SURVIVING IN A WAL-MART SUPERCENTER ENVIRONMENT
By
Kenneth E. Stone
Professor of Economics
Iowa State University
2Ken Stone, ISU, Ames, IA
Top Ten North American Retailers By Sales, 2001
$31.1
$32.0
$34.3
$34.8
$37.9
$39.9
$41.1
$50.1
$53.6
$219.8
$0 $100,000 $200,000 $300,000
K Mart
J.C. Penney
Safeway
Costco
Albertson's
Target
Sears
Kroger
Home Depot
Wal-Mart
Millions of DollarsSOURCE: Chain Store News
3Ken Stone, ISU, Ames, IA
Top 10 U.S. Corporations By Sales, 2002
72.9
85.9
99.7
112.0
125.9
138.7
162.4
177.3
191.6
219.8
0 50 100 150 200 250
Phillip Morris
IBM
Chevron/Texaco
Citigroup
General Electric
Enron
Ford Motor
General Motors
Exxon-Mobil
Wal-Mart
Sales ($ Billions)SOURCE: Fortune Magazine
4Ken Stone, ISU, Ames, IA
Top U.S. World Corporations by Sales, 2002
120.0
125.0
135.0
136.0
138.0
162.0
174.0
177.0
191
219.8
0 50 100 150 200 250
Toyota
GE
Royal Dutch/Shell
Daimler/Chrysler
Enron ?
Ford Motor
BP
GM
Exxon/Mobil
Wal-Mart
Sales ($ Billions)SOURCE: Fortune Magazine
5Ken Stone, ISU, Ames, IA
Top North American Food Stores, 2001
$11.9
$12.9
$15.3
$20.9
$34.3
$37.9
$50.1
$76.0
$0 $10 $20 $30 $40 $50 $60 $70 $80 $90 $100
Meijer's
Winn-Dixie Stores
Publix
SuperValue
Safeway
Albertson's
Kroger
Wal-Mart Supercenters
Billions of Dollars
1
2
3
4
5
6
7
8
SOURCE: Supermarket News
6Ken Stone, ISU, Ames, IA
Top North American Food Stores, 2001
$3.2
$3.8
$4.0
$4.4
$5.0
$5.1
$9.0
$11.0
$0 $2 $4 $6 $8 $10 $12 $14
Super Target
Hy-Vee
Pathmark Stores
Shaw's Supermarkets
Fred Meyer
Super K Mart
H.E. Butt
A & P
Billions of Dollars
9
10
11
12
13
14
15
16
SOURCE: Supermarket News
7Ken Stone, ISU, Ames, IA
Average Sales Per Store for U.S. Supercenter Stores, 2001
$33.64
$35.00
$36.33
$42.12
$64.55
$70.09
$77.83
$80.02
$0.0 $10.0 $20.0 $30.0 $40.0 $50.0 $60.0 $70.0 $80.0 $90.0
Big Bear Plus
DAIEI USA
Fred Meyer
Super K Mart
Biggs
Super Target
Wal-Mart Supercenters
Meijer
Millions of DollarsSOURCE: DSN Retailing Today
8Ken Stone, ISU, Ames, IA
Average Sales Per Store for U.S. Club Stores, 2001
$8.89
$42.58
$60.30
$138.91
$0.0 $20.0 $40.0 $60.0 $80.0 $100.0 $120.0 $140.0 $160.0
Smart & Final
BJ's Wholesale Club
Sam's WarehouseClub
Costco
Millions of DollarsSOURCE: DSN Retailing Today
9Ken Stone, ISU, Ames, IA
U. S. MARKET SHARE OF MAJOR GROCERY RETAILERS
Source: Fortune Magazine
1995 1996 1997 1998 1999 2000 20012
4
6
8
10
12Market Share (%)
Wal-Mart Kroger Albertson's Safeway
Wal-Mart
Kroger
Albertson’s
Safeway
10Ken Stone, ISU, Ames, IA
WAL-MART SUPERCENTER MARKET SHARES
SOURCE: Trade Dimensions, Dec. 2001
31.9
24.2
21.2
17.8
16.2
15.7
15
13.6
12
Springfield, MO
Memphis
Oklahoma City
Birmingham
Albuquerque
Kansas City
Saint Louis
Indianapolis
Des Moines
Market
0 5 10 15 20 25 30 35 40
WM Market Share, %
An Overview of Wal-Mart
