LAUREL TRIES OUT LOW-PRICE PROGRAM

Lucia Moses

LONDON, Ky. -- Laurel Grocery here is the latest to embrace a strategy that combines everyday low prices on fast-moving items while stressing the quality of perishables.

The wholesaler, which specializes in serving small independents in the Midwest, began testing a program in three stores in September, with plans to add a fourth on Nov. 4. The Strategic Marketing Initiative, as it's called, aims to increase sales-per-customer transactions by pricing 3,500 to 4,000 items within 5% to 10% of Wal-Mart Stores' prices, said Bob Kirch, Laurel's executive vice president of operations.

"Because we run advertising, feature pricing, we don't expect to be as low as their price on the shelf every day," Kirch said.

Laurel hopes to complete the test in January, then extend the program to other retail customers. Laurel serves about 428 retailers, more than half of which are conventional grocery stores.

The program includes heavy signage that identifies the lower prices and promotes stores' high-quality and customized perishables.

Laurel's customers compete with discount retailers everywhere, but in Ohio and Indiana, competition from Wal-Mart is particularly fierce, Kirch said.

In economically hard-hit eastern Kentucky, however, the timing of the test was good for Larry Whitaker, one of the participants. His two Foodworld IGA stores battle Wal-Mart, Save-A-Lot, Food City and Dollar General for the budget-conscious shopper, and one of the Wal-Marts he competes with just expanded its dairy and frozen assortment.

The pilot, in addition to lowering prices store-wide, also involved changing associates' dress code, putting in a new sign package and adding a "you saved" line on receipts, Whitaker said. "It has done very well for us," he said. "Our sales have not increased a lot, but we're still having gains each week."

Another effort by Laurel to help customers compete with discounters involves offering 150 of the fastest-moving items in its Valu Time discount food line below cost to its retail customers who agree to sell it for a low retail. Laurel price checks the competition once a month. The prices it sets typically match or beat Save-A-Lot and Wal-Mart, Kirch said.

"We sell that product sometimes below our cost so that a retailer can be very competitive with other formats and still be able to cut a decent gross profit," he said.

In markets with strong value-retailer competition, Laurel advises operators to display Valu Time, from Topco Associates, together with dollar items, heavily signed, near the front of the store. "We isolate it, we try to put it first in line of traffic whenever possible," Kirch said, adding that many retailers have had strong results with this approach.