Reed Case Supermarkets

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Table of Contents

Executive Summary        3

Situation Analysis        3

Competition Faced        4

Problems Faced by Protagonist        5

Internal environment – Strengths and Weaknesses        5

External environment – Opportunities and Threats        6

Alternatives        8

Evaluation of Alternatives        8

        10

        12

Conclusion        13

Appendix        13

Appendix A        13

Appendix B        14

Appendix C        14

Appendix D        15

Executive Summary

Reed was founded in 1939 by William H Reed in Kalamazoo, Michigan. By 1960, 25 stores opened in Michigan and Illinois. Reed bought two medium sized chains in Ohio, Indiana, and Wisconsin and by 2010 they had 192 shops opened and two local centers. They have 21000 employees operating in their retail stores. For twenty years, Reed had been considered a high-end supermarket. They are famous for having fresh seafood and also for having quality on their products, highlighting organic products. When it comes to the Columbus market, Reed has 25 stores in Ohio to serve around 2 million people. The Columbus's Population Growth is 11% with and an unemployment rate of 8.5%. In 2010, the median household income was $52000, which is higher than the national average.

Situation Analysis

Reed supermarkets have utilized all its resources to provide best customer satisfaction to its clients. The two principal points which Reed has used is differentiators and location. Reed has created an atmosphere about itself by having several features like attractive supermarkets, night hours, high-end service case displays and excellent customer services. Reed also has given particular emphasis to product variety and range. Second is the location as Reed supermarkets are available in several places and target customers in one to three miles away from the store. In comparison, when it comes to a location with competitors, Reed holds an edge as its competitors are not always open. Also, the variety of Dollar stores is becoming a significant competitor for Reed, as they are even more readily available to the consumers.  Reed lacks satisfaction to their consumer by not providing a better price strategy. As an economic slowdown has become evident, the prices of the products become one of the factors of customer satisfaction. Reed supermarkets need to work on its prices to improve its customer satisfaction.

Competition Faced

Reed Supermarket was facing head on a threat from Aldi Stores. However, the competition it faced was from Supercenters, specialty grocery retailers, warehouse clubs, dollar store chains and limited selection stores. Traditional supermarkets distinguished themselves from the range and quality they offered. However, a customer opted for value over privileges such as excellent customer service, attractive stores, and high staffing levels. In this situation, dollar stores and Aldi took a chip of Reed’s market share. Compared to its competitors Reed has a narrower range of private label merchandise which was being promoted aggressively by its competitors due to high margins. Super Centers like Walmart offered high discounted products below the standard MRP along with one-stop shopping for multiple needs thus creating an edge irrespective of its location.

Warehouses maintained no options with just one brand for every product. The prices were as low as 20% of MRP. Thus selling Bulk packets and hence concentrating on both middle and affluent class. Dollar stores worked from fill-in trips which make up 60% of the purchasing trend. It has a lean cost structure, low maintenance, and simple operations. It occupied a niche which just 3% market share but still considered a threat. Also, they were near the customers. Limited selection stores specialized in private label foods with an emphasis on imported and limited edition food. The prices were heavily discounted and had the maximum per square foot of sales.  Aldi, its direct competition has started planning expansion.                      

Problems Faced by Protagonist

The Columbus, Ohio market after being well established it decreased Reed's revenues and market share.  The start of various other brands in the supermarket industry took a proportion in its pie of market share but declined from 15% to 14%. Since the time of its launch in 1938, Reed supermarkets always focused on not only providing products but a better shopping experience and best quality products, which was not the case with other competitors. Because they were cheaper, some of the customers perceived Reeds’ prices to be more expensive. Large organizations associated with Reed influenced the company to consistently advertise the brand through private labels without any extra compensation for doing so. Private labels proved to be competitive due to their high price competitiveness.

Due to low pricing points and catering to all the consumers’ demands, during the times of recession, customers were switching over to private labels in some categories. Second generation and limited selection stores like Dollar stores and Aldi; Traders Joe’s respectively have become part of the lower end of the market with private labels providing products at cheaper rates. The composition of private labels in their offering went up to 85% - 95%. Customers who transacted before with Reed supermarket have started switching over to other supermarkets, warehouses clubs, etc. thereby depicting a decrease in customer loyalty.

Internal environment – Strengths and Weaknesses

Reed is a high-end, well-established supermarket with 25 stores situated in Columbus, Ohio. The company is known for producing high-quality organic products and high-quality index averaging at 8.4 (Appendix A). Reed also provides an abundant amount of weekly basic goods, baked products, beef, seafood products, paper, beauty, health goods as well as a pharmacy. The company persistently grows and upgrades its stores, creating new departments while progressing their offers for consumers with their higher-margin offerings like prepared foods and flowers. These units create a great value for customers by providing one-stop shopping. With attractive stores and convenient locations, long hours, and exceptional customer service, Reed can distinguish itself from the rest of its competitors. Consequently, Reed has high brand recognition; its name is well-known and has an excellent reputation among customers.