Reed Supermarkets Case Study PDF

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Reed Supermarkets: A New Wave ofCompetitorsCase StudyTable of ContentsI. INTRODUCTION .................................................... 3a. Company Background ....................................................... 3b. Problem Description ......................................................... ...

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Reed Supermarkets: A New Wave of Competitors Case Study

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Table of Contents I.

INTRODUCTION ……………………………………………. 3 a. Company Background ………………………………………...……. 3 b. Problem Description ………………………………………………... 3

II.

WHAT IS REED’S POSITION IN THE COLUMBUS MARKET? …………………………………………...…….. 4-5

III.

HOW SERIOUS IS THE THREAT POSED BY DOLLAR STORES AND ALDI? …………………………...………… 5-6

IV. SHOULD COLLINS CONTINUE THE DOLLAR SPECIAL CAMPAIGN? ………………………………...…………….. 6-7 V.

CONCLUSION ………………………………………………. 7

VI. REFERENCES ……………………………………………...... 8

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3 I.

INTRODUCTION a. Company Background Established in 1939 by Williams H. Reed, opening his first store in Kalamazoo,

Michigan, Reed Supermarkets is one of the most leading supermarket chains with business operations in different states in the Midwestern region U.S. The chain is recognized for its attractive stores, long hours, quality and emphasis on organic produce, and exceedingly attentive customer service. It has 192 stores operating in two regional distribution centers that have employed over 20,000 individuals in 2010. b. Problem Description The company is facing several numbers of challenges that need an instant solution. Reed Supermarkets is facing keen competition and a decline in its share in its central region Columbus, Ohio. First of all, the company faces significant competition from existing and new market firms, including smaller regional chains, warehouse-club outlets, and three main independent competitors offering different strategies to attract consumers: TopVal with low prices, Galaxy with mid-ranged quality, and Delfina with top-ranked quality. Consequently, Reed Supermarkets faces a big fight to acquire a fair market value among grocery retail stores. The operating margin stands at 2.1%, so the new strategies used must be appropriate for the company to be at other competitors' level. Another issue that the company faces is in the expansion plan. Low strategies have been implemented in the past, prohibiting the expansion of Reed Supermarkets. Apart from all this, the main issue involved in the evaluation is the company's high prices compared to its competitors, and most consumers perceiving this matter. The position of Reeds Supermarkets in the Columbus market is challenging. Although the company has implemented

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4 strategies to compete directly with other firms, Reed Supermarkets has not developed an investment plan that monitors the increase in the number of stores it operates in the region -and the country-. Hence, the problem is to achieve the increase in market share for Reeds with the limited resources and low past strategies. II.

WHAT IS REED’S POSITION IN THE COLUMBUS MARKET? Reed supermarkets is highly competitive in the Columbus market. With more than 20

retail store locations, each of them generating sales over $20 million annually. It is considered as a market leader when it comes to product and quality. Competition and marketing strategy is present in the Columbus market with Reed’s market share distributed on multiple levels. Since you enter the parking lot until you go to the checkout counter the only thought you will have on mind is to buy more items than you need, because it is designed for costumers to spend more time and money than expected. Demographics play a big role in Reed Supermarkets’ position, as it differentiates itself from competitors in the market in several ways. As mentioned before, Reed has emphasis on quality. In order to maintain its long-lasting reputation in the Midwestern area, it attempted to maintain its high-end position by diversified the products it offers, including fresher, higher margin sections, floriated sections, and assortment of specialty offers. Without neglecting the long hours of operations undertaken compared to its competitors. Allowing customers to shop at their own pace without any concern in regard to missing offers or not getting the quality expected. Not to mention the exceptionally attentive customer service it has to offer any time you visit a store. Effective pricing of products is key to generating demand. Businesses must inherently know where to position their products and how to price them for their target

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5 demographic. An efficient supply chain allows retailers to pass down cost savings to their customers, especially when middle-intermediators are eliminated. Organizations can use promotions not only to increase demand but also to instill trust and confidence in their buyers, particularly regarding return policies and warranties. Building and managing brand equity has become a priority for companies of all sizes, and in all types of markets, but finding the most powerful and unique image for the place is the most important task. To understand this, it is important to first understand the concept of place branding. Simon Anholt (2010), one of the most influential researchers, defines place branding as talking about doing something to enhance the brand image of the place… [and] a way of making places famous (p. 7). As a result, place branding can help by building a competitive identity in order to have a strong presence in relevant markets. It is all about the impression of a place, the products it has to offer, the experience visitors get when they visit, and the perception that individuals have of a place. Reed Supermarkets made an excellent job by positioning itself at the top for several years. In today’s fast-moving economy, place branding presence is essential for firms. The truth is strategic geographical dispersal of physical outlets is also an important part of marketing strategy. III.

