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* Hot prices and coupons continue to be the favorite weapons in store wars. Private label slips a bit.

* Store managers, wholesalers, chain executives all agree: Generics have lost competitive clout.

* Double coupon promotions score marked gains in use by both independent and chain stores.

* The growth rate in number of warehouse stores once again outpaces other "new" formats.

* Circulars pick up in use and share of advertising budgets--at the expense of newspapers.

Two things stand out dramatically in this year's examination of currently used competitive tactics as viewed by independent owners/managers and chain managers. First, the level of competitive activity was up sharply: In 15 of the 17 categories here, the current rate of use was higher than the year before. Second, there was a dramatic decline in emphasis on generics as a competitive weapon. Last year the net (those seeing an increase minus those seeing a decrease) was 43 for independents and 39 for chain managers. This year the net increase is 6 and 15, respectively. The other decliner was private label emphasis. It went from a net of 26 for independents and 34 for chain managers to a net of 16 and 20, respectively. Meanwhile, "hotter" specials continue to dominate as a customer lure. "Cutthroat" pricing at a 44 and 27 net last year is now at 53 and 39.

The outlook for use of these tactics is viewed somewhat differently by wholesaler executives and by chain executives. Wholesalers foresee greater increase in the emphasis on "hotter" specials, longer store hours and Sunday openings than do chain executives. The latter see TV advertising, merchandising "events," customer service and national brand emphasis as growing faster than do the wholesalers. An unusual coincidence has both groups rating generics exactly the same--that is, as a declining tactic compared to recent years.

As reported by independent owners/managers and chain managers, there has been little change in the relative popularity of these seven promotional tehcniques. As always, there are strong differences among regions and by size of store, however. Compared to the previous year there was a mild increase in use of merchandise promos (including continuity programs), but there was a more substantial gain for double coupons. Their use by independents rose eight percentage points; use by chain managers rose nine. Circulars gain in popularity Newspapers traditionally have been independent retailers' favorite advertising medium. Today 88% of independents use newspapers as compared to 90% two years ago, not a significant change, but one which looms larger when share of advertising dollars is considered. In 1981, 66% of advertising dollars went for newspapers. Two years ago the share was 62%. Meanwhile, both the percentage of retailers using circulars and the percent of advertising dollars spent on circulars increased to 69% using (up from 55%) and to a 31% share of dollars (up from 22%).

Users of television increased three percentage points, to 23% of independents. There was a small decline in users of radio and a small increase in users of outdoor advertising but their shares of the dollars changed little.

Among these four relatively new formats, superstores (30,000 square feet and up) lead in number, but the growth has been strongest in warehouse units. Last year, the number of superstores increased 12% while the number of warehouse stores rose 24%, almost exactly matching the 23% increase of the previous year. Now that the economy has recovered, the barebones warehouse stores presumably will not grow as rapidly. The really big super warehouse stores with strong perishables departments are anything but barebones, however. Their numbers are small, perhaps 25, but they are expected to grow. The number of combination stores last year increased 8% to a new high. Limited assortment stores continue to dwindle. They declined 11% last year and compared to their high of 750 units in 1980, there are now 47% fewer of them.

Each year we ask independent owners/managers and chain managers, "How important are these formats in competing for your customers' food dollar?" and each year the rankings by both groups are nearly identical. This year, however, the independents view warehouse and combination stores as more of a threat than last year. Chain managers' opinion didn't change much from the previous year except that superstores picked up eight percentage points in importance. We also asked wholesaler and chain executives, "What prospects do you foresee for these formats?" and their views were far more divergent. Wholesalers are more optimistic about the prospects of convenience stores and warehouse stores than are chain executives. Chain executives are less sanguine about the outlook for conventional supermarkets than are wholesalers. The prospects for limited assortment stores are clearly limited, according to both groups.
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Title Annotation:grocery annual report
Publication:Progressive Grocer
Date:Apr 1, 1984
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