, Bashas’ will partner with a local TV station to hold its 19th annual Turkey Tuesday drive from 6 a.m. till 10 p.m., during which customers at the chain’s Bashas’ and Food City stores can donate frozen turkeys or make monetary donations to the St. Vincent de Paul Society.
Jozwiak said Bashas’ has also created an in-store flier featuring a five-day “After Thanksgiving” special that will be inserted into shoppers’ grocery bags before Thanksgiving to encourage them to return after the holiday.
This has been the first year the chain’s weekly mailers were distributed via email, Jozwiak said.
“Thanks to our partnership with MyWebGrocer, shoppers can opt in to get the weekly ads emailed to their home rather than having to go to the chain’s website or getting the ads in more conventional ways through the mail.
“We are also utilizing our Bashas’ and Food City Facebook pages to promote special offers,” she said — for example, an opportunity on each of three Facebook pages to win a Thanksgiving meal.”
Paul Butera, who operates Butera Markets in Chicago and heads the Piggly Wiggly Midwest franchisees in Wisconsin, told SN that price competition for holiday items like turkeys thus far has been less intense than he anticipated.
“I thought the market was going to be very price competitive, but I haven’t found it,” he said last week. “In Chicago, I found we are the lowest price in town with a 39-cent [per pound] turkey. Meijer would be second [cheapest], and everyone else is high. In Wisconsin we are seeing multiple prices but Pick’n Save is 69 cents [per pound on turkeys], which is high. I mean, it’s way below cost but high for the market. That’s not as competitive as I expected it to be.”
Jack Brown, chairman and CEO of Stater Bros. Markets, San Bernardino, Calif., said he expects holiday pricing will be the same this year as last year, and he doesn’t expect much change in sales.
“Sales will depend on whether or not consumers have hopes for a better year, and I don’t see much difference this year compared with last year. I believe their attitude will be similar to last year because nothing has changed in terms of the economy or the job market, so I see this year’s holiday season replicating last year.”
Stater will be slightly more aggressive for the holidays this year, Brown said, though plans for Christmas were still undecided “because we still have a long way to go. We will firm up our pricing two weeks before Christmas.
“For Thanksgiving we will be slightly better priced than last year because we have a few more competitors, and we want to be sure we give them a warm welcome,” he quipped. “For Christmas we will probably bring prices down slightly from a year ago.”
Brown said Stater will seek to be the market leader in its turkey pricing. “As always, we will be the best-priced among the full-service supermarkets, and if necessary we will adjust prices downward to make sure we achieve that goal.”
Although he did not elaborate, he also said Stater would “stick its toe in the waters” for the first time in terms of online and social media this holiday season “to introduce ourselves to customers who may not know what great values we offer.”
At Karns Quality Foods in Pennsylvania, the company is also experimenting with more digital advertising on local online newspaper sites this year, in addition to its in-store and other traditional media. It has also testing ads on Pandora, an online music service.
Social Media 'Very Important' at United
Eddie Owens, a spokesman for United Supermarkets, Lubbock, Texas, said his company expects stronger holiday sales this year. “Our sales have been up just slightly over a year ago, and we hope that will continue through the remainder of the year.”
He said social media is “a very important component of our overall marketing strategy.”
The company has a full-time social media coordinator, and it currently posts two Facebook pages — one in West Texas, one in the Dallas-Fort Worth area, along with at least four Twitter and Pinterest postings a day.
“By the first of December, we will expand our Facebook presence to three pages — one for each major company brand (United, Market Street and Amigos),” he said.
Although Chicago-based IGA had launched its IGALink network website shortly before last year’s holiday season, 2012 will introduce some new elements to that mix, according to Heidi Huff, manager of marketing and retail programs at Chicago-based IGA.
She said the network of independent operators — 701 of whom operate websites through IGALink — tends to be innovative at the local level, but added that IGA is “giving them a lot of tools that offer a little something different this year, and I think that gives them some excitement as well.”
This year IGA is offering movable graphic ads for its retailers’ home pages, including some contributed by its supplier partners.
IGA is also offering electronic coupons for the first time this year through a partnership with coupons.com, including some high-value coupons that are exclusive to IGA members.
“Things like that that can give us a step up on the chains,” Huff explained.
In addition, IGA is conducting its traditional holiday promotions, including distribution of its coupon-loaded IGA Hometown Holidays magazine and its IGA Family, Friends and Food sweepstakes.
All of the traditional promotions have an online tie-in, Huff explained, so retailers can promote the Hometown Holidays magazine with a matching ad on their website, for example. Retailers can offer the coupon book as an incentive, she explained — free with a $50 purchase, for example, or retailers who have a loyalty program can give it away for free to their top shoppers.
Overall, Huff said she feels retailers are optimistic about the holiday season.
“In conversations I have had, I have heard a hopeful outlook, as there might always be in a holiday season,” Huff said.
Greg Sandeno, CEO of C&K Market, Brookings, Ore., said he believes pricing will be more competitive this year.
“We’ve already seen that from Labor Day through Halloween,” he said. “It’s just a continuation of what’s been happening the last four or five years, with an economy that continues to be tough.”
He said C&K will be more aggressive this year. “To drive customers to the right products we plan to offer more promotions geared to specific items in different spending tiers. And we will be putting more emphasis on in-home entertaining by featuring party platters, and we’re incentivizing employees in service seafood, service meat and service deli to see who can sell the most.”
The 65-store chain is also gearing other programs to incentivize its employees, he said — for example, by running a contest that gives them points for every $25 they spend at the stores, with a weekly drawing for prizes.