HOW SERIOUS IS THE THREAT POSED BY DOLLAR STORES AND ALDI? Consumers are willing to make multiple trips to different stores in order to find the best

deal. Although Dollar Stores and Aldi have a small percent of market share, the threat to Reed’s is very serious. From one side, Aldi sells private label, and are able to offer consumers lower prices than Reed Supermarkets, even though their selection is smaller. On the other side, Dollar Stores have many well-known brands to offer at a ridiculous lower price. Consequently, loyal

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6 customers value price way more than the convenience of a supermarket, and so, it is difficult for Reed’s to compete against Aldi’s and Dollar Stores’ prices. However, Reed has managed to maintain its brand image through pricing and quality of items as mentioned above, and loyal customers have remained loyal even in the presence of new competitors, creating a market opportunity for the growth of the business. A study by Narayanan Janakiraman (2019), assistant professor at The University of Texas at Arlington published in the Journal of Marketing shows that marketers of relatively high-priced products should consider keeping prices high, as many consumers associate high price with high quality (para.13). Hence, they are attracted to the brand, and are unlikely to change their behaviors. IV.

SHOULD COLLINS CONTINUE THE DOLLAR SPECIAL CAMPAIGN? If it is true, the use of the dollar special campaign was intended to drive traffic, as many

competitors were entering the market leaving the Reed Supermarkets behind. Collins started the dollar special campaign to ensure that the company shed off Reed Supermarkets’ image of being only offered for the rich and repositions itself in the market as a brand that is both economical and quality conscious. Each week, Reed Supermarkets offer about 250 items at a large discount from the regular sale price, becoming the focus of Reed’s online, print and broadcast advertising. Certainly, the company decision-making should be to give the campaign sufficient time, so it would help to change the perception of costumers that the company has higher prices, in comparison to others. In that manner, the campaign would keep the quality image of the company in the long run. Besides, lowering prices would help improve and maintain customer loyalty since continuing the dollar specials campaign can help reduce prices significantly and attract more customers to the company (Gbadamosi, 2013).

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7 However, the main deficiency of this strategy is that it creates confusing position for Reed’s in the Columbus market. With this campaign, items are being discounted by about 44%. Thus, Reed’s is not driving sales of higher-margin items to compensate. In addition, the name “dollar specials” sounds very similar to its competitor’s name “dollar store”. This may be muddy Reed’s image by association. Furthermore, the dollar special campaign should be discontinued as it does not improve the high-quality perception of Reed Supermarkets for consumers and can negatively impact the company’s current reputation of being high-end retail food store. V.

CONCLUSION To conclude, Reeds Supermarkets have experienced critical issues, especially in its

strategic management sector. Despite its high performance in other markets, the market share in Columbus has been relatively slow, due to the increase of threats by competition among other issues, mainly generated by Aldi and Dollar General stores. The company has tried to surpass these competitors by providing specialty products and developing private labels and big promotions. However, all of the mentioned above has not worked quite well for it. The company still needs to change the price structure in order to enhance market expansion. Besides, the development of royalty programs and rewards initiatives for its customers will also play an essential role in this process. There is only one recommendation to enhance the company’s operations and its growth and solving its problems. The decision that Is being taken should be justified and viable for solving these problems. The best strategy Red Supermarkets can come up to, is to monitor its progress since it will be able to measure its market share and notice if its strategies are really working.

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8 REFERENCES Anholt, S. (2010) Definitions of place branding – Working towards resolution. Place Branding and Public Diplomacy 6(1):1-10. Carlson, Carole, and John Quelch. “Reed Supermarkets: A New Wave of Competitors.” Harvard Business School Cases 1.1(2011): 1. Print. Gbadamosi, A. (2013). Principles of Marketing: A Value-Based Approach. London, United Kingdom: Macmillan International Higher Education. University of Texas at Arlington. (2019, September 6). Consumers rely on price to determine quality of products. ScienceDaily. Retrieved March 11, 2021 from www.sciencedaily.com/releases/2019/09/190906104111.htm

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