PRICE RULES

Christina Veiders

Discount prices are a common denominator for many U.S. food shoppers these days as low prices have become the main draw at many different outlets that now sell food.

Traditional food retailers may consider this the lowest common denominator in a food retailing world where the almighty dollar drives consumers to shop multiple venues to get the best deal in town.

The national/regional supermarket chains are trying to counter-attack the alternative formats and win back shoppers. Consumers in a recent SN online poll cited specific improvements they've witnessed at the large food chains over the last two years.

Despite efforts made by large grocery chains, which include lower and more competitive prices, the question raised is can enough still be done to win back lost shopping trips from alternative retailers now selling discounted food? The jury remains out on that question. The 405 consumers queried by SN overwhelmingly chose price as their main motivator in patronizing a retailer that sells food. Convenience and selection were listed as strong second and third reasons to shop a particular retailer.

When asked if supermarket chains can satisfy all their food needs, consumers were split down the middle, with half saying yes, and half saying no or they were not sure.

When it comes to winning consumer loyalty, price again wins with 51% of shoppers who said they would be loyal to retailers that consistently offered good prices and values.

However, nearly a third of consumers (32%) said they were not loyal to any one retailer, indicating loyalty is a value of bygone days and has been eroded due to today's competitive retail choices. Only 4% said they were loyal to those retailers that offered a good loyalty program.

The "Where Do You Shop? -- Supermarkets vs. Alternative Formats" survey was conducted for SN in March by InsightExpress, a Stamford, Conn.-based research company. The survey randomly invited individuals to participate through thousands of Web sites. The online panel was nearly split equally between men (48%) and women (52%) who answered 20 questions about their food shopping habits and food retailer preferences.

The survey asked consumers where they primarily shop for food; how frequently they food shop; their opinions about shopping large supermarket chains, independents and alternative formats; and their food shopping habits in general.

The vast majority of participants (72%) were between the ages of 30 and 59. Household incomes were skewed at the higher level, with 52% reporting incomes between $40,000 to $70,000 and above, which indicates a natural bias in online surveys in that those who can afford a computer are generally those in higher income brackets, vs. the general U.S. population.

SURVEY RESULTS

The good news is that despite the proliferation of alternative formats that sell food, large supermarket chains still remain the primary shopping venue for more than half of consumers polled by SN.

When consumers were asked where they shop for most of their food, the majority (55.6%) chose a large grocery chain. Both Wal-Mart supercenters and independent grocers received the next highest shopper endorsements, with an equal percentage of shoppers (18%) choosing Wal-Mart supercenters and 18% selecting independent grocers as their primary shopping venues.

A small percentage said they regularly patronized warehouse clubs (4%), limited-assortment, low-price stores (1.5%) and natural foods stores (1.5%). Convenience and dollar stores all drew less than 1% of shoppers.

The majority of respondents (63%), said their patronage to the large grocery chains is unchanged. However, nearly a quarter (22%) said they shop these outlets less often, while 15% said they shopped more often for food at a large supermarket chain.

In terms of shopping frequency, more than a third (38%) said they shop at supermarket chains once a week. Just 14% said they shop there twice a week. A small percentage (7.4%) said they shop supermarkets three times per week.

Well over a third of respondents (37%) reported shopping at a national grocery chain on a monthly basis, and nearly a quarter (21%) said they go to the supermarket once a month or less. While a small percentage (3.5%) said they never shop at a national grocery chain, this figure could be significant given consumer trends to shop alternative formats on a regular basis.

SN asked consumers the same shopping frequency question when it comes to shopping at alternative formats. In response, nearly a third of consumers (32%) said they occasionally visited alternative formats: supercenters, discount stores, warehouse clubs, natural foods stores, and dollar and limited-assortment stores. This is compared to 12% who said they shop supermarket chains occasionally. Less than a quarter (20%) said they shopped alternative stores weekly, vs. 38% who said they shop supermarket chains weekly.

Over a third (36%) said they shop alternatives once, twice or three times monthly, as compared to those (25%) who said they shop supermarkets once, twice or three times monthly.

While it's clear from the aforementioned responses that large supermarket chains draw shoppers more frequently than alternative stores, national trends indicate alternative retailers are stealing shopping trips away from the national grocery chains.

Food Marketing Institute, which tracks frequency of trips to supermarkets through its annual Trends consumer survey, reported some erosion in the number of weekly grocery visits last year for the first time in nearly two decades. The report speculated it was due to more fill-in grocery trips to alternative stores like discount and warehouse clubs on a monthly basis. The typical shopper made 2.0 visits to a supermarket in 2004, vs. 2.2 weekly trips reported in 2003, according to Trends. This included an average of 1.7 visits to his or her primary supermarket.

