Grocery Wars«

One Big Food Fight

Andrew Bauer, Marcus Ceniceros, Kelly Cox, Monica Culver, Daniel Deslatte, Megan Kever, Natalie Roberts, Rebecca Schneider, Bridget VanOsdell, Erin Wood

The Case ‡ Grocery Wars ² The intense fight for market share among the food retail industry ‡ The Key Players: ² New Superstore Entrants ² Existing Local Chains ² Independent Grocers .

who will win the grocery wars? . or customers ² The Fight Tactics: ‡Change/innovate in food retail service ‡Minimize costs of production ‡Drop market prices ‡ With all the competing firms.The Case ‡ All the firms are competing to win market share.

The Brown Bag Basics  Assumption of Perfect Competition:  Many small firms  Homogeneous Products  Easy entry/exit in long run  Firms are ´price takersµ because perfect substitutes exist .

price decreases Q1 Q2 Price Level Effect of a S1 Supply Increase on Price P1 P2 S2 D Quantity of resources . the less control original firms will have over prices: ‡Firms are price takers in perfect competition and it is impossible to stray from market demand ‡As supply increases.Increasing Competition ‡The more firms that enter a market.

carry-out. but increasingly large when multiplied ² New entrants have raised the bar (implementing instore franchises. and other services) encouraging others to expand their services too ² Firms have mastered the art of bulk buying and discount pricing which increases profit margins ² Consumers will always have the need to eat despite the state of economy .An Attractive Industry ‡ Even though in perfect competition firms can·t control output prices: ² The food retail industry proves to be very profitable as per-product profit margins are individually small.

Location is Key ‡ Location plays a significant role in the competition for market share ‡ All firms exist in a Geographic Market ² Customers are not affected by transportation costs or tax differences ² Convenience is not a major factor .

Yes. people grocery shop once/wk. firms must evaluate their geographic market: ² Identify their target market or audience ² Identify competitors and their target market ² Forecast positive trends by evaluating other geographic markets to decide the best location ‡ For Example ² On average. but location is important (they won·t drive an extra 20 minutes to save 5 dollars) ‡ Convenience is the key! . they like cheaper prices and services.Location is Key ‡ Upon entrance into the food retail industry and/or to gain competitive advantage.

based on the previous information.3 Key Fighters ‡ Now. a categorized introduction to the three main competitors allow for further evaluation and predictions of the winner: ² Superstores ² Local Chains ² Independent Grocers .

000 sq ft of grocery space. ‡ General Merchandise + Groceries = Very attractive to customers ‡ Inevitable pressure on other competition forces some surrounding firms out of business ² Wal-Mart surpassed local chains to become the nation·s top grocer with $53 billion in grocery sales . typically expanding from solely general merchandise firms to selling groceries (Ex.Superstores ‡ Large discount grocers. Super Targets) ‡ Advantages: ² Production Techniques‡ Greater ability of bulk buying and discount pricing ‡ Nonunion Labor lowers input costs ² Size ‡ They are huge! Some as large as 200.000 sq ft have 60. Wal-Mart Supercenters.

Local Chains ‡ Focus typically on groceries. Kroger·s. Current Kroger Strike ² by practicing union labor. HEB. etc) ‡ Feel pressure from Superstores ² Rising competition sparks price wars that drive down grocery prices ‡ Hard to decrease grocery prices ² Higher input prices because lower ability to bulk-buy and discount price compared to Superstores ² Union Labor forces higher labor prices ‡ Ex. existing national chains (Ex. this chain has the risk of creating a liability if they try to cut prices because they would have to cut labor costs . Albertson·s.

Independent Grocers ‡ Focus on Customer Loyalty ² Need to differentiate themselves through superior customer service ‡ Some may prefer to pay more in exchange for staying in their comfort zone and better service ² By focusing on customer retention. pressure from competition leads to ² Merges with other stores ² Leave industry . they have the ability to remain profitable and in the food retail market ‡ 80% of a firms· revenue comes from 20% of its customers ‡ However.

but less on the replacement of human resources with may variety. . the debate exists more products. own checkouts may have independents v. local chains new technology. proves that Grocery Wars Must decide what is best are constantly going on and for their targetbattle fields expanding their market! with new profit earning ideas. baggers?) This current Austin unique qualities like American Statesman Article more organic foods.A Glance in the Future« Selection Balance of and price new guide all technology with human markets resources Superstores may have Presently. (Ex. On-yourhave better selection.

in-store franchises. etc) surface .Who is the Winner? ‡ With increased competition. grocery prices remain consistent with consumer market demand cheaper and cheaper prices ‡ Firms realize the importance of convenient locations ‡ More and more new services targeting customer loyalty (one-hr photo.

Who is the Winner? CONSUMERS! .

customers are put in the position to demand what they want and suppliers have no choice but to listen to what consumers are looking for if they want to stay in the market and on the competitive edge. Thus. .Who is the Winner? Firms· competition is based on winning consumer loyalty.

where do you usually buy groceries? Why? ‡ What new services have you seen develop? ‡ Which ones do you actually find useful and like? ‡ Who else would you consider a winner? .Let·s Chat« ‡ Questions? ‡ As a consumer.

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