Published on: February 3, 2010Crain’s Chicago Business reports that Craig Herkert, the new Supervalu CEO, “sees more growth potential in the Save-A-Lot discount chain than in the grocery giant's local flagship, Jewel-Osco,” and plans to “ bulk up Supervalu's presence in the increasingly crowded Chicago-area grocery business” by building Save-A-Lots - not Jewel stores.
“With prices 20% to 40% lower than traditional grocers',” Crain’s writes, “Save-A-Lot would take on growing discount-style competition from Aldi and Wal-Mart, which are expanding in and around Chicago.
“The strategy is a major shift for Eden Prairie, Minn.-based Supervalu, which in the past few years has remodeled Jewel stores to highlight quality and selection. Now, Mr. Herkert wants to rein in costs by reducing the selection of items at Jewel by as much as 20%. And by expanding Save-A-Lot rather than the longtime local market leader, Mr. Herkert, 50, is betting on a nameplate that's relatively unknown in Chicago.”
- KC's View:
- It is a retailing truism that it is less expensive to retain a customer than to attract a new one.
So the question that occurs to me is whether it is more expensive to re-train Jewel customers to be Save-A-Lot shoppers, or to reorient Jewel’s focus to be more price competitive and with less selection.
I don’t know the answer to this. It may be that the changes that would have to be made at Jewel in order to fulfill Herkert’s vision would be so dramatic that people wouldn’t think of it as Jewel anymore...and so Supervalu might as well focus on a different banner. But it also makes me wonder whether Jewel’s connection to its shoppers is so tenuous that in the end, it really doesn’t matter.
Think about it. For a while, Jewel was broadening its selection to appeal to more shoppers. Then, it edited its selection to appeal to more value-oriented shoppers. Then, it started talking a lot about lowering prices, but got smacked around in the local media (and by some of its suppliers) for doing more talking than actual lowering. At the same time, the company brings in a Walmart veteran to run the company, and he has to blame Supervalu’s current travails on moves made by the previous administration in much the same way that the Obama White House blames the Bushies. And of course Herkert is focused on low prices because we are, after all, in a recession...but on the other hand, if all you have is a hammer, isn’t every problem going to look like a nail?
So this is where Supervalu finds itself. When you think about it, the company has every possible arrow in its quiver....stores like Save-A-Lot for value shoppers, Bristol Farms for the high end, and lots of formats for the middle. And yet the quiver doesn’t seem nearly full enough at the moment...and it is hard to tell whether the company is acting tactically or strategically.