Grant Lunde, director of marketing, said 2012 was the first year C&K has used electronic media in conjunction with its loyalty cards, offering digital coupons and e-blasts, “and we’ve gotten very favorable redemption rates.” The company also uses Twitter and Facebook, “but it’s more conversation-driven than promotion-driven. We see it as a great tool to talk with customers.”
Shoppers 'Very Deliberate, Very Calculated'
Lily Lev-Glick, founder of Closter, N.J.-based Shopper Sense, said consumers are carefully planning their holiday purchases this year.
According to shopper research she is conducting nationwide, about 90% of shoppers said they are planning to use some type of “pre-store media” to help them determine where to shop.
“Shoppers are going to be very deliberate, and very calculated about what they are doing and where they are going up front,” she told SN.
And even though shoppers are increasingly using digital media as part of their shopping, she said that six in 10 shoppers in her research say that they will rely on physical media more in determining where to shop.
“That planning seems to be very hard-copy focused right now,” she said. “Shoppers are paying attention to the value messaging and the offers that are being presented to them.”
Although some surveys indicate that consumer optimism about the economy is improving, many observers have been cautious in their outlooks for consumer spending this holiday season.
Deloitte’s 2012 Annual Holiday Survey showed that when asked how much they would spend this year, consumers projected slight declines in the amount they would spend on gifts (down 2.3%, to $386) and on entertaining at home (down 2.6%, to $149).
Overall, however, 63% of shoppers surveyed said they would spend “more or the same” this season, vs. 37% who said they would spend less. That compared with 59% who projected spending more in last year’s holiday outlook survey, and 42% who projected spending less.
The National Retail Federation, Washington, projected that total holiday spending would increase 4.1% this year, to $586.1 billion.
Despite what the NRF described as a conservative mood among consumers, the average holiday shopper will spend $749.51 on gifts, decor, greeting cards and other items, up slightly from the $740.57 they spent in 2011, NRF said.
“We’ve seen this pattern of cautious optimism all year and despite the challenges that still exist in our economy, it looks as if consumers are eager to celebrate with friends and family,” said Matthew Shay, NRF president and CEO, in a statement accompanying the association’s projections.
The survey projects that the average shopper will spend $421.82 on gifts for family members — plus additional spending on gifts for friends and co-workers — and will also spend $100.76 on food and candy, $51.99 on decorations, $28.66 on greeting cards and $19.55 on flowers.
Sidebar: Hurricane Hits Holiday Sales
Hurricane Sandy appeared to take a big bite out of Halloween sales in the Northeast, and analysts said they expect it will continue to cast a shadow over the year-end holiday season.
The U.S. Commerce Department last week reported that retail sales were down about 0.3% in October, which some observers attributed to the store closures that took place around the Oct. 28 storm.
Deborah Weinswig, an analyst at Citigroup, New York, said in a report last week that the massive storm caused about $200 million in “retail disruption,” although she said the impact on national retail sales was expected to be minimal. In the Northeast, however, where millions were without power and many homes and businesses were damaged or destroyed, the impact could be greater.
“We believe that the cost of clean-up and repairs from the hurricane could take money away from holiday purchases, which puts early holiday sales at risk,” she said.
Lily Lev-Glick, founder of Closter, N.J.-based Shopper Sense, told SN she thinks the storm could impact the way consumers approach food shopping as well.
“I think after the storm there will be some trepidation about stocking up on too much food, given the amount of food that was lost,” she said. “A lot of people might just say, ‘I am going to the supermarket anyway to pick up things for fill-in, and I am just going to do that until I can get through the winter. We could have more nor’easters, more snow, more storms, and I don’t want to go through this again.’”
She also agreed that consumers in the region will be pressured by costs associated with hurricane clean-up.
“Coughing up money for generators, making unexpected home repairs, footing the bill for hotels while homes were without power and other costly outlays will leave some consumers tapped out before the season even begins.”
Sidebar: Online Shopping Ramps Up
Online shopping is expected to continue to gain traction this holiday season, with 23% of shoppers saying they expect to conduct the majority of their shopping via the Internet, according to Deloitte’s 2012 Annual Holiday Survey.
About one in 10 shoppers — 11% — said they will shop online via a mobile tablet such as the iPad.
Additionally, 48% of shoppers will use social media to assist in their holiday shopping — mostly looking for discounts, but also to research gift ideas, read reviews, see what gifts their family and friends want and browse products.
Smartphone-assisted shopping will also increase, with 68% of smartphone owners saying they will use their devices for holiday shopping, according to the Deloitte research.
The National Retail Federation’s Shop.org division last month released its first-ever online shopping forecast, projecting that sales would grow by 12% over year-ago levels, to “as much as $96 billion” during the holidays season (defined as November and December).
Read more: Firm Forecasts Mediocre Holiday Sales
Last year, the U.S. Department of Commerce estimated that online sales increased 15% in the fourth quarter.
“Online retail has been a bright spot for years, and we don’t expect that trend to change anytime soon, especially with the growth in mobile,” said Matthew Shay, NRF president and chief executive officer. “Aside from the convenience, shoppers look to the holiday season to take advantage of retailers’ increased digital offerings. In addition to enhancing the site experience, retailers have spent the year investing in optimizing their mobile and social platforms, just what holiday shoppers are looking for.”
Several supermarket chains have enhanced their digital and social-media presence this holiday season, with chains including Albertsons LLC and Save Mart launching Pinterest-based recipe promotions, and others launching digital coupons, new types of online ads and boosting their presence on Facebook and Twitter.
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