MORE CHOICES, LOWER PRICES

SN's consumer survey indicated that lower food prices and more alternative shopping choices are primarily driving consumers away from shopping supermarket chains.

For those (22%) who said they shop less often at supermarkets, the majority (58%) said alternative stores offered lower prices. Over a third (33%) said there are simply more alternative outlets that sell food from which to choose.

For a quarter of shoppers who said they shop less often at national chains, better selection of food at alternative retailers was the reason they gave. Nearly a quarter of respondents (19%) said they shopped other retailers because they found the experience at supermarkets lacking when it came to ease, speed and convenience. Others (22%) said they shop less often at supermarkets for unspecified reasons.

As to why shoppers aren't patronizing supermarket chains on a more frequent basis, SN asked consumers what supermarkets can do to attract them.

In response, three-quarters of consumers said better prices and values. Another 40% said supermarkets need to improve their quality and selection.

Other areas for improvements included:

- Overall service, cited by about 15% of shoppers.

- Well-trained, knowledgeable and friendly staff, cited by 12%.

- Greater selection of more unique items and healthy, natural/organic foods, cited by 10%.

- More ethnic foods, in-store excitement, and stores that are generally in tune with shoppers' needs, cited by 5%.

MAKING ADVANCES

While shoppers clearly stated they want and are driven by lower prices, nearly half (47%) pointed to "more competitive prices" or "lower prices" as one area in which supermarket chains have most improved over the last two years.

Just over a quarter of shoppers (27%) said supermarkets have upgraded their selection of goods. Another 18% said in-store decor and design have most improved during the period.

Other improvements that were noted include: faster service (18%), fresher produce (17%), more natural/organic foods (12%), more in-store services (10%), more ethnic foods (8%), and more professional employees (6%).

While consumers indicated national chains have made headway in lowering prices, it may not be enough to compete against alternative formats. Discount prices offered by alternative retailers still appeal to most shoppers.

When asked what appeals to them most about shopping alternative chains, price/promotion was rated the No. 1 draw by a high percentage (from 66% to 70%, depending upon format). This was followed by convenience and overall selection, corroborating the reasons why consumers said they shop less at supermarket chains.

For those shopping Wal-Mart supercenters, consumers rated price/promotion (66%) as the main draw, followed by convenience (32%), and overall selection (27%).

When asked to name a store they shop frequently for food and what they liked most about it, the majority naming Wal-Mart supercenters obviously said low prices. Wal-Mart's convenience also was a big attraction.

"Wal-Mart supercenter is where I purchase the majority of my food. I shop there because I can get a lot done in one trip, and it is less expensive," said one. However, the consumer added: "If I need to make a quick trip for something, I might go to Kroger because it is on my way home from work, but it is more expensive."

Another said, "I can get all of my needs accomplished in one place at a Wal-Mart supercenter."

"Wal-Mart because they have a variety of items. I can purchase food, sewing supplies, movies, toys, clothing, furniture and get my car serviced in one stop," said another respondent. This same person also shops Ukrop's "because they are so nice."

For those shopping warehouse clubs, 70% chose price/promotion as the main appeal, followed by overall selection (22%) and convenience (16%).

In individual responses, consumers mostly mentioned Costco and Sam's Club as their preferred stores to buy food. The reasons they gave were mostly price and value.

"Costco has good produce, good prices, bulk shopping for nonperishables," said one.

Another consumer shops Costco and Safeway. "I like both of them because they each have something that appeals to me: low prices, rewards, and friendly and helpful staffs. There are some items that one store does not have that the other has."

"My family shops at Publix and Costco," said another. "We love their clean environment at Publix. At Costco, we shop there because of the bulk items and the prices."

"Sam' Club is convenient and sells in bulk," said one respondent. Another said of Sam's Club, "I like the quantity and quality in the products."

"Sam's Club has great service -- knowledgeable people who help find great bargains for me. I can get fresh produce at great prices," said a shopper, who noted the ability to get locally grown produce in season.

Price again was the draw for 70% of those shopping dollar and limited-assortment stores. They gave overall selection (31%) and convenience (14%) as the next highest reasons they shopped the formats. This is a bit confusing since dollar and limited-assortment formats have an edited selection and don't carry a wide variety of goods. Yet, the question was about shopping other alternative formats in general, citing dollar stores and limited-assortment stores as examples.

How do independents fare compared to other formats? Just over half (55%) said they do not shop independent stores on a weekly basis, though nearly a third said convenience is what appeals to them most about shopping at independents.

Independents also scored high percentages on price/promotion (26%), knowledgeable friendly staff (23%), fresh produce (22%), community involvement (21%), and quality goods (19%) in terms of their overall appeal.

