Wal-Mart Gets Beaten At Its Own Game
In the first-round battle between Wal-Mart and Tesco on U.S. soil, the battle goes to the hoe team, – and by a substantial margin.
Conventional supermarkets have struggled in no small part because they have found themselves caught in the middle of a squeeze play. On the one side, they had Bentonville, AR-based Wal-Mart Supercenters and warehouse clubs that were crushing conventional supermarkets on price, and on the other end they had specialty supermarkets, such as Austin, TX-based Whole Foods and San Antonio, TX-based H-E-B’s Central Market concepts, offering superior assortment and quality.
Now, as the Produce Business Wal-Mart Pricing Study rolls into its 16th edition, we visit Sacramento, CA, and we see that Wal-Mart may be starting to feel squeezed itself.
In Sacramento, we selected three competitors that are particularly price-oriented:
1. FoodMaxx bills itself to consumers as “your maximum discount supermarket” and promotes itself with “The FoodMaxx Promise,” which goes like this:
We understand that you work hard for every dollar. So it’s our commitment to continually find ways to bring you the lowest possible price on all your grocery needs, without sacrificing freshness or quality. We are committed to making every dollar go further and ensuring that you take home the most groceries, for the lowest possible price.
The Save Mart Supermarkets organization, with headquarters in Modesto, CA,operates 44 FoodMaxx stores, many of which are former Food 4 Less stores that Save Mart acquired in 2004.
Wal-Mart Supercenter vs 3 Chains
Price Comparison — Sacramento, CA
Jan 2008 – Prices Available To The General Public
|FOOD MAXX||FOOD SOURCE||WINCO|
|Apples — Granny Smith||Lb||0.98||0.89||-9.18%||0.77||-21.43%||0.89||-9.18%|
|Apples — Red Delicious||Lb||1.06||0.89||-16.04%||0.77||-27.36%||0.89||-16.04%|
|Apples — Fuji||Lb||1.48||0.89||-39.86%||0.99||-33.11%||0.98||-33.78%|
|Bananas — Yellow||Lb||0.50||0.68||36.00%||0.47||-6.00%||0.53||6.00%|
|Cabbage — Green||Lb||0.48||0.38||-20.83%||0.27||-43.75%||0.47||-2.08%|
|Cabbage — Red||Lb||0.64||0.48||-25.00%||0.47||-26.56%||0.65||1.56%|
|Cantaloupe — Whole||Lb||1.48||0.38||-74.32%||0.37||-75.00%||3.58||141.89%|
|Coleslaw — 1# Bag||Bag||1.18||0.98||-16.95%||0.98||-16.95%||1.18||0.00%|
|Corn — Yellow||Lb||0.20||0.48||140.00%||0.33||65.00%||0.98||390.00%|
|Cucumbers — Regular||Each||0.38||0.48||26.32%||0.49||28.95%||1.18||210.53%|
|Dressing — Bottle||13 oz||2.88||3.98||38.19%||3.73||29.51%||2.16||-25.00%|
|Grapefruit — Red||Lb||1.25||0.68||-45.60%||0.57||-54.40%||0.97||-22.40%|
|Grapes — Green Seedless||Lb||1.68||1.58||-5.95%||1.37||-18.45%||1.58||-5.95%|
|Grapes — Red Seedless||Lb||0.98||1.58||61.22%||1.37||39.80%||0.97||-1.02%|
|Honeydew — Whole||Each||2.68||0.48||-82.09%||0.47||-82.46%||2.58||-3.73%|
|Jar Fruit — Del Monte||Jar||1.50||1.58||5.33%||1.50||0.00%||1.29||-14.00%|
|Lemons — Bulk||Lb||0.33||0.48||45.45%||0.33||0.00%||0.43||30.30%|
|Lettuce — Green Leaf||Lb||1.38||0.78||-43.48%||0.77||-44.20%||1.29||-6.52%|
|Lettuce — Iceberg Bulk||Lb||0.98||0.78||-20.41%||0.87||-11.22%||1.39||41.84%|
