Another Grocery Store Bites The Dust
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.
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 Secret To Lowering Summertime Electric Bills
We were thrilled to see the electric bill come in the mail these summer months. We used to dread those bills but not any more. We have made some major changes in the way we consume energy and we’re delighted to see how our efforts have saved us money.
I couldn’t believe my eyes when I compared the bills from this year and last year. Check it out:
| July 2006 | $325.03 | August 2006 | $357.81 |
| July 2007 | $161.19 | August 2007 | $164.90 |
| Savings | $163.84 or 50% | Savings | $192.91 or 54% |
How did we do it? I’m sure a lot of little things added up to that success, like turning off the lights and the TV when not in use, unplugging unused appliances, and changing to CFLs. Although all the steps we took were important the change that had the most impact on our electric bill was reducing our use of A/C this summer.
We live in the south so just turning off the air conditioner and opening the windows is not a reasonable option. It gets hot here, folks. And we happen to both like it cold. Really cold. Last year at this time, we would have the A/C cranked at 68-70 degrees all day and all night. It was constantly running, trying to keep up with the demand against the 100 degree heat.
When we created a budget and made some financial goals for ourselves this year we realized our summer electric bills were out of control. We knew we had to make some radical changes in our A/C usage. In the spring we decided to start gradually weaning ourselves off the super-low temps, relying more on fans rather than A/C cooling. By the time June hit we had adjusted to life at 76 degrees. That may not seem very high to some, but for us that is huge. Normally, we would find this unbearable but the standing fans really made a difference. They use less energy and keep us cool by circulating the air. They really do work.
I’m not saying that we are always completely comfortable. Some nights, I must admit, I long for the cool 68 degree air of last year, but all-in-all it’s not so bad. We are adjusting well and by August we were up to 78 degrees. We feel it is a challenge now, which makes me smile.
Even if we can’t tolerate much higher temps than 78 degrees we have already made quite a difference in our energy consumption. Getting used to warmer temperatures and using less A/C has allowed us to slash our energy bills in half. I’d call that a fantastic success.
Image Source: aw223
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The Psychology of Free
Recently, Golbguru at Money, Matter, and More Musings talked about hoarding free “stuff”. He discussed how it wasn’t really frugal to hoard free things like ketchup and low-end toiletries from a hotel.
I have to admit, I’ve been guilty of hoarding free stuff. Specifically hotel shampoos and soaps. Not out of frugality. Not out of need. It was really because, as the person in Golbguru’s story said, I felt I had paid for them, so I better take them. It makes no sense. But I did it anyhow.
We went to dinner with some friends over the weekend. A nice cheap dinner with some frugal friends of ours where we could just socialize, talk, and share stories. I brought up the stories about the ketchup and free toiletries. I admitted my hoarding (which is really in the past – I can’t get any more until we use some, which we will). Then my friend brought up a point I hadn’t considered:
You know, if they charged you a penny for those toiletries, I bet you wouldn’t take them.
Immediately, I knew he was right. A penny. A single stinking penny. I’m sure I have hundreds of pennies around the house. It wouldn’t be a burden in the least. In fact, that stuff is probably worth more than a penny. But I wouldn’t have spent a penny on them.
(Note : If you’ve had this habit of hoarding these things, consider donating them to a local women’s or homeless shelter. They can usually make use of them even if you can’t.)
Why would something so insignificant as a penny stop me from taking what I would have gladly taken for free?
Could it be that something becomes more desirable solely because it’s free, and not because it has any real intrinsic value? Removing free from the equation, you can make a real judgment on the value. Very simple concept, but not something I had given much thought to before.
What’s the “real” value of something I’m getting for free? Do we value it less because it’s free, yet still want it based on the fact that we don’t have to pay for it? Do things that are free lose the value they might have had if we had actually paid for them? Is this free item valuable enough to me that I would be willing to pay for it? This conversation kind of made it click for me.
I wondered if the same could go for fast food restaurants. I haven’t hoarded ketchup (it’s OK, but not my favorite condiment), but I always take too much hot sauce from Taco Bell. I have a drawer full. If I go back, I’ll just get more, regardless of how much I have at home.
When the sauces are free, I tend to take too many. More than I would ever use. But what if they weren’t free? By charging any amount of money, I’m forced to make a decision. Is the sauce worth purchasing? I might be willing to pay a small amount for just the sauce I will use. But if they gave a small amount for free (say 5 packets) and charged me a fee for another 5 packets, I would really have to think about it. Even if it was just a tiny bit of money to get more, I would be more likely to limit what I took just because I was forced to make a decision about how many I would actually use.
Our friend shared with us another story that I felt was relevant. She was volunteering and had to help folks who were down on their luck and needed help. If the people lived far enough away, her charity would provide them a bus ticket so they could have transportation. This would cost the charity $30 and would be given free to the client. These tickets were frequently lost. The charity instituted a new rule – all tickets would cost $1 to help offset the costs of replacement. Suddenly, people lost fewer tickets. Just the act of paying $1 changed how they viewed the ticket. They had invested in it now. The clients seemed to be more careful with them. Even though it was worth something before they spent $1 on it, it was somehow worth even more now.
This reminded me of the time I had 15 lollipops melt in my favorite travel bag. Traveling home from seeing my brother, Melissa and I stopped and had lunch at the airport. They had unlimited free lollipops. Jackpot! We stocked up! We’d eat these on the plane! Oh man, sour apple! Gotta have it! I think we both ate one, while the other 13 or so melted in the luggage which we had left in the hot garage. We never even thought about those lollipops. Those free lollipops cost us more in time and cleaning supplies than they were worth! I think if we had payed for them, we wouldn’t have taken as many, and we probably would have eaten what we had taken.
