GIANT EAGLE LATEST TO GO EDLP ROUTE 2004-11-08 (1)

LUCIA MOSES

PITTSBURGH -- Giant Eagle here last week cut prices permanently by an average of 7% on about 3,000 frequently purchased grocery, dairy and frozen items -- including private-label products -- across its 221 stores in western Pennsylvania, Ohio, West Virginia and Maryland, company spokesman Brian Frey told SN.

Giant Eagle follows several other retailers in recent months that have adopted everyday-low-price strategies, or hybrids of EDLP and promotional pricing. EDLP appears to be gaining momentum as a means of competing against low-price formats like supercenters and limited-assortment stores, said industry observers.

Besides Giant Eagle, Clemens Family Markets, with 20 stores serving suburban Philadelphia, has rolled out an EDLP program in the past few months on products that are competitive in the market, a store source said. "It's one way of trying to keep [customers] here," the source said.

Fresh Brands, Sheboygan, Wis., last week announced it was rolling out companywide a "value proposition" that contained EDLP on nonfood products (see story on Page 6).

Lubbock, Texas-based United Supermarkets, with 47 stores in Texas, has instituted everyday low prices on best-selling items in the past few months, according to store sources.

Bill Bishop, president, Bishop Consulting, Barrington, Ill., said he also has talked to a retailer, which he wouldn't identify, that converted to an EDLP format in the past two weeks.

"I think it's safe to say, we can expect more of this," he said, given the increasing number of formats with a low-price message, including limited-assortment stores, mass merchandisers and club stores.

Another retailer, Safeway, Pleasanton, Calif., said recently while it would not convert to EDLP, it would lower prices on key items. "Retailers are realizing that pricing strategies they were following were putting some of their shelf prices at unreasonably high prices," Bishop said.

Two years ago, Wegmans Food Markets, Rochester, N.Y., targeted 4,000 items or about 10% of its inventory as EDLP in an effort many analysts saw as an effort to retain its market share against erosion from Wal-Mart supercenters.

Giant Eagle's program appears more extensive than other EDLP retailers, which often lower prices on only 200 to 500 items. "New Lower Prices" shelf tags will identify the products and compare them to previous prices. The company described the companywide EDLP program as one of a variety of ways it's trying to meet customers' needs, including an emphasis on high-quality perishables.

Rather than becoming purely EDLP, Giant Eagle and Clemens have adopted the increasingly common hybrid strategy of blending year-round low prices with promotions that seem to recognize the need for specials to create traffic-driving excitement.

Giant Eagle said it would continue running weekly specials, loyalty-based offers, double coupons and seasonal offers, a decision supported by customer feedback and purchase behavior. In Clemens' most recent weekly ad, nearly three full pages of 10 for $10 specials supplemented two full pages of EDLP items such as Capri Sun drinks, Cascade dish detergent and Purina Dog Chow.

In stressing its continued commitment to great perishables, Giant Eagle seems to be taking a page from operators like H.E. Butt Grocery, San Antonio, Texas, which also emphasize quality along with good prices, said Sven Risom, a partner at Cannondale Associates, Wilton, Conn. "It's a value proposition vs. a price proposition."

EDLP strategies aren't without risk. Retailers need to pick the right items for price cuts and communicate those cuts to customers. Trade spending is regularly used to support the programs, Risom pointed out.