Reasons given by those naming specific independents they shop frequently usually included convenience, smaller store, and special selection or quality of products. Price was usually mentioned as a secondary reason.

"I have begun shopping more at local New Orleans stores, such as Langenstein's and Dorignac's. They've been around for over 20 years; sell lots of fresh, local products; and have great, helpful employees and a very loyal customer base. The food is fresh and high quality. The prices aren't the lowest, but they feel 'fair.' I don't feel that someone down the line is suffering so that I can pay 30 cents less for a can of tuna. That's what I don't like about Wal-Mart and other national food chains. I'm no radical. I just think that it's important for both businesses and consumers to be responsible," said one consumer.

Another respondent shops at Ron's Food Market because of the "excellent cuts of meat and specialty items." One cited Vic's Foodland for its "consistent shopping experience with reasonable prices, and it offers good community support."

"Scatturo's is the local grocery store. It has most of the amenities of a supermarket on a smaller scale, and a good variety of healthy and ethnic foods," noted another shopper.

Regardless of where they go, the majority of consumers (58%) said they are shopping for food the same as they have in the past. Yet, nearly a quarter (23%) said they buy food more often than in the past; 19% said less often.

When asked how their food shopping has changed over the last two years, consumers generally cast their votes across a broad spectrum of reasons. Drawing the largest percentages were "I go out of my way to get a bargain" (17); "I shop for healthy foods" (16%); and "I buy larger sizes and more quantity in food" (14%).

NO. 1 FOOD VENUE

Over half of grocery shoppers voted the national supermarket chain as the place they procure most of their food.

Where do you shop for most of your food?

Wal-Mart Supercenter 18.5%

National chain supermarket 55.6%

Independent grocery store 18%

Warehouse club 4%

Limited-assortment low-price store 1.5%

Convenience store 0.7%

Natural food store 1.5%

Dollar store 0.2%

ALTERNATIVE CHOICES

Buying food more cheaply at more alternative outlets are some reasons consumers gave as to why they have cut back on their trips to supermarkets.

Why do you shop less often at supermarkets?

I can buy food more cheaply at other alternative stores: 58%

There are many other food shopping alternatives: 33.0%

I like the food selection better at alternative retailers: 25.0%

Other: 22.7%

The shopping experience is not fast, easy or convenient: 19.3%

(Multiple responses.)

CAN'T GET NO SATISFACTION

Half of consumers said that a supermarket could not satisfy all their needs in one stop or that they weren't sure if it satisfies all their needs.

Do you feel the national chain supermarkets can satisfy all your food needs in a one-stop experience?

Yes 50.4%

No 35.1%

Not sure 14.6%

SUPERMARKET SHOPPING FREQUENCY

Most consumers said they are shopping supermarkets about the same as they have in the past two years. However, nearly a quarter said they are shopping there less often.

Do you shop at national chain supermarkets more often, less often or about the same as you did two years ago?

More often 14.8%

Less often 21.7%

About the same 63.5%

MAIN ATTRACTION

Three quarters of consumers said supermarkets can attract them with better prices and values. Another 40% of consumers said improved quality and selection would draw them to supermarkets.

What can national chain supermarkets most do to attract you to their stores?

Offer better prices/values: 74.8%

Improve quality/selection: 40.2%

Improve overall customer service: 14.6%

Employ well-trained, knowledgeable friendly staff: 12.3%

Offer more unique items: 9.9%

Other: 9.1%

Offer healthy, natural/organic foods: 8.9%

Offer in-store excitement: 5.4%

Better know their customers' needs: 4.9%

Increase selection of ethnic foods: 4.9%

(No more than two responses)

SUPERCENTER APPEAL

No surprises here. Price rules for two-thirds of consumers shopping at Wal-Mart Supercenters or other discount superstores.

What appeals to you most about shopping at Wal-Mart Supercenters or other discount superstores?

Price/promotion: 66.2%

Convenience: 32.1%

Overall selection: 26.7%

Other: 13.8%

Full service: 7.4%

Quality: 5.4%

In-store excitement: 3.5%

Fresh produce: 2%

Knowledgeable, friendly staff: 2%

Healthy, natural/organic foods: 0.2%

(No more than two responses.)

WAREHOUSE CLUB APPEAL

For 70% of consumers, price/promotion is what they said draws them to warehouse club stores. Nearly a quarter of shoppers cited overall selection as the reason for their patronage.

What appeals to you most about shopping at warehouse clubs?

Price/promotion: 69.9%

Overall selection: 21.5%

Convenience: 15.8%

Other: 14.8%

Quality: 10.6%

In-store excitement: 5.4%

Full service: 4.7%

Knowledgeable, friendly staff: 2.2%

Fresh produce: 2.0%

(No more than two responses)

MISSING WEEKLY RETURNS

Over half of the shoppers said they do not shop smaller independents on a weekly basis.