12Ken Stone, ISU, Ames, IA
SIZES OF WAL-MART SUPERCENTERS
• 109,000 Sq. Ft.– Smaller towns
• 150,000 Sq. Ft. – Market areas of 30,000+
• 180,000 Sq. Ft.– Market areas of 30,000-50,000
• 220,000 Sq. Ft.– Market areas larger than 50,000
13Ken Stone, ISU, Ames, IA
WAL-MARTSUPERCENTERS
LADIESAPPAREL
MENSAPPAREL
CHECKOUTS
GROCERY
HEALTH &BEAUTY AIDS
PHARMACY COSMETICS
LAYAWAY
FABRICS & CRAFTS
SEASONAL
TOYS & GAMES
HARDWARE
PAINT SUPPLIES
AUTOMOTIVE
BA
BY
WO
RLD
GIR
LSA
PP
AR
EL
SPORTINGGOODS
DRESSINGROOM
HOSIERY
SHOES DAIRYBAKERYBEDDING DRAPERIES
SMALL APPLIANCES
HOUSEWARES
INT
IMA
TE
S
CA
ME
RA
SE
LEC
TR
ON
ICS
RE
CO
RD
ER
S
CARDS & BOOKS
DELI
OFFICE SUPPLIES
PET FOOD
HOME DECOR& FURNISHINGS
MEATS
PRODUCE
CANDY, CIGARETTES,CRACKERS, & COOKIES
BO
YS
AP
PA
RE
L
FASHIONACCESSORIES
JEWRY
DOMESTICS
GA
RD
EN
CE
NT
ER
AU
TO
CE
NT
ER
PUBLIC RESTROOMS
DELI CAFE
ICE CREAM
120,000 SQUARE FEET
14Ken Stone, ISU, Ames, IA
WAL-MARTSUPERCENTERS
LADIESAPPAREL
MENSAPPAREL
CHECKOUTS
GROCERY
HEALTH &BEAUTY AIDS
PHARMACY COSMETICS
LAYAWAY
FABRICS & CRAFTS
SEASONAL
TOYS & GAMES
HARDWARE
PAINT SUPPLIES
AUTOMOTIVE
BA
BY
WO
RLD
GIR
LSA
PP
AR
EL
SPORTINGGOODS
DRESSINGROOM
HOSIERY
SHOES DAIRYBAKERYBEDDING DRAPERIES
SMALL APPLIANCES
HOUSEWARES
INT
IMA
TE
S
CA
ME
RA
SE
LEC
TR
ON
ICS
RE
CO
RD
ER
S
CARDS & BOOKS
DELI
OFFICE SUPPLIES
PET FOOD
HOME DECOR& FURNISHINGS
MEATS
PRODUCE
CANDY, CIGARETTES,CRACKERS, & COOKIES
BO
YS
AP
PA
RE
L
FASHIONACCESSORIES
JEWRY
DOMESTICS
GA
RD
EN
CE
NT
ER
AU
TO
CE
NT
ER
PUBLIC RESTROOMS
DELI CAFE
ICE CREAM
PLUS 60-70,000 SQ.FT.OF GROCERY SPACE
15Ken Stone, ISU, Ames, IA
Number of Wal-Mart Supercenters in the U.S., 2002
Alaska - 0 StoresHawaii - 0 Stores 1,066 Stores
3
36
10
5
011
14 13
22
62
07
10
19
19
53
36
135
40
4334 43 53
69
31
3449
39
30
13
8
39 1934
17
5
4520
45
430
2
1
0
16Ken Stone, ISU, Ames, IA
Wal-Mart Supercenter, 220,000 Sq. Ft., Ankeny, IA
17Ken Stone, ISU, Ames, IA
Wal-Mart Supercenter, 109,000 Sq. Ft., With Gas Station, Knoxville, IA
18Ken Stone, ISU, Ames, IA
Number of Neighborhood Markets in the U.S., 2002
Alaska - 0 StoresHawaii - 0 Stores 31 Stores
19Ken Stone, ISU, Ames, IA
Wal-Mart Net Sales1981-2001
1.4 3.4 6.4 11.920.6
32.6
55.5
82.5
104.9
137.6
193.3219.8
-30
20
70
120
170
220
81 83 85 87 89 91 93 95 97 99 '01 '02
Fiscal Year
Billion $
20Ken Stone, ISU, Ames, IA
39 Centers
Wal-Mart Regional Distribution Centers, 2002
21Ken Stone, ISU, Ames, IA
Wal-Mart Food Distribution Centers, 2002
26 Centers
22Ken Stone, ISU, Ames, IA
Cost of DistributionAs a Percentage of Sales
5.0%
3.5%
1.3%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
Sears K-Mart Wal-Mart
Source: Discount Store News
23Ken Stone, ISU, Ames, IA
Cost of Distribution ComparisonFor $25 Billion Annual Sales
$325 Mil.
