Another Grocery Store Bites The Dust

Posted on September 18, 2007 by Melissa
Filed Under Shopping

Wheee! It was just a matter of time, I suppose. Our closest Albertsons is shutting its doors next month. Why? They aren’t a “mom and pop” store that just couldn’t keep up with the big guys. They are a big guy. At least they were until the stores started closing last year. From our perspective, their downfall could have been easily predicted. In my opinion, they were charging more without giving more to the customer.

When I think of non-specialty grocery stores I think of three major categories:

Expensive but have unusually good sales on select things (Albertsons, Randalls)
Moderately priced with good, solid weekly sales (HEB)
Low priced with very few sales (Walmart)

Obviously, Albertsons is at a disadvantage in the sense that they were competing against the moderate and lower priced stores. But high priced grocery stores succeed all the time in this town (as confirmed by my pricebook).

Albertsons has higher prices than the “moderate” stores on practically everything. Their strategy is to run loss leaders like “10 for 10″ specials to get you in the door. They must be counting on the convenience factor as well because they have a good location right off of a busy highway.

Randalls also has high prices on their products. In fact, even higher than Albertsons when you compare them. Their strategy is advertising weekly loss leaders (with multiple restrictions) and double or triple coupons on the first item (no stocking up with coupons). The store has a good location nestled in a middle class residential area. They seem to be doing well, despite having the highest prices around. I often have to suppress the urge to laugh uncontrollably at some of the “sales” they advertise.

So why do we think Albertsons is closing while Randalls is doing fine?

Layout and Ambiance

Albertsons: The first thing I see when I walk into Albertsons is a lackluster display table of sale items and rows and rows of aisles. There is no fresh food in sight. Just aisles of packaged foods. The fresh food areas are in the back corners of the store. I like to see the fresh items when they enter a store, whether it is baked goods, produce, meats, even floral. Fresh food is what makes people “ooh and ahh” - not boxes of cereal or cans of soup. Attractive presentation makes us think that the store is “upscale”.

The lighting is strange and the displays are sloppy. The lack of design or decorative elements makes it feel like a discount store. Nothing about it says “I’m worth the extra money you are about to pay”. Why am I paying more to shop at a place that feels like it should cost less? This is where Randalls got it right.

It's all about the produce, produce! Randalls: This store has the deli/prepared foods counter and a large Starbucks kiosk immediately in front of me as I walk in. The fresh coffee smells familiar and comforting. Beyond the deli (with fresh artisan sandwiches on display) I see the fresh bread. The aisles are in the middle of the store so they are not “front and center” as I walk in. When you enter the other side of the store, you see the fresh floral and produce. Either way I am greeted with lovely things to look at. This sets the mood.

Randalls has a warm, inviting, “upscale” feel. It’s very nicely appointed with professional displays and artsy signage. You immediately know it is an expensive store because it looks expensive. My expectation is set from the beginning. At least if I decide to shop here and pay more, I feel like I get some sort of perceived benefit - a pleasant shopping experience in a beautiful store.

Products

Albertsons: Although Albertsons does have a butcher, he is hidden in the back corner where he is not easily accessible. Most meat items are prepackaged and don’t look all that “fresh”. The veggies and fruits tend to look average and the selection is limited. It is clear that this store isn’t focusing on the fresh aspect of their business, but instead it is targeting all the prepackaged foods available in the aisles. The problem is that prepackaged foods are consistent wherever you go; it’s the fresh food that makes me decide if I will shop there or not, regardless of price.

Randalls: Randalls seems to be using their fresh food to anchor their higher prices. They have a decent selection of produce and it is all well cared for and appealing. Their meat, although mostly prepackaged, looks bright and fresh. They have a butcher working behind a case full of fantastic looking proteins. They even offer Black Angus beef, which helps set them apart as higher quality. I get the impression (right or wrong) that their fresh food might be worth the extra cost. If I’m willing to shop here for my fresh food I’ll likely stay and shop for my other goods, too.

I actually don’t shop for regular groceries at either of these stores. I only shop there for their loss leaders because everything else is just too pricey for me. It is clear that Randalls offers double or triple coupons because their prices are high enough to absorb the extra costs. No other grocery stores offer that in my area.

It appears that while Randalls is charging more, they are offering a higher level of ambiance and product quality to help “justify” that cost to the consumer. Albertsons didn’t give that something extra and just demanded higher prices. I think the perks are what keeps Randalls going when people have cheaper alternatives out there. Without those advantages Albertsons is just an overpriced “discount” grocery.

I have to wonder, based on my observations, if Albertsons was ever trying to compete with the higher-priced “upscale” grocery stores. They certainly have the prices but not the perks that I’d associate with that level. Maybe they were aiming to compete with the moderate stores that don’t offer the “frills” but their business model forced higher prices for some reason. I’m not sure.

What a shame. I have found some excellent loss leaders at this store and I will miss that. The revenues they get from loss leaders alone are not going to be enough sustain a store. Quite simply, if you’re going to be charging higher prices, you better be offering me something more.

Cart image by KitAy — Produce image from Daniel Morrison

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The Clearance Craze | I've Paid For This Twice Already... on October 16th, 2007 3:53 am

[...] other day we noticed that the grocery store that is shutting down was having a “45% off” sale. There were signs everywhere proclaiming “Store [...]

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