reed supermarkets a fresh wave of competitor
This case requires a mid-sized, regional supermarket chain called Reed Grocery stores. Reed has 192 retailers, two regional distribution centers and 21, 000 personnel in five states inside the Midwest of the United States. This case examines Reed’s marketplace strategy for the Columbus, Ohio, market in particular, which is among Reed’s largest markets. The Columbus marketplace has grown slightly over the past five years, when Reed’s business has dwindled slightly available in the market. Reed features watched their particular market share stagnate with the access of new competition (10% expansion in stores) and a dramatic switch in client preferences to value or perhaps quality.
Reed’s CEO has requested his professionals to come up with a strategy that will growth revenues by simply 2% inside the coming year. The main difficulty Reed encounters is just how can they develop revenues with no compromising their particular customers’ notion of them like a high-end company. Situation Research External In the last three decades, the U. S. food selling industry has experienced significant changes.
The most significant alter has been in the trends and preferences of its customers, as consumer loyalty features dwindled drastically and consumers have concentrated their decision making on value almost specifically.
This is not an impermanent movements and they have created fresh segments of outlets within the meals retailing sector. Over the past twenty years, three fresh segments possess either started or expanded considerably. These types of industries happen to be supercenter shops (WalMart and Target), storage place clubs (BJs and Costco) and dollar/limited selection shops (Family Dollar and Dealer Joe’s), which is the most recent development segment. These kinds of segments possess quickly moved to take a significant market share off their more established supermarket counterparts.
Every single segment presents different aspects that appeal to customers, but the one attribute that is normal with all is usually low prices. Classic grocery stores are getting pushed to tighten previously tight margins. The Columbus market has always been stable throughout the recession and outperformed the nation in unemployment rate and population development. Columbus’ typical household cash flow is also greater than the state of Ohio’s average. Reed’s position within just in the Columbus is strong. In the past season, Reed placed highest part of the market by 14%.
The foreign exchange market share features declined relatively over the past five years, although held steady in all the past two years. Internal Reed Supermarkets started off as a lower-end retailer, nevertheless over the past 2 decades Reed provides moved into the high-end in the supermarket business. They have performed this using a combination of exceptional customer service, a full assortment of the two standard and high-end items, including bakeries, meats and seafood. This niche continues to be very effective and recently been the plunging force within their growth.
Regrettably, as mentioned above, consumer loyalty to a quality manufacturer has dwindled and been replaced y the need to find a very good price. Reed has attemptedto combat this kind of by the two increasing their high-margin products (private labeled and prepared foods) and increasing the number and amount of specials they give. These techniques have done little to change consumers’ perception of Reed as a high-end and high-priced dealer. See Appendix A for any full SWOT analysis upon HLL. Alternative Courses of Actions Reed’s executives have you want to three alternatives to increase earnings in the Columbus market.
The first is to continue with the current “dollar special campaign, which offers two hundred fifity items in considerable price cut each week. This alternative is hoped to hold the majority of prices at their current level, while creating the perception the fact that retailer offers dropped prices and then generate greater traffic. There are two drawbacks to this strategy. The very first is that customers may poach just those items upon deep price cut and significantly decrease margins storewide. The other negative is that a campaign of this kind could alter the perception of Reed becoming a high-end merchant, which could include a much more significant negative effect.
The second alternate is to move to a everyday low pricing version, which is employed by one of Reed’s main competition. This could include a similar impact as the “dollar special campaign and drive down Reed’s high-end notion among the customers. The next alternative is always to fight for the high-end surface and offer little in the way of specials/discounts, but instead continue to give attention to their main competencies: outstanding customer service and a large selection of items. Recommendation
Based upon the current economic environment, my advice would be to contain the high-end market and watch for customers to come back to Reed’s excellent product. Reed should continue to expand its premium non-public labels and higher-end prepared foods to compete with the high-end opponents. By not offering deep discount offers and keeping its margins in a appropriate position, Reed should be able to hold its discuss and progress its revenue. Smaller specials should be offered, but not profound discounts. Picky advertising towards the right customer in terms of socioeconomic conditions and proximity to their stores ought to be undertaken and expanded.
This kind of advertising should speak to the high-end shopping experience that Reed is short for. Conclusion Reed Supermarkets is located in an alluring position to be perceived as expensive and, as such, can charge a premium for it. Reed should not concentrate on trying to contend with the lower-end user, because could lead to straddling the two segments and they could possibly lose upon both as a result. They need to focus on their core competency: featuring exceptional customer service and superior quality, well-priced items.