Us Food Retailing Industry - Reed Supermarkets

Situation Analysis

The US Food Retailing Industry is slowly recovering from the recession and Reed Supermarkets leads in the Columbus area with a 14% market share. Since 2008, the recession has affected the "spending" mindset of the US consumer. People now prefer to shop in bulk at Costco or refill essentials at Dollar stores during the week. This is also reflected in the trend towards buying more private label products over branded products due to lower prices and comparable quality.

Due to the increasing number of supermarket chains and a wider range of choice for the consumer, customers may no longer be loyal to a single store. While Reed is known for its excellent customer service, the perception of higher prices can act as a deterrent for increasing sales and adding new customers. It can be seen that Dollar stores in general manage a much higher gross margin compared to Reed. This could indicate a failure in negotiating with the suppliers, or the benefit of stocking up on private labels.

Recently introduced initiative "Dollar Special" at Reed has had no significant impact on sales and might taint the brand image of Reed as a high end food retailer in the long run. There is also a lack of clear direction in terms of where Reed wants to position itself in the market and how to do it.

Problem Statement

What strategy should Reed follow to increase profitability and also improve overall market share in Columbus?

Statement of Objectives

In the short term, Reed needs to reposition itself to attract new customers and increase loyalty of existing customers. It also needs to work on increasing profitability while increasing revenue and market share.

In the long term, the customers' perception of high prices at Reed needs to be addressed. Also, in terms of revenue, Reed needs to maintain sustainable growth.

Criteria and Constraints for Evaluation

The weightage for each criteria is given alongside within braces:

Criteria:

1. Positive impact on profits (35%) - increase in profit margins and/or volume of sales and minimum cost for implementing the strategy

2. Respond to customer feedback on high prices or Customer Satisfaction (30%)- increase in promotional activities, decrease in prices, or wider price ranges in every category

3. Clear effect on brand image (20%) - there should be no confusion in the consumer's mind on which retail category Reed belongs to

4. Sustainability of the strategy in the long run (15%)

Constraints:

5. Time - the strategy needs to be implemented and prove successful within one year

6. Budget - No capital expenditure possible during the short term

Generation of Options

Based on the decision tree shown in the appendix, we can see that there are several simple options available. The solutions will be a combination of these options. For the sake of clarity, the individual options are listed here. Next, possible solutions are generated from the available options.

1. Continue with "Dollar Special" offers and give it 6 more months to show results - Rejected due to time constraint

2. Continue with "Dollar Special" offers and make enhancements to the model

3. Terminate Dollar special; Increase ratio of private labels to branded labels (around 1:4)

4. Terminate Dollar special; Reduce costs - reduction of extra staff (instead of carrying bags to cars, we can have a ramp so that customers can wheel out their purchases themselves)

5. Terminate Dollar special; Reduce costs of goods - negotiate with suppliers

Rejected because branded labels may not reduce costs by a significant amount

6. Terminate Dollar special; Set up a Loyalty Program to encourage regular customers

7. Terminate Dollar special; Scale up online