Reed’s superstore case study

Presented by –Sarang BanubakdeSaurabh MhaseVarun Balakrishnan

Reed’s supermarket• Mid sized regional grocery store • Established in 1939 – William Reed• 192 retail stores, 2 regional distribution centers ,

21000 employees • Attractive stores, long hours, exceptionally

attentive customer service• Meredith Collins – VP Marketing• Jack Morrissey - CEO

The Columbus market• Case discusses Reed’s market strategy for the

Columbus, Ohio • 3rd largest metropolitan area in Ohio• Population: 2 million, Median income- $52000• Intense competition in Grocery supermarket

sector• Three competitors of Reed’s supermarket 1. TopVal - Lower priced 2. Galaxy - Mid ranged 3. Delfina – Top ranged

U.S. Food retailing Industry• 50 companies dominated the industry ( 70% of

overall revenue)• Each household spends $5200 a year on groceries

with 2.1 trips a week• Key trends- 1. Decreasing customer loyalty 2. More frequent fill in trips than stock up trips 3. Private label foods are on rise 4. Customers are preferring value to influence 5. Second generation

Reed’s position in 2010• Sales $660 millions in 2010 • Gross margin 22.7%, Net 2.1%• Dollar store margins 8.5%• Current market share 14%

• Goals- 1. Market share 16% 2. Increase sales by $94.3 millions 3. Increase revenues by $14.3 millions 4. Increase net profit by $1.9 millions

Strategy

• With high quality index , exceptional customer care and a recognized brand, Reed should concentrate more to boast about it through IMC.

• Should launch some customer loyalty program to appreciate customers.

• Bundling according to preference of customer should be introduced.. For example 5buns + tuna patties + sauces scathes +fresh veggies, can serve approx. 4-5 burgers.

Strategy contd..• Pricing should be brought as low as competitors

by reducing variable price. • Offer more range of private label brand which

when purchased in bulk would provide better margin.

• Reed has large number of stores, so bulk offers should be made .

• Get involve in co-branding with famous local fast food vendor in Columbus, which would help to increase footfalls at stores.

• Start online retailing with cash on delivery as an option.

Threat from Aldi and Dollar storeAccording to Exibit 2: • Operating profit for Reed is 2.1 and that of Aldi is

1.5, while dollar store (3+) is 8.5• Quality index is very high as compare to Aldi and

dollar stores i.e 8.4 over 6 and 5.6 resp.• If Reed reduces the prices and come up with

suggested strategies , it will have no threat from Aldi and Dollar store, as its positioning will be better in terms of quality .

• Hence in long run Aldi and Dollar have no threat but can't be easily ignored .

Dollar Special Campaign• Offer items at discounted rates.Feasible or not?• High priced image still exists.• Doesn’t bring in any major profits.• Cherry picking by customers.

Collin’s action plan for 2011• Discontinue the Dollar program• Focus more on daily price reduction plans• Increase Sales Target: To increase the current

market share to 16%, sales target is set to 775Mn for 2011

• Focus and Maintain current Target Segment: Continue focusing on the current target segment of affluent and older customers with smaller household size. Their wallet share is 8.93% only as compared to average supermarket customer’s wallet share of 10.0%

Collin’s action plan for 2011• Maintain current Brand Positioning: Maintain

current brand positioning as high quality supermarket.

Thank You