Supermarket companies, even small operators in America's heartland, appear to be participating in the surprisingly strong opening of this year's holiday season.
Although they face increasingly intense competition from the national discount big-box chains, the smaller companies have been surviving, at the least, and in many cases thriving through innovative promotions.
Nationwide, on the first day of the Christmas holiday season, the Friday following Thanksgiving, mall traffic was up 9.7% over last year, according to the National Retail Federation, and Telecheck, a division of First Data Corp., estimated that the day saw sales rise 4.6%.
While the post-Thanksgiving Friday is traditionally a strong day for retailers, this year many observers "had been skeptical of consumer spending in light of rising gas prices and a slowing economy," said Deborah Weinswig, analyst, Bear, Stearns & Co., New York.
Weinswig noted that food retailers are increasingly looking to get their share of the gift-buying dollar. "We have noticed that supermarkets and drug stores are aiming to capture more of the seasonal sales opportunity with competitively priced digital cameras, DVD players and computer supplies," she said.
However, Weinswig sounded a note of caution that deep discounts are cutting into profits. "It is apparent that retailers are depending heavily on sales and promotional activity to generate consumer demand, a trend we expect to continue throughout the holiday season," she said.
With "an extra weekend before Christmas compared to last year," she said, "consumers will have more opportunity to hunt down the lowest prices."
Meanwhile, in the supermarkets of Middle America, the holiday season got off to a strong start in many places in the lead up to the Thanksgiving weekend.
For Dan Welgos, owner, Thorp IGA, Thorp, Wis., sales for Thanksgiving, "the biggest eating event of the year," were up about 10% to 15% over last year.
Although Welgos told SN he participates in many IGA promotions, for the year's end his only promotion is a homegrown one, a gun giveaway, timed to coincide with the Thanksgiving weekend hunting season. "Up here," he said, "hunting season is called Holy Week."
December is essentially promotion-free, Welgos said. "We don't do anything, other than the holidays themselves, which are themselves a good promotion."
For Christmas eating, he said folks in Wisconsin tend to like ham and turkey. Welgos said he thinks sales for the year's last month will be up about 10%.
Welgos is facing more competition from national retailers, but has found so far it has not hurt his business. "In the last 12 months, Target has opened within 45 miles of us, and Wal-Mart has opened two new supercenters within 45 miles," he said. "They haven't been doing as well as expected."
Even the shoppers who were originally lured by the big box discounts have been returning to their local supermarket, he added. "People have come back," Welgos said. "Our perishables have done well. People are buying meat, deli and produce here.
"Also, one of our competing stores here, an independent retailer, went out of business this year. That has helped our sales."
Rick Long, store manager, Village Market IGA, Harrogate, Tenn., said his unit has also been facing stiff competition. Some of it a result of having both a Kroger and a Wal-Mart only three miles away. And some of it a result of having those two stores on the other side of a stateline, the border between Kentucky, which has no sales tax, and Tennessee, which has an 8 1/2% sales tax.
"We're keeping our own," said Long. One way the store does that is by innovative displays. "We've won 20 [IGA-sponsored] display contests," he said. For Christmas, Long said, "We're just going to decorate the store. IGA didn't have any special promotions coming up, and we didn't invent one."
He also said he expects Christmas falling on a Monday to be a bonus for supermarkets. "It'll be a great weekend, I hope."
Jim Mills, owner, chief executive officer and president, Snyders IGA, a six-store chain based in Oklahoma City, said his market area has been "inundated" with Wal-Mart supercenters and Neighborhood Markets, Wal-Mart's experimental small-store format.
"Wal-Mart is building supercenters five miles apart," Mills said, "with Neighborhood Markets every two miles."
Heavy promotions, Mills said, are the key to competing with Wal-Mart. "We had a week-long produce sale heading into Thanksgiving," he said. "Four of our stores ran ahead of last year, and two ran only slightly behind.
"We ran an after-Thanksgiving coupon ad. The day after Thanksgiving is traditionally very poor in the supermarket business.
"We're going to continue to run additional promotions for December, do different things to get customers in our stores."
