Superior Supermarkets: Everyday Low Pricing
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In April 2003, James Ellis, the president of superior supermarket was about to meet with the District Manager that manage the three supermarkets in Centralia Missouri. He mentions that the higher prices in Centralia and the growing price consciousness among the local shopper. They are currently facing the risk of losing market share from supermarkets in Centralia. Specifically, he was asked to implement Everyday Low Pricing for all product categories across-the-board or only on certain categories.
In Centralia Missouri, there are total population of 41,000 and about 13,500 households. The median age of population is 35 and their median income per household is $36,000. More than 80% of the population has high school education or more. Centralia recorded a total retail sales of $725 million and food and beverage retail store sales of 62.3 million in 2002.
There are four grocery chain stores which dominate the market of food sales in Centralia Missouri, Harrison’s, Grand American, Missouri Mart and Superior Supermarkets. Each supermarket serves a different role and has their own company image toward the shopper in Centralia. The superior supermarkets owned three locations in Centralia. The gross profit margin is 28.8% which is over average by 2.4%. Each location have a shopper center which consisting of a drugstore and two or three shop such as dry cleaner, shoe repair shop, barber shop or a florist. They carry high quality general merchandise and fresh product to attract customers. Superior supermarket also offer deeply discount prices in high volume items and features “Loss leaders” which is items sold to the customer at or near their cost to the seller.
Around 20-23% of customers buying from two locations are out of Centralia. The STP Strategy for superior supermarkets targeted the age of 35-49 years old. Most of them shop two times a week in superior supermarket and having a patronage of 3 years or more. They consider the loyal customers which also shop in the other supermarkets at the same time. About half of them purchased their food need in Superior and the most popular category in the supermarket is grocery and daily products. We did a SWOT analysis for superior supermarkets. For Strength, they offered high quality merchandise and fresh products.
The three locations increased the shopping convenient for customers within Centralia. They have over 25 years of experience operating the supermarket. In end of 2002, they are ranking number two in total market share. For weakness, the superior supermarkets are having a higher pricing compare to the average. They offered only limited variety of merchandise which might not satisfy all customers. Compare to other supermarkets, superior have a low advertisement investment. The store sizes are smaller comparing to other supermarkets which will limit the product capacity. Superior supermarket also lack of customer image because of their higher pricing and lower meat quality.
For opportunities, Superior supermarket could expand their selection of product which could satisfy more customers. They could offer competitive pricing and attract more customers to the store. They should remodel their store to gain customer image toward the company. In the meantime, offering exclusive product and change their advertising strategy could also help to brand their customer image and drive more traffic to the store.
For threats, they might be risking the loss of market share which will drop to a lower rank. Customer might reject and dislike the new image of the store since most of them are loyal customer for more than 3 years. They might be risking losing current customer and switching to purchase from a different supermarket instead. There will be a higher cost or extra expense if they want to expand their selection of products. At last, there might be new competitors enter the market and drive some customers away from Superior Supermarket.