0 200 400 600 800 1000 1200 1400
Sears
K-Mart
Wal-Mart
$550 Mil. more than Wal-Mart
$925 Mil. more than Wal-Mart
$875 Mil.
$1.25 Bil.
24Ken Stone, ISU, Ames, IA
SUPER TARGET STORE LAYOUT
GENERALMERCHANDISE
25Ken Stone, ISU, Ames, IA
SUPER TARGET FOOD LAYOUT-ARCHER FARMSAISLE 1 AISLE 2 AISLE 3
Bread Soup AsianStuffing Canned ItalianPeanut Butter Canned Fruit MexicanJams/Jelly Dry
Rice/BeansKosher
Salad Dressing Packaged Dinners
CoffeeKetchup Canned Tea
AISLE 4 AISLE 5 AISLE 6
Baking Mixes Lunch Box CookiesOil Juice Box Popcorn
Syrup Cereal CrackersSpices Pudding Cups Natural JuiceDried Fruit Granola Bars JuiceJello Natural Cereal Powdered
DrinksAISLE 7 AISLE 8 AISLE 9
Water Soda Laundry New Age Beverages
Tonic Water Dish SoapSport Drinks Trash Bags BleachSnack Nuts Plastic Wrap StarchNatural Insect Household Chips Air Freshener Fabric
SoftenersAISLE 10 AISLE 11 AISLE 12
Paper Towels Wine Frozen DinnersBath Tissue Champagne Frozen PastaNapkins Beer Meal SolutionsFacial Tissues Drink Mixes Frozen PotatoPaper Plates Wine Coolers Frozen
VegetablesPaper Cups Liquor Frozen Bread AISLE 13
Frozen Meat
Frozen Frozen JuiceFrozen PizzaFrozen DessertsIce Cream
26Ken Stone, ISU, Ames, IA
TARGET 5-YEAR SALES PROJECTIONS
*=Projected
29.332.9
37.843.5
50.1
57.6
2000 2001* 2002* 2003* 2004* 2005*
Year
0
10
20
30
40
50
60
70Sales ($ Million)
SOURCE: DSN Retailing Today
Impacts of Wal-Mart Stores on Existing Businesses
12 Year Study of Regular Wal-Mart Stores in Iowa
29Ken Stone, ISU, Ames, IA
IMPACTS OF BIG BOX STORESRules of Thumb
• Local businesses that are selling something different are in good luck and will probably experience an increase in sales because of the “spillover” effect of the additional traffic.
• Local businesses that are selling the same merchandise as the big box store will probably lose sales unless they reposition themselves.
