SN ASKS: RALEY'S SIMPLIFIES PRICING

Jon Springer

SACRAMENTO, Calif. -- "It's not as if we cracked the code on anything magical. We just try to stay in tune with consumer trends and make good decisions," said Bill Coyne, president and chief executive officer of Raley's here. He was referring to the company's decision to abandon the high-low pricing scheme it employed for years in favor of an everyday-low-price format. In going EDLP at its 125 Raley's, Bel Air and Nob Hill stores, Raley's joined several other regional chains that made similar changes in recent months, notably Giant Eagle, Pittsburgh; Fresh Brands, Sheboygan, Wis.; and Clemens Markets, Kulpsville, Pa. Is high-low pricing a relic of the past? What's driving retailers to switch pricing strategies? SN asked Coyne as his chain became the latest to make the switch.

SN: Several companies, including Giant Eagle and Fresh Brands, have announced they were switching over to an everyday-low-price strategy. Do you feel like you're part of a trend?

Coyne: I don't know. But what we're focused on here is what our customers want, and they very clearly are telling us that they don't like the traditional ways that grocery stores have priced their products. They don't like having to spend time shopping for value by running around to different stores comparing newspaper ads. They want to find value in one place.

SN: How were you able to determine that's what your customers wanted?

Coyne: We have focus groups, surveys and customer panels -- and our employees are our customers, too. Everything we were hearing from them was consistent. We also asked Cal State-Sacramento to conduct a survey, and that survey confirmed what our shoppers told us. They don't like to shop around. They don't like to stock up because when they do, they wind up throwing some things away and using products beyond their expiration date.

SN: Were there other factors that indicated to you the time for high-low pricing had come and gone?

Coyne: Maybe the pace of life. Whether it's our customers or ourselves, the pace of life has just increased so much that everybody is looking to simplify their lives. This kind of pricing structure, where we stabilize prices and have a consistent value-based pricing system, is a way to simplify lives.

SN: Does the new strategy make any difference in how you operate the store?

Coyne: We are not going to change anything about what's made our company famous. We're still going to have the same great level of customer service. We're one of the few left that still has checkers unload our customer carts, and we still have carryout service to the car. We still have very clean stores, and we're still very involved in our community. None of those things will change.

SN: What about your relationship with vendors? How might that be affected?

Coyne: Our vendors will be a big partner with us. It has been many months in planning, and we've been working with vendors to get to a net cost of goods we can hold throughout the year and help their volume, and ours as well.

We will still have promotions and weekly ads, and we'll continue to cooperate with our vendors on those opportunities. But what we're seeing is that vendors are becoming more sophisticated about consumer behavior, and they're second-guessing whether the deeply discounted, promotional-based [strategy] is the best way to go to market. We've found a good level of cooperation with vendors to take those promotional dollars and drop them to the net cost, and reduce the overall cost on an everyday basis. Not every vendor has agreed with our approach, but many of them have, and we're working with them.

SN: Where will your shoppers see price reductions?

Coyne: We tried to hit every category in the store and make sure there was a real solid reduction. This is a continuous program, and we'll lower more prices as we move forward. The percentage discounts vary.

SN: How will you know this new strategy is working?

Coyne: Our four key metrics will be our customer counts, our overall sales, the number of transactions, and the number of items our consumers are purchasing. Our specific goals will be confidential. But I can say we did a pilot test in our northern Nevada stores, and we got very good results with that. With no promotion, the customer noticed, and they shopped more with us.

SN: How does Wal-Mart Stores' influence impact your pricing decisions today?

Coyne: We really don't focus on Wal-Mart or on any one competitor. We just want to stay focused on our customer and how we can provide a better experience for them. I can't really say how our competition will react.