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Transcript of Reed Supermarkets
A New Wave of Competitors Udit Singh
Nimitta Tamrakar Overview Strategic Issues & Problems (Intro) Situational Analysis Internal & External Analysis Financial Overview Recommendations Proposed Solution Strengths Opportunities Weaknesses Internal and External Analysis (SWOT) Threats Recommendations Weekly 'Customer Appreciation Sale' Focus On Staples Offer More Private Label Brands Offering Items in Bulk Customer Loyalty Refund Program Integrated Market Campaign Adopt a Pet • The Dollar Sales have not helped price perception, but have increased share.
• “Customer Appreciation Sale” separates the store from Dollar Store comparison, and helps maintain quality perception. Potential to help customer loyalty thru message of appreciation.
• The effectiveness of this campaign in increasing share is not certain. Review after 6 months will be necessary. Weekly ‘Customer Appreciation Sale •Problem is not price, but perception of price
•Determine the comparison basket, and price items as low as competitors, even if this is under variable cost.
•Though the results would not be instant, defeating the high price perception would in time grow market share.
•Although remote, there is the potential for customers to purchase only these low priced items. Focus On Staples • Private label brands carry larger margins, and are growing in market share.
• Aldi is opening three new stores.
• Private label brands, with their low cost and high margins, have an application in the customer loyalty refund program. Offer More Private Label Brands • Our target market visits warehouse stores for very specific reasons.
• Just a few items, such as paper towels and toilet paper.
• The collective might of 25 Reeds stores should allow this to be done without loss. Offering Items in Bulk • We cannot hope to gain 2% in market share without developing customer retention techniques.
• Total store expenditures are recorded, when a customer hits $500, he or she is notified of $5 off next purchase. If the customer doesn’t apply it, it will grow.
• Grocery shopping is large dollar buys, the customers will start to see the rebates soon.
• $5 is not a budget changer, it is just enough to notice, and reinforce the customers desire to shop only at Reeds. Customer Loyalty Refund Program •Facebook especially, offers chance to stay in the front of customers’ minds.
•Effective social campaigns through some media are complicated and/or costly.
•YouTube still attracts a younger than our target market crowd. Integrated Market Campaign • Drop off cards at animal shelters to be given to people who adopt a pet that give a discount on pet food for life.
• Dog Food is a higher margin item, and a good choice to discount in hopes of add on sales. '
• Customer Loyalty. Pet owners will come back to use the discount.
• Reach members of all market segments. Animal lovers exist in just about every group.
• Good PR. Animal lovers are passionate, and it is not unreasonable to expect that some will come to Reeds even without the discount card, just because of the support to shelters. Adopt a Pet Brand name is well recognized and holds a good reputation.
High quality and wide variety of products.
Second highest market share in Columbus.
25 stores were in in operation in 2010.
Location of the stores are in the areas with promising above average population growth. Attracting a smaller pool of the overall market.
Third lowest on the price index.
The “Dollar Special” could confuse consumers and decrease Reed’s quality status.
Operating at a low operating margin of 2.1% of gross sales compared to its competitors. Potential growth in Columbus economy.
Increasing trend of American consumers becoming more health-conscious.
The growing trend of private label merchandise. COMPETITORS!!!
Whole Foods market
The customers are cherry-picking. Strategic Issues & Problems Situational Analysis Proposed Solution Financial Options as considered by Meredith Collins, VP of Marketing: Do more to convey value to consumers?
Compete more aggressively on price?
Consider other strategies? The problem: Lost market share, and potential of further loss of market share to a variety of competing store types. Options as presented by Meredith’s team. -Unfortunately, Reed Supermarkets are perceived as high quality (from all perspectives) in a market where consumers are looking for value. This poses as a significant hurdle for Reed’s.
-Consumers are less loyal and spending less each trip. Intro Overall goal:
2% Market Share Increase in the Columbus Ohio region (25 Stores) Reed’s History Reed’s in Columbus The US Food Retailing Industry Area: 2 Million People with median household income ($52K)
Consumers desire better prices and better discounts and coupon (Reed has a high quality index but very low price index)
Galaxy and TopVal (each having 20+ stores)
18 Delfina stores (very much like Reed)
22 Family Dollar Stores
3 Whole Foods Markets
Wal-Mart (5), Target (4), Costco (3) 50 companies dominated the industry (70% of overall revenue)
Each household spent $5200 a year ($100 a week) on groceries and took 2.1 trips a week in 2010.
Decreasing Customer Loyalty
More frequent fill in trips as opposed to ‘stock up’ trips
Private label foods are on the rise
Americans are becoming more health conscious*
Supermarket industry is turning into something that offers more than just food (Wal-Mart, Costco)
Customers are preferring value to influence
Significant grown of limited selection stores like Aldi and Trader Joe’s Established 1939 by William H. Reed in Kalamazoo Michigan.
As of 2010 – 192 retail stores, 21,000 employees – all over the Midwest.
High end because of a vast array of products and services (staples to lavish seafood and many different brands of snails)
Amazing customer service (greeters who offered cookies and runners) Sales $660 million 2010
5 % decrease from 2005-2010
Gross Margins 22.7%, Net 2.1%
Dollar store margins 8.5%
Aldis - 1.5% Income Statement Average revenues increase 1-2% year
Goal of 14.3% revenue increase
Sales per store increase 5800 customers
$73,000 per store-25 stores
Net profit increase of $1.9 million Goal of
16% Currently market share 14%
Total supermarket sales area $4.7 billion
Increase sales $94.3 million=2% market share
$3.8 million per store. The Objective: Increase market share from 14% - 16% - Margins are NOT the objective. Merchandising director - terminate dollar sales and move to an everyday low pricing model.
Advertising and promotions manager - give it another six months for some change.
Merchandising director- need of higher margin items like prepared foods.
Advertising and promotions manger- increase margin, not share.
Operations direcotr - increase low price specials, expand private label brands, and introduce double couponing.
CEO Morrissey: “Everything should be on the table.” Revenues and market share increase Case 2D