30Ken Stone, ISU, Ames, IA
Change in General Merchandise Salesin Iowa Towns, 12 Years after Wal-Mart
-13
-29
56
44
26
-7
-33
-5-4
-40-30-20-10
010203040506070
4 Years 8 Years 12 Years
Years After Wal-Mart
Non Wal-Mart Towns Wal-Mart Towns Cities
Percent Change
31Ken Stone, ISU, Ames, IA
Change in Building Materials Salesin Iowa Towns, 12 Years after Wal-Mart
-19-24
-14-10
1420
-32
36
2
-40
-30
-20
-10
0
10
20
30
40
4 Years 8 Years 12 Years
Years After Wal-Mart
Non Wal-Mart Towns Wal-Mart Towns Cities
Percent Change
32Ken Stone, ISU, Ames, IA
Change in Eating & Drinking Salesin Iowa Towns, 12 Years after Wal-Mart
-4
-6
5
76
-2-3
3
1
-10
0
10
4 Years 8 Years 12 Years
Years After Wal-Mart
Non Wal-Mart Towns Wal-Mart Towns Cities
Percent Change
33Ken Stone, ISU, Ames, IA
Change in Automotive Salesin Iowa Towns, 12 Years after Wal-Mart
-2-5
4
02
15
-2
20
0
-10
0
10
20
30
4 Years 8 Years 12 Years
Years After Wal-Mart
Non Wal-Mart Towns Wal-Mart Towns Cities
Percent Change
34Ken Stone, ISU, Ames, IA
Change in Food Store Salesin Iowa Towns, 12 Years after Wal-Mart
1
8
-4
3 31
16
1
-2
-10
0
10
20
4 Years 8 Years 12 Years
Years After Wal-Mart
Non Wal-Mart Towns Wal-Mart Towns Cities
Percent Change
35Ken Stone, ISU, Ames, IA
Change in Home Furnishings Salesin Iowa Towns, 12 Years after Wal-Mart
-26
-32
0
-3 -1
0
-38
32
-50
-40
-30
-20
-10
0
10
4 Years 8 Years 12 Years
Years After Wal-Mart
Non Wal-Mart Towns Wal-Mart Towns Cities
Percent Change
36Ken Stone, ISU, Ames, IA
Change in Apparel Salesin Iowa Towns, 12 Years after Wal-Mart
-17
-30
-10
-21
-27
1
-38
35
-50
-40
-30
-20
-10
0
10
4 Years 8 Years 12 Years
Years After Wal-Mart
Non Wal-Mart Towns Wal-Mart Towns Cities
Percent Change
37Ken Stone, ISU, Ames, IA
Change in Specialty Store Salesin Iowa Towns, 12 Years after Wal-Mart
-18
-30
-4 -5
-11
1
-30
6
0
-40
-30
-20
-10
0
10
4 Years 8 Years 12 Years
Years After Wal-Mart
Non Wal-Mart Towns Wal-Mart Towns Cities
Percent Change
38Ken Stone, ISU, Ames, IA
Change in Services Salesin Iowa Towns, 12 Years after Wal-Mart
-17-20
-5-2 -2
6
-14
8
4
-30
-20
-10
0
10
4 Years 8 Years 12 Years
Years After Wal-Mart
Non Wal-Mart Towns Wal-Mart Towns Cities
Percent Change
39Ken Stone, ISU, Ames, IA
Change in Total Salesin Iowa Towns, 12 Years after Wal-Mart
-11
-17
7 6
-3
7
-18
12
4
-20
-10
0
10
20
4 Years 8 Years 12 Years
Years After Wal-Mart
Non Wal-Mart Towns Wal-Mart Towns Cities
Percent Change
40Ken Stone, ISU, Ames, IA
CHANGES IN TOTAL SALES IN IOWA SMALL TOWNS, 12 YEARS AFTER WAL-MART*
* Towns Under 4,000 Population
-9.6
-13.9-16.4 -17.6
-22.7
-26.5-29.1
-27 -27.4 -27 -27.1 -27.3
-35
-30
-25
-20
-15
-10
-5
01 2 3 4 5 6 7 8 9 10 11 12
Year After Wal-Mart
Per
cen
t C
han
ge
41Ken Stone, ISU, Ames, IA
Percent Change in Per Capita Sales in Iowa Stores, 1983-2000
-69.8%-65.5%
-37.6%
-37.1%-30.3%
-22.7%
-21.3%
-13.8%
-11.4%-11.1% 95.6%
-80% -60% -40% -20% 0% 20% 40% 60% 80% 100%
Percent Change in Sales
Men's Apparel Stores
Variety Stores
Women's Clothing
Shoe Stores
Misc. Apparel Stores
Drug Stores
Garden Supply Stores
Grocery Stores
Jewelry Stores
Hardware Stores
Department Stores
42Ken Stone, ISU, Ames, IA
U.S. Stores Impacted by Discount Department Stores, 1980-2000