So what determines when something is worthwhile, and when it’s not?
I’ve got a new rule when it comes to free. Would I pay a penny for it? Would I pay a nickel for it? What’s my threshold for “free”? If I can’t answer honestly that I would consider paying a penny for it (or some other reasonable amount), then maybe it’s not worth it for me to take it. I will not take any more free “stuff”, just for the sake of taking it because it is free.
Image by frankh
Cheap Coffee Conundrum
I’m the main coffee drinker in the house. Melissa might have a cup every once in a while, but it’s pretty rare. I usually get my coffee fix during the week when I’m at the office, where the coffee is free (and a tasty French roast, too). But on the weekends, I used to always grab a Starbucks Latte (with an extra shot) and that really adds up (yes, I know about the latte factor).
I’ve been using a Senseo
When we started scrutinizing our grocery bills more closely, one thing started to pop out at us. Those little individual coffee pods that the machine uses can really add up! I usually used at least 2 a day, and then had to throw them away when I was done. This meant I used between 4 and 8 pods a weekend so I really burned through them.
I don’t need any fancy coffee, and I don’t want to pay more just for the coffee to be individually packaged. Just some caffeine and coffee with a taste that is tolerable. Store brand basic coffee. Yummy store brand basic coffee.
Melissa began searching for a solution, and came across Ecopads
These refillable filters have allowed us to use whatever coffee is cheapest at the time because we aren’t tied to buying only the pods that fit into the machine. If we have a coupon for some good coffee, we can get that. Maybe a free sample here or there. Whatever kind of coffee I have on hand now I can make myself just a cup or two at a time, when I want it, and save money on coffee.
In addition to brewing the amount I want of the coffee I choose, with the Ecopads
This has made all the difference on these weekends when I need to be productive. Ahh, the wonders of caffeine.
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The Non-Emergency “Emergency” Fund
I’ve Paid For This Twice Already‘s article on giving yourself a payday advance is a very good concept. It’s easy to see why payday loans have such an allure for those strapped for cash. For people living paycheck to paycheck tapping their emergency savings to help them get through the tighter periods can be very helpful. It acts as a “payday loan” without paying the high fees typically associated with those short term loans. I am all for avoiding payday loans.
However, I think using your emergency fund for these types of short term loans can start to erode the meaning of that fund. Ideally that fund is for emergencies. For me, that means serious (and hopefully rare) problems like unemployment, car repairs, huge medical bills, and critical home repairs. We want this fund out of our immediate reach in a high interest savings account. It needs to feel untouchable. I fear that if we got used to withdrawing from it for small, non-emergency things it could create a “slippery slope” that blurs the boundaries. It loses it’s distinction as the almighty emergency fund and becomes yet another savings account for me to use at my discretion.
Although running short on money before the next paycheck can feel like an emergency, technically it is simply going over budget for that time period. Instead of pulling money from our emergency fund, we’ve found that it’s better for us to keep a fund specifically for “everyday” shortages and frequent transactions. We call this the overage fund.
Let’s say you find a spectacular sale on paper towels and you stock up, spending more than you have set aside for the household that month. Maybe it’s time to get your oil changed but fuel costs ate up the car budget. Or perhaps the first part of the month has a higher proportion of the bills and you have unexpected expenses that result in that paycheck running short. Are these really emergencies? In most cases, probably not. But they could put you in a situation where you could be in a real pinch or even go into debt. These would be cases to use an overage fund.
Our overage fund is a couple hundred dollars and we keep it in our normal checking account as a cushion. Basically it’s a small amount of savings that we dip into whenever we have to and replace as soon as possible.
We use the overage fund for two main reasons:
- As a temporary loan while waiting for the next paycheck
- To avoid interest accruing debt when we go over budget for the month
Temporarily using money from the overage fund can help you make it to the next paycheck without going into panic mode. Mostly we use ours to help us avoid debt by using it to supplement months where we go over budget. We can pay the extra expenses from our overage account without having to keep a credit card balance. This saves us on potential interest charges. In the upcoming months we make sure to pay back the amount we took by reducing our budget accordingly.
An overage fund can be in any form you feel comfortable with. Maybe this fund is just the cushion you keep in your checking account. Maybe it’s a savings account from which you can easily transfer funds. It just needs to stay close to home so you don’t have to wait for the funds to transfer if you need them quickly.
Always aim to keep a certain level in this fund. It could be something like $200. If you go below that amount work to stay under budget in order to replenish it. If you are using it as a floater until the next payday be sure to replace the funds immediately when you get paid next. If you have to tap these funds due to unexpected bills pushing you over budget it should be a priority to pay them back, just like other debt payments. Only this time you’re paying yourself back and not the bank.
Whether you are pulling cash from your official emergency fund or an overage fund you are using your own cash instead of relying on a payday loan or credit card. It’s a very positive thing that can help keep you from paying fees and interest. Using this method, we’ve been able to stock on some sales, go out to an unexpected dinner with friends, and manage to pay for our car registration (which we had completely forgotten about) without having to dip into our emergency fund or leave a balance on our credit card. Within a month or two we’ve usually managed to reduce our spending enough to replenish our overage account so we’re ready for the next unexpected expense.
Image Source: StuSeeger
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A Penny Closer is for those of us who want to improve how we spend, save, and invest. We want to be able to manage our money so that we can use it to enjoy our lives today while still saving to reach our dreams tomorrow. Read more about us here...
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