LAS VEGAS -- There's more than one right way to price Center Store products to compete successfully against mass merchants.
Speaking during a session at the National Grocers Association convention here last week, two food distributors described how they've improved their sales and image using different pricing strategies -- one high/low, one everyday low price.
Supervalu's Center Store program, in essence, combines low prices on about 100 common grocery items and cross merchandising with other, higher-margin items, said Leland Dake, vice president of merchandising and distribution for the Eden Prairie, Minn.-based wholesaler and retailer.
Supervalu uses widely available consumer data to find cross-selling opportunities beyond coffee and creamer based on stores' market demographics, for instance, taking a page from vaunted retailer H.E. Butt Grocery in San Antonio, Dake said.
"Ever thought about cross merchandising Tagamet and vitamins with coffee on end bases?" he asked the audience. "Does H-E-B in Texas do it? Yes, they do."
Riesbeck Food Markets, with 13 stores in southeastern Ohio, also has improved its financial footing, albeit with an EDLP approach.
Riesbeck, which essentially had been a high/low retailer, has been working with manufacturers to get prices within 6% to 10% of supercenter competitors on 5,000 to 6,000 items throughout the chain, with the goal of making stores "an option to shop every day," said Leo Braido, sales and marketing director there.
"We don't want to sell item 'X' when we're selling it six times a year at a ridiculously low price, and the other 46 weeks be at a super high retail," he said.
Getting vendors to lower their prices on an ongoing basis required Riesbeck to share sales information with them, as well as fund occasional promotions on EDLP items itself, Braido said. "You're going to have to do it on your dime," he said. And the program won't work without clean stores, good service and perishables, and continually communicating the value message to customers, he said.
Both speakers cited the financial success of their Center Store strategies. When Supervalu piloted the program with a 10-store group, average weekly sales rose 8.5%; sales per customer gained 71 cents; and average gross profit increased 4.8%, Dake said. Of roughly 300 participants using the program today, sales growth averages 3.4%, he said.
Riesbeck offered a few category examples as evidence of the program's success there. From May through December 2004, salad dressing grew unit sales 245.2% and dollar sales 155.8% over the year-earlier period, for instance. Braido pointed out that while unit sales growth outpaced dollar sales after the retailer went EDLP, customers make up for that disparity as they do more of their shopping there.
Clearly, neither approach is the absolute right one, Dake said. "Whether you go EDLP or high/low, you can make either Center Store strategy work."
