LONDON, Ky. - Laurel Grocery here credited a new everyday low price program aimed at winning back Center Store sales from discounters with boosting store sales in test stores.
Total store sales rose 4% while year-over-year sales per customer increased 5%, said Bob Kirch, executive vice president and chief operating officer for the wholesaler, which serves about 428 retailers in the Midwest. Results were based on year-over-year sales at four units that tested the program in the second half of last year.
The fact that all four stores competed with one or two Wal-Mart stores in a 15-mile radius made the results all the more impressive, Kirch said.
"We're very pleased," he said. "For the first time in five years, our Center Store business is growing."
Laurel is in the process of adding more operators to the program, which is part of a trend among retailers trying to beat back value banners through a blend of EDLPs and strong perimeter-department offerings.
More than 60% of Laurel-supplied retailers compete with supercenters, and the wholesaler projects that within the next three years the percentage will grow to almost 100%.
Laurel expects to have 30 stores participating in its so-called Strategic Marketing Initiative by early summer, and 50 stores a year from now, Kirch said. Based on the test stores' results, the wholesaler expects stores that comply with the SMI program to achieve a 5%-10% total store sales increase if they have a Wal-Mart store within a 15-mile radius, and a 10%-15% total store sales increase if they face no Wal-Mart competition.
Lower prices on commonly bought grocery items and a new loyalty card program are the key elements of the initiative.
Laurel negotiates lower year-round prices with vendors to get retail prices of 3,500 to 4,000 branded and private-label items, mostly from Center Store, within 5%-10% of Wal-Mart's prices.
Ad markdowns were reduced by 50%, but promotions will continue; the SMI stores will be doing more promotions like one- and two-day sales, but they will run them simultaneously, thereby reducing the cost of advertising and increasing the power of group buying.
Communicating the price cuts are eight to 10 hanging signs per aisle, shelf bib signs under the reduced-price items, endcap signage and a "you saved" line on the bottom of sales receipts.
"I think the biggest issue is the fact that we're offering the consumer a better value than we had before, and we're identifying that to them," Kirch said.
The program isn't limited to the center aisles, though.
SMI stores will rebrand their delis and bakeries as Olde World Deli/Bakery. To support the new name, they'll sell lunch meat by the same name that can be priced below other premium brands. Olde World coffee will be added in March, and Olde World pizza and deli-cut cheeses will come in April.
Another 24 signs advertising customer service and quality of perishables will hang throughout the SMI stores.
"The strength of the independent has always been the perishables department," Kirch said. "We have to make sure we maintain that in the eyes of the consumer."
As participation in the SMI grows, Laurel plans to hire a trainer and mystery shopper to help ensure compliance with the program. The wholesaler also will consider increasing the number of EDLP items, which could reach as many as 7,000, Kirch said.
NEW PRICES, NEW CARD
LONDON, Ky. - Laurel Grocery here said shoppers have embraced a new loyalty card because it gives them coupons for products they want, rather than products vendors want them to try.
Laurel tested the card last fall and is now rolling it out to its independent retailer customers. Shoppers need the Extra Savings card to take advantage of weekly promotions and a new everyday low price program that Laurel is offering to retailer clients.
The card program - managed by Retail Loyalty Marketing, based in Lexington, Ky., and Oklahoma City - rewards customers with coupons at the checkout for free or cents-off items identical to ones they've bought in the past or for savings on future fuel purchases. Coupons must be redeemed at the retailer where they originated.
More than 90% of shoppers have signed up for the card at four test stores, and coupons have been redeemed at a rate of almost 30% - a surprising outcome, given that customers weren't accustomed to using a loyalty card at those stores, said Bob Kirch, executive vice president and chief operating officer for Laurel.
He attributed the card's success to the fact that customers are getting coupons for items they've already bought rather than a complementary or competing product a vendor wants to promote.
"Most independents have never used a card," he said. "They've actually marketed against a card. And the customers really like it."
Loyalty marketing experts said such an approach can foster customer loyalty, but is harder to attract vendor support. Indeed, in the Laurel case, the coupon redemption cost is absorbed by the retailer.
"Most retailers want those to be funded by CPGs, and CPGs are much more willing to spend money to try to convert customers than reward their customers," said Carlene Thissen, director at Ogden RSC in Naples, Fla., formerly Retail Systems Consulting. "That's always been kind of a disconnect with retailers."