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Reed’s superstore case study analysis
- Reed's is a mid-sized regional grocery store chain established in 1939 with 192 stores in Ohio. - It faces intense competition from lower, mid, and higher priced grocery store chains in the Columbus, Ohio metropolitan area. - Key trends in the grocery industry are decreasing customer loyalty, an increase in fill-in trips rather than stock-up trips, and a rise in private label foods and value over brand influence.
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Reed’s superstore case study analysis
- 1. Presented by – SarangBanubakde Saurabh Mhase Varun Balakrishnan
- 2. • Mid sizedregional grocery store • Established in 1939 – William Reed • 192 retail stores, 2 regional distribution centers , 21000 employees • Attractive stores, long hours, exceptionally attentive customer service • Meredith Collins – VP Marketing • Jack Morrissey - CEO
- 3. • Case discussesReed’s market strategy for the Columbus, Ohio • 3rd largest metropolitan area in Ohio • Population: 2 million, Median income- $52000 • Intense competition in Grocery supermarket sector • Three competitors of Reed’s supermarket 1. TopVal - Lower priced 2. Galaxy - Mid ranged 3. Delfina – Top ranged
- 4. • 50 companiesdominated the industry ( 70% of overall revenue) • Each household spends $5200 a year on groceries with 2.1 trips a week • Key trends- 1. Decreasing customer loyalty 2. More frequent fill in trips than stock up trips 3. Private label foods are on rise 4. Customers are preferring value to influence 5. Second generation
- 5. • Sales $660millions in 2010 • Gross margin 22.7%, Net 2.1% • Dollar store margins 8.5% • Current market share 14% • Goals- 1. Market share 16% 2. Increase sales by $94.3 millions 3. Increase revenues by $14.3 millions 4. Increase net profit by $1.9 millions
- 6. • With highquality index , exceptional customer care and a recognized brand, Reed should concentrate more to boast about it through IMC. • Should launch some customer loyalty program to appreciate customers. • Bundling according to preference of customer should be introduced.. For example 5buns + tuna patties + sauces scathes +fresh veggies, can serve approx. 4-5 burgers.
- 7. • Pricing shouldbe brought as low as competitors by reducing variable price. • Offer more range of private label brand which when purchased in bulk would provide better margin. • Reed has large number of stores, so bulk offers should be made . • Get involve in co-branding with famous local fast food vendor in Columbus, which would help to increase footfalls at stores. • Start online retailing with cash on delivery as an option.
- 8. Threat from Aldiand Dollar store According to Exibit 2: • Operating profit for Reed is 2.1 and that of Aldi is 1.5, while dollar store (3+) is 8.5 • Quality index is very high as compare to Aldi and dollar stores i.e 8.4 over 6 and 5.6 resp. • If Reed reduces the prices and come up with suggested strategies , it will have no threat from Aldi and Dollar store, as its positioning will be better in terms of quality . • Hence in long run Aldi and Dollar have no threat but can't be easily ignored .
- 9. • Offer itemsat discounted rates. Feasible or not? • High priced image still exists. • Doesn’t bring in any major profits. • Cherry picking by customers.
- 10. • Discontinue theDollar program • Focus more on daily price reduction plans • Increase Sales Target: To increase the current market share to 16%, sales target is set to 775Mn for 2011 • Focus and Maintain current Target Segment: Continue focusing on the current target segment of affluent and older customers with smaller household size. Their wallet share is 8.93% only as compared to average supermarket customer’s wallet share of 10.0%
- 11. • Maintain currentBrand Positioning: Maintain current brand positioning as high quality supermarket.