Do you shop smaller, independent grocery stores at least once a week?

Yes 45.4%

No 54.6%

FOOD SHOPPING

Many consumers said they shop for food in general about the same as they have in the past two years. Nearly a quarter said they shop more often.

Regardless of where you shop for food, are you shopping for food more often, less often or about the same as you have in the past two years?

The same 58.0%

Less often 18.8%

More than 23.2%

EXTREME APPEAL

While price/promotion is the main attraction at dollar, limited assortment stores, about a third of consumers said they also shop these outlets for convenience

What appeals to you most about shopping at other alternative formats?

Price/promotion: 70.1%

Convenience: 30.9%

Overall selection: 13.8%

Quality: 7.7%

Other: 7.2%

Knowledgeable, friendly staff: 4.7%

Healthy, natural/organic foods: 4.2%

Fresh produce: 3.0%

Full service: 2.2%

In-store excitement: 2.0%

(No more than two responses)

ALTERNATIVE SHOPPING FREQUENCY

Over a third of consumers shop monthly at alternative retailers. Over a quarter said they shop weekly, and another third said they shop occasionally.

How frequently do you shop for food at alternative retailers?

Occasionally 31.9%

Once a month 23.0%

Once a week 20.4%

Two or three times a month 13.0%

Twice a week 4.7%

Never 4.0%

Three times a week 3.0%

NO LONGER TRUE TO ONE

A third of consumers said they aren't loyal to any retailer. But half said they are loyal to those that consistently offer good prices/values.

What can you say about loyalty when it comes to where you shop for food?

I am loyal to the retailer who consistently offers good prices/values 50.9%

I am loyal to the retailer with a good royalty rewards program 4.0%

I am loyal only to the retailer who treats me special 6.7%

I am not loyal to any one retailer 32.3%

Other: 6.1%

Rating the National Chains

Consumers were asked to name food stores they frequently shopped and why. Here is what some had to say about four of the largest supermarket operators:

Kroger

"Convenient location to home with competitive prices."

"I like their sales."

"Good value on weekly sales, double coupons, low turnover in staff so friendly, knowledgeable."

"I shop at Kroger for variety of ethnic and healthy foods, low prices and the weekly buys/markdowns."

"It is on the way home from work and my bank is located in the store."

"Has everything at good prices."

"Great deals and good customer service."

"I like their meat and feel they have competitive prices."

"Double coupons."

"Close to home; clean, good bargains."

"I shop Ralphs for better deals."

"Fry's for their VIP discounts."

"Fry's, I like the 10 for $10 bargain prices."

"Fry's: good quality, good customer service."

"Fred Meyer is close by."

"Fred Meyer, I love the produce and they have a lot of variety to choose from."

Albertsons

"Good prices and selection."

"I like Albertsons, and the parking lot is not overly crowded. I can easily find what I am looking for."

"They run weekly specials and provide money off entire bill."

"Great selection."

"Convenient and consistent. I like the store brand."

"Conveniently close."

"I know the layout of the store, makes it easy to shop."

"Convenient, low prices."

"Specials, prices and beer selection."

"Acme has almost everything I need and has expanded their vegetarian choices."

"Acme has good selection, low prices."

"Acme is convenient and has good quality."

"Acme is an extremely convenient physical location."

"Shaw's selection."

"I shop Jewel, which I absolutely like nothing about. However, it is the most convenient to my home."

Safeway

"Local selection, good prices."

"Location."

"Convenience, full service."

"I shop at Safeway because it is there. We have little choice where I live."

"Prices."

"Good deals on meats."

"Clean stores, friendly staff, fair prices."

"Service and friendly staff."

"Von's is my No. 1 store for shopping. I use coupons to save money and will go to other stores to save money."

"Dominick's for its produce, fish selection and freshness. Price."

"Dominick's, discount card, Starbucks coffee counter."

Ahold USA

"Stop & Shop -- because they have good deals."

"Stop & Shop for its decent variety."

"Newly enlarged Stop & Shops that try and make it one-stop shopping with some discounted prices."

"Stop & Shop has all my shopping needs under one roof."

"Stop & Shop for its variety."

"Stop & Shop for its bonus card."

"Tops because they have the foods and brands I was getting in the Philly metro area before I moved to the country. They are part of the same chain of markets I shopped at before."

"Tops is convenient."

"Giant has fresh produce. It is clean, and has good selection of foods. Store employees are friendly."

"Giant, convenient and very good quality."

"Giant, new stores, great selection, good prices."