-44.5%
-43.6%
-28.9%
-22.0%
-21.3%
-21.3%
-19.9%
-15.2%
-10.9%
50.1%
-60% -40% -20% 0% 20% 40% 60%
Conventional Dept. Stores*
Men's & Boy's Clothing
Hardware Stores
Women's Clothing
Household Appliance Stores
Shoe Stores
Variety Stores
Grocery Stores
Auto & Home Supply Stores
Discount Dept. Stores*
Percent Change in Real Sales* Percent Change from 1987-2000
43Ken Stone, ISU, Ames, IA
Percent Change in Sales of Iowa Firms Due to Lifestyle Changes, 1983-2000
18.6
19.3
44.2
68.7
69.3
72.7
75.2
75.6
82.4
295.3
0 50 100 150 200 250 300 350
Eating & Drinking Places
Used Merchandise
Book & Stationery Stores
Sporting Goods Stores
Family Apparel Stores
Appliance & Entertainment
Home Furnishings Stores
Building Materials
Gift & Novelty Stores
Hobby, Toy, Craft Stores
Percent Change in Sales
44Ken Stone, ISU, Ames, IA
U.S. High Growth Stores, 1980-2000
14.4%
20.2%
37.7%
49.6%
58.3%
62.0%
98.8%
109.2%
124.3%
274.3%
0% 50% 100% 150% 200% 250% 300%
Floor Covering Stores
Furniture & Home Furnishings
Eating Places
Sporting Goods
Building Materials Supply
Drug & Proprietary Stores
Family Clothing Stores
Appl., Radio, TV & Computer
Book Stores
Mail Order
Percent Change in Sales
Texas Supercenter Study
46Ken Stone, ISU, Ames, IA
Department Store Sales Changes in Texas Towns After Wal-Mart Supercenters Opened
32.2
37.1
25.8
0 5 10 15 20 25 30 35 40
Non SupercenterTowns
SupercenterTowns
Percent Change
Year 1
Year 2
Year 3
47Ken Stone, ISU, Ames, IA
Grocery Store Sales Changes in Texas Towns After Wal-Mart Supercenters Opened
0.5
-17.6
-2.7
-13.5
-1
-8.1
-20 -15 -10 -5 0 5
Non SupercenterTowns
SupercenterTowns
Percent Change
Year 1
Year 2
Year 3
48Ken Stone, ISU, Ames, IA
Drug Store Sales Changes in Texas Towns After Wal-Mart Supercenters Opened
10.2
-20.2
2.7
-11.5
3.6
-6.4
-25 -20 -15 -10 -5 0 5 10 15
Non SupercenterTowns
SupercenterTowns
Percent Change
Year 1
Year 2
Year 3
49Ken Stone, ISU, Ames, IA
Total Sales Changes in Texas Towns After Wal-Mart Supercenters Opened
-2.64
1.7
-1.45
2.77
-1.21
3.85
-3 -2 -1 0 1 2 3 4 5
Non SupercenterTowns
SupercenterTowns
Percent Change
Year 1
Year 2
Year 3
MISSISSIPPI WAL-MART SUPERCENTER STUDY
51Ken Stone, ISU, Ames, IA
% Change in Av. General Merchandise Pull Factor for Mississippi Host Counties After Entry of Wal-Mart
SupercenterCounties Less Than 100,000 Population
52.0%59.0%58.0%
49.0%
40.0%
0%
10%
20%
31%
41%
51%
61%
71%
Year 1 Year 2 Year 3 Year 4 Year 5
52Ken Stone, ISU, Ames, IA
% Change in Av. Food Store Pull Factor for Mississippi Host Counties After Entry of Wal-Mart Supercenter
Counties Less Than 100,000 Population
-16.8%
-13.4%
-8.4%
-12.6%
-10.1%
-18%
-16%
-14%
-12%
-10%
-8%
-6%
-4%
-2%
0%Year 1 Year 2 Year 3 Year 4 Year 5
53Ken Stone, ISU, Ames, IA
% Change in Av. Total Sales Pull Factor for Mississippi Host Counties After Entry of Wal-Mart Supercenter
Counties Less Than 100,000 Population
3.1% 3.1%
9.4%10.4%
4.2%
0%
2%
4%
6%
8%
10%
12%
Year 1 Year 2 Year 3 Year 4 Year 5
Study of Impact of Iowa Wal-Mart Supercenters
55Ken Stone, ISU, Ames, IA
IMPACT OF WAL-MART SUPERCENTERS ON HOST TOWNS IN IOWA
Food Stores
-15
-3.5
-8
-1.6
-16 -14 -12 -10 -8 -6 -4 -2 0
SC Town
WM Town
Pull Factor Percent Change
Year 1
