Conventional wisdom seems to increasingly suggest that the supermarket model (with the exception of the super-supermarket, Wal-Mart) is on its way out. Today’s consumers want niche stores and brands that seem like a good deal, now that everyone is seeking ways to save their pennies.
The battle lines have been drawn between the discount chain Trader Joe’s, a private labeler and its supermarket competitors. Trader Joe’s mocks the complex pricing strategies of the supermarkets in its marketing materials, arguing that it doesn’t need focus groups to decide whether to bring its customers inexpensive, yet high-quality products directly from the source.
But now the supermarkets are fighting back, according to an editorial in Supermarket Weekly, a trade journal:
Trader Joe’s wins points for presenting its case in a humorous fashion, but why did the retailer feel the need to do this? Doesn’t it have a strong enough value proposition with consumers to avoid having to bash the other guys?
The answer is yes, but the retailer also realizes other grocers are gaining traction with their own value messages. Supermarkets have increasingly trumpeted lower prices and private labels, and consumers are taking notice.
Investors have also taken notice, worrying that the supermarket industry is now engaged in a self-defeating price war.
“I don’t see anyone doing anything that’s crazy out there,” Peter Lynch, CEO of Winn-Dixie Stores, a Southern supermarket chain, told investors last week. “While some people are talking about price wars, I clearly don’t see it. I see rational markets out there.”
Do you think its rational for traditional supermarkets to go head to head on price with niche retailers like Trader Joe’s and super-centers like Wal-Mart?
Photo by Flickr user “hellochris,” CC 2.0.