|Lettuce — Red Leaf||Lb||1.38||0.78||-43.48%||0.77||-44.20%||1.29||-6.52%|
|Lettuce — Romaine||Lb||1.33||30.78||-43.48%||0.77||-44.20%||1.29||-6.52%|
|Limes — Bulk||Lb||0.28||0.12||-57.14%||0.10||-64.29%||0.28||.00%|
|Mushrooms — Package||8 oz||1.88||1.78||-5.32%||1.77||-5.85%||1.78||-5.32%|
|Onions — Red||Lb||0.98||0.68||-30.61%||0.67||-31.63%||0.98||0.00%|
|Onions — Yellow||Lb||0.94||0.48||-48.94%||0.33||-64.89%||0.95||1.06%|
|Oranges — Valencia Bag||4||3.78||3.28||-13.23%||3.47||-8.20%||3.97||5.03%|
|Oranges — Navel||Lb||0.46||1.28||178.26%||1.47||219.57%||1.19||158.70%|
|Peaches — California||Lb||0.88||0.99||12.50%||0.87||-1.14%||0.89||1.14%|
|Pears — Bartlett||Each||1.04||0.59||-43.27%||0.47||-54.81%||0.97||-6.73%|
|Pears — Bosc||Each||1.22||1.58||29.51%||1.67||36.89%||0.98||-19.67%|
|Peppers — Green Bell||Lb||0.48||0.48||0.00%||0.67||39.58%||0.70||45.83%|
|Peppers — Red||Lb||1.78||1.78||0.00%||0.87||-51.12%||0.98||-44.94%|
|Pistachios — Bag||14oz||3.97||3.97||0.00%||4.78||20.40%||4.35||9.57%|
|Potatoes — Red Bulk||Lb||0.66||0.66||0.00%||0.37||-43.94%||0.67||1.52%|
|Potatoes — Russet 5# Bag||Bag||2.68||2.68||0.00%||1.47||-45.15%||1.98||-26.12%|
|Potatoes — Russet Bulk||Lb||0.66||0.66||0.00%||0.47||-28.79%||0.69||4.55%|
|Potatoes — White Bulk||Lb||0.74||0.74||0.00%||0.37||-50.00%||0.73||-1.35%|
|Salad — Caesar Bag||10 oz||2.48||2.48||0.00%||2.29||-7.66%||3.18||28.23%|
|Salad — Spring Bag||10 oz||2.50||2.50||0.00%||2.29||-8.40%||3.18||27.20%|
|Spinach — Bulk||Lb||2.68||2.68||0.00%||0.77||-71.27%||2.98||11.19%|
|Squash — Zucchini||Each||1.55||1.55||0.00%||0.67||-56.77%||1.98||27.74%|
|Tomatoes — Cherry||Pkg||2.68||2.68||0.00%||2.27||-15.30%||1.98||-26.12%|
|Tomatoes — Grape||Pkg||1.98||1.28||-35.35%||3.17||60.10%||2.98||50.51%|
|Tomatoes — Plum/Roma||Lb||0.98||0.89||-9.18%||0.97||-1.02%||0.97||-1.02%|
|Tomatoes — Regular Large||Lb||1.24||0.63||-49.19%||0.67||-45.97%||0.78||-37.10%|
|Watermelon — Seedless||Lb||3.33||2.98||-10.51%||3.37||1.20%||3.34||0.30%|
2. Food Source is part of the Sacramento, CA-based Raley’s organization, and Raley’s commitment to the concept is uncertain. Although Raley’s Web site proudly trumpets its Raley’s, Bel Air and Nob Hill Foods banners, one has to dig deep to learn about the connection with Food Source. In the end, this is the way the concept is presented:
The history of Food Source is a short one so far! It begins in 1994 with the opening of a store in Folsom, California. We now have six additional warehouse-format stores in Northern California. And more are in the works. Built around a warehouse concept, this discount chain offers the same high-quality products as Raley’s other stores but with less overhead. Less overhead, of course, means more savings.
Although Food Source stores look and function differently than Raley’s other divisions, their clean, wholesome environment and commitment to quality set them apart from other stores serving this sector. At Food Source, you’ll find everyday low prices on exceptional produce, fresh baked goods, quality meats and all your favorite name brand groceries.