Year 2
56Ken Stone, ISU, Ames, IA
Dillow’s Super Value Closed One Year After Wal-Mart Supercenter Opened in Ankeny, IA
57Ken Stone, ISU, Ames, IA
Jubilee Food Store in Polk City, IA, Closed3 Months After Wal-Mart Supercenter Opened in Ankeny, IA
58Ken Stone, ISU, Ames, IA
Town & Country Grocery in Slater, IA, Still Open4 Years After Wal-Mart Supercenter Opened in Ankeny, IA
59Ken Stone, ISU, Ames, IA
IMPACT OF WAL-MART SUPERCENTERS ON HOST TOWNS IN IOWA
General Merchandise
37.2
-5.5
36.7
-2
-10 0 10 20 30 40
SC Town
WM Town
Pull Factor Percent Change
Year 1
Year 2
60Ken Stone, ISU, Ames, IA
IMPACT OF WAL-MART SUPERCENTERS ON HOST TOWNS IN IOWA
Total Sales
5.1
-6.8
5.6
-4.9
-8 -6 -4 -2 0 2 4 6 8
SC Town
WM Town
Pull Factor Percent Change
Year 1
Year 2
61Ken Stone, ISU, Ames, IA
First-Year Impact of Supercenter on Host Town Sales
(200,000 Sq.Ft., Average Town Population = 25,000)
-45
-30
25
70
-10
-60 -50 -40 -30 -20 -10 0 10 20 30 40 50 60 70 80
Loss by all HostTown
Loss by ExistingGM
Loss by ExistingGroceries
Net Gain inTown Sales
New Store
Sales ($Million)Based on Studies in Iowa & MS
Actions Necessary for Competing
63Ken Stone, ISU, Ames, IA
HAVE AN ATTITUDE CHECK
• In a free-enterprise economy, all firms are free to compete.
• Recognize that big-box stores will enlarge the trade area size.
• It is possible to co-exist in a mass merchandise environment.
• You will probably need to change your mode of operation.
64Ken Stone, ISU, Ames, IA
DEVELOP A STRATEGY
• Analyze the Market– Ages
– Income
– Life styles
• Analyze Your Business and the Competition for:– Strengths
– Weaknesses
– Market Share
65Ken Stone, ISU, Ames, IA
DEVELOP A STRATEGY
• Determine your competitive advantage
• Determine your niche
• Determine necessary changes– Target market– Inventory– Pricing structure– Marketing methods
66Ken Stone, ISU, Ames, IA
Wal-Mart’s Over-archingStrategy is Every-Day-
Low-Prices
The Word “Sale”is Never Mentioned
In Today’s Ads.
67Ken Stone, ISU, Ames, IA
Wal-Mart’s MottoWent from “Alwaysthe Lowest Price” to“Always the LowPrice”.
68Ken Stone, ISU, Ames, IA
Wal-Mart’s Motto Added “on the Brands You Trust”But Dropped this as Private Label Was Added.
69Ken Stone, ISU, Ames, IA
Wal-Mart Used the Term “Sale” in Their Earlier Ads,But Dropped it in Order to Strengthen EDLP
70Ken Stone, ISU, Ames, IA
FINALLY, WAL-MART REALIZED THAT IT COULDN’T HAVE SALES AND EDLP
71Ken Stone, ISU, Ames, IA
Wal-Mart Adopted the “Smiley Face” as aSymbol for Falling
Prices, a euphemism forSale.
72Ken Stone, ISU, Ames, IA
EDLP Has Evolvedto
“Always, Low Prices”
73Ken Stone, ISU, Ames, IA
Wal-Mart Grand OpeningsFocus on Special Valueson Price-Sensitive Items
74Ken Stone, ISU, Ames, IA
MERCHANDISING TIPS
• Try to handle different merchandise.
• Fill the voids.
• Buy well.
• Consider upscale merchandise.
• Emphasize private-label merchandise.
• Get rid of slow-moving items.
75Ken Stone, ISU, Ames, IA
Private Label SKU Count and Share of Sales, 2000
Company SKU Count PL Share of Total Dollars
A & P 2,300 23%
Winn Dixie 2,700 23%
Kroger 6,000 20%
Safeway 3,000 20%
Wal-Mart 5,000 20%
Albertson’s 6,000 16%
76Ken Stone, ISU, Ames, IA
MARKETING TIPS
• Know and evaluate your market.
• Focus your advertising; stress competitive advantage.
• Sharpen your pricing skills.
• Opening hours convenient to customer
• Adopt a “no hassle” returns policy.
77Ken Stone, ISU, Ames, IA
CUB (SUPERVALUE)-UPSCALE BOX STORE
Big SelectionLow Prices
Low ServiceGood Hours(Bag Your
Own)
78Ken Stone, ISU, Ames, IA
HY-VEE, MIDWESTERN STATES
Hy-Vee has Stores in
Several Midwestern
States. New Stores
Are Very Large with
Large Selections,
Many Amenities and
Full Service.
79Ken Stone, ISU, Ames, IA
HY-VEE FEATURES HIGH QUALITY MEATS
80Ken Stone, ISU, Ames, IA
Fareway is an IowaChain that has anOutstanding MeatDepartment and
Produces Very GoodWeekly Circulars,Featuring GoodValues on Price-Sensitive Items
81Ken Stone, ISU, Ames, IA
ALDI is a Limited-Selection, Low-Service
Store Featuring LowPrices Primarily onPrivate-Label Items
82Ken Stone, ISU, Ames, IA
BANANAS ARE HIGHLY PRICE-SENSITIVEPrice Check, Ames & Ankeny, IA, Late July, 02
Dahl’s $.19
Aldi $.25
Super T $.45
Fareway $.45
WM SC $.48
CUB $.49
Hy-Vee $.49
83Ken Stone, ISU, Ames, IA
MIRACLE WHIP IS VERY PRICE SENSITIVEPrice Check, Ames & Ankeny, IA, Late July 02
WM SC $1.97
Cub $1.99
Super T $2.00
Fareway $2.19
Dahl’s $2.49
Hy-Vee $2.79
K Mart $3.39
84Ken Stone, ISU, Ames, IA
Wal-Mart $2.00
Fareway $2.00
Super T $2.04
Cub $2.59
Dahl’s $2.69
K Mart $2.79
Hy-Vee $3.39
SNACK CRACKERS ARE SOMEWHAT PRICE SENSITIVEPrice Check, Ames & Ankeny, IA, Late July 02
85Ken Stone, ISU, Ames, IA
LAUNDRY DETERGENT IS VERY PRICE SENSITIVEPrice Check, Ames & Ankeny, IA, Late July 02
WM SC $5.24
Super T $5.24
Cub $5.48
Hy-Vee $5.49
Fareway $5.49
K Mart $5.99
Dahl’s $5.99
86Ken Stone, ISU, Ames, IA
SALTINE CRACKERS ARE PRICE-SENSITIVEPrice Check, Ames & Ankeny, IA, Last Week July, 02
Fareway $1.50
Super T $1.54
WM SC $1.67
Hy-Vee $1.99
Dahl’s $2.09
Cub $2.19
K Mart $2.19
87Ken Stone, ISU, Ames, IA
PAPER PRODUCTS (LIKE KLEENEX) ARE PRICE-SENSITIVEPrice Check, Ames & Ankeny, IA, Late July, 02
Super T $.89
Hy-Vee $.97
WM SC $.98
Fareway $1.07
CUB $1.09
Dahl’s $1.17
K Mart $1.29
88Ken Stone, ISU, Ames, IA
PET FOOD IS VERY PRICE-SENSITIVEPrice Check, Ames & Ankeny, IA, Late July 02
CUB $7.55
WM SC $8.28
Super T $8.29
Dahl’s $8.79
Hy-Vee $9.17
Fareway N/A
89Ken Stone, ISU, Ames, IA
COFFEE IS SOMEWHAT PRICE-SENSITIVEPrice Check, Ames & Ankeny, IA, Late July 02
Dahl’s $5.55
WM SC $5.67
CUB $5.89
Fareway $5.89
Super T $6.49
K Mart $6.49
Hy-Vee N/A
90Ken Stone, ISU, Ames, IA
LOW WATTAGE BULBS ARE PRICE-SENSITIVEPrice Check, Ames & Ankeny, IA, Late July, 02
CUB $0.99
WM SC $1.10
Super T $1.14
Fareway $1.48
Hy-Vee $1.48
Dahl’s $1.99
91Ken Stone, ISU, Ames, IA
HIGHER WATTAGE BULBS ARE NOT PRICE-SENSITIVEPrice Check, Ames & Ankeny, IA, Late July, 02
CUB $1.46
Fareway $1.69
Hy-Vee $1.69
Super T $1.94
WM SC $1.96
Dahl’s $1.99
92Ken Stone, ISU, Ames, IA
WAL-MART IS ESTABLISHING A LARGE PRIVATE LABEL SELECTION (GREAT VALUE)
93Ken Stone, ISU, Ames, IA
WAL-MART PRICING STRATEGY
Every Day Low Prices means we will be as low or lower than the competition on all similar items we carry. It has never been our intention to beat the competition on every item. We ignore short-term incentives designed to hype sales for a short period of time. This means we do not support couponing, rebates, sweepstakes, unnecessary advertising, etc. because those activities add costs that will come back to us in the form of higher cost of goods.