3. WinCo Foods, based in Boise, ID, proudly proclaims itself “The Supermarket Low Price Leader!” and promotes its large stores this way:
Sixty-one stores in Washington, Idaho, Nevada, California and Oregon – and more scheduled this year. Stores of 90,000-100,000 sq. ft. with a huge selection of groceries, fresh meat and produce, fresh bakery, gigantic bulk foods and large deli. Open 24 hours for your convenience.
The company explains its success this way:
The company has fostered a nearly 40-year tradition of success by focusing on very large stores with a wide selection of national brands at prices below our competition. In addition, the very nature of having employee stockholders that have seen their Employee Stock Ownership Plan (Pension Plan) grow at a 21.2% annual compound growth rate creates an extremely dedicated workforce. This has made WinCo a very successful company.
Whatever the pitch of these retailers, one fact is clear: In Sacramento, at least, Wal-Mart has forfeited its low-price leader position.
FoodMaxx prices on fresh produce turned out to be 11.31 percent less than Wal-Mart’s. Food Source crushed Wal-Mart with its prices coming in at 15.67 percent less than Wal-Mart. And WinCo came in a statistically insignificant .12 percent over Wal-Mart — so its price levels are virtually identical to Wal-Mart.
This is not the first time someone has beaten Wal-Mart’s pricing by a significant amount — A&P Food Basics did it back in our Detroit market study (January 2005).
But to make that happen, we had to edit our normal market basket to account for the concept’s limited product offer. Here, we are dealing with stores that offer a full range of product, many that are open 24 hours and take credit cards — real competitors in the food business.
Perhaps as food sales have grown disproportionately fast compared to general merchandise, Wal-Mart executives feel compelled to generate more profit on the food side.
The big question is why Wal-Mart has chosen not to respond. There was a time when Wal-Mart fought to maintain a slogan of Always the Lowest Price — legal issues compelled the company to move to an launched have raised cost levels and Wal-Mart may feel unable to compete. Perhaps as food sales have grown disproportionately fast compared to general merchandise, Wal-Mart executives feel compelled to generate more profit on the food side.
How They Stack Up Against Wal-Mart Supercenter
|Connecticut||Super Stop & Shop||23%||Shaws||34%||Big Y||36%|
|Salt Lake City||Harmon’s||2%||Smith’s||6%||Albertson’s||12%|
|South Florida||Super Target||22%||Publix||31%||Winn-Dixie||52%|
|Neighborhood Market||-1.2%||Tom Thumb 27%|
|Portland, OR||Albertson’s||30%||Fred Meyer||22%||Haggen||27%|
|Palm Springs, CA||Albertson’s||19%||Jensen’s||60%||Ralphs||16%|
|Detroit, MI||A&P Food Basic||-17%||Farmer Jack||24%||Kroger||28%|
|St. Louis, MO||Dierbergs||22%||Schnucks||14%|
|Houston, TX||HEB||15%||Kroger||30%||Fiesta Mart||-0.3%|
|Denver, CO||Albertsons||16%||King Sooper||21%||Safeway||25%|
|Portland, OR||Albertsons||32%||Fred Meyer||21%||QFC||54%|
|Sacramento, CA||FoodMaxx||-11%||Food Source||-16%||WinCo||12%|
What is clear is that Wal-Mart is playing with fire. What Wal-Mart has benefitted from is a kind of consumer confidence that it always offers the “right” price.
Yes, consumers have always known a wacky competitor could offer a loss-leader unsustainable price — but the trust is that Wal-Mart shoppers could count on the fact that if they shopped all year at Wal-Mart, their total expenditures would be less than if they shopped elsewhere.
Our study is showing in Sacramento, at least, consumers can regularly buy produce at both FoodMaxx and Food Source and spend less than at Wal-Mart and that WinCo provides a comparable price. If consumers begin to perceive this, and consumers are typically very good at perceiving price differences, Wal-Mart will lose more than sales — it will lose its positioning with consumers. That is a loss almost impossible to compensate for.