94Ken Stone, ISU, Ames, IA
WAL-MART PRICING STRATEGY
“Our basic competitive policy for the fresh department is:
– Use the 850 list plus any items specified by your regional vice president.
– Meet all competitive prices.
– If a competitor lowers the price on additional items in the marketplace, then you are to meet the price of the additional competition items.
– If a competitor lowers additional items again, then you should meet the price on those additional items, plus lower prices on other key items.”
95Ken Stone, ISU, Ames, IA
WAL-MART PRICING STRATEGY
“Wal-Mart will not be undersold by any competitor. If a competitor has a lower price on any item, we will meet that price. Store Managers have the authority to lower our prices to meet or beat our competitors. We must regularly check our competitors and react to any changes.”
96Ken Stone, ISU, Ames, IA
STRESS CUSTOMER RELATIONS
• Offer a friendly greeting to customers.
• Solicit complaints, take action.
• Go the extra mile.
• It costs less to keep existing customers.
• Live by the golden rule.
97Ken Stone, ISU, Ames, IA
OFFER GREAT SERVICE
• Develop knowledge of store and products.
• Offer deliveries/Carry-outs.
• Develop special order capability.
• Become a one-stop service center.
• Exceed customer expectations.
98Ken Stone, ISU, Ames, IA
Some Stores, Like HardwaresAre Adding a Variety of
Services as a Way ofAttracting Customers
99Ken Stone, ISU, Ames, IA
DEVELOP A TEAM CONCEPT
• Set a good example.
• Train employees well.
• Have regular company meetings.
• Empower employees.
• Develop participative management.
• Consider “open book” management.
• Reward employees on total performance.
100Ken Stone, ISU, Ames, IA
CONTINUALLY IMPROVE OPERATIONS
• Adopt modern technology.
• “Brain-storm” to find better methods.
• Persist in reducing operating costs.
• Maintain and repair facilities (carts).
• Know your financial statements.
• Network with other merchants.
101Ken Stone, ISU, Ames, IA
Self Checkout StationIn 45 States, Over 2,000 Stores
102Ken Stone, ISU, Ames, IA
TIPS FOR GROCERS
• Find your niche.– Meats– Full service– Deli/catering
• Price-sensitive items within 10% of WM• Stress private label items• Focus on faster and easier shopping• Feature carry-out and/or drive-by service
103Ken Stone, ISU, Ames, IA
TIPS FOR GROCERS (Cont’d)
• Develop a loyalty program• Clean and repair (restrooms, carts, dairy,etc.)• Check big-box prices on “blind items”• Post in-store signage when you have lower price
on “blind items.”• Advertise regularly, showing good prices on price-
sensitive items.• Always state your competitive advantages in your
ads.
104Ken Stone, ISU, Ames, IA
SAM WALTON’S TEN COMMANDMENTS OF BUSINESS
LEADERSHIP1. Commit to your business.2. Share your profits.3. Motivate your partners.4. Communicate all that you know.5. Appreciate what your associates do.6. Celebrate your success.7. Listen to everyone in the company.8. Exceed your customer’s expectations.9. Control your expenses better than competitors10. Swim upstream and avoid conventional wisdom.
105Ken Stone, ISU, Ames, IA
FOR ADDITIONAL INFORMATION
Contact: Kenneth E. StoneProfessor of EconomicsIowa State UniversityAmes, IA 50011
Phone: (515) 294-6269Fax: (515) 294-1700E-mail: [email protected]: WWW.econ.iastate.edu/retail