Reed Supermarkets: A New Wave of Competitors - Case Study Example

Reed Supermarkets: A new wave of Competitors Introduction Unfortunately Reed supermarket is being perceived as high quality retailer from all the various outlooks. This provides a significant obstacle for the company as the consumers are spending less amount of money in the each trip and also the consumers are becoming less loyal. The study has been conducted in lieu to analyze the various obstacles faced as well as the opportunities that prevail in front of the company in near future. During the course of the study SWOT analysis has been used as an analytical as well strategic tool. Reed supermarkets were developed in the year 1939 by William Reed in Kalamazoo Michigan. As on 2010 there were 192 retail stores and had 21000 employees all over the Midwest. One of the significant attributes would be vast array of the products and services. As a result the Reed is perceived as a high end retailer. SWOT Analysis Strengths One of the major strengths of the retailers would most certainly be the brand name of the company. The company has been in the business for very long period of time. Reed is a reputed and well recognized brand. The brand awareness is also quite high. Another major strength of the company has been the high quality and wide ranging products due to which the company is perceived as a high end retailer. The quality of customer service is also of high standard. The position of the retailer in the Columbia market is quite strong. It happens to be the second largest market share holder in Columbus. Also the locations of the stores are also in areas that have promising demographic features. Weaknesses One of the major weaknesses of the retailer has been the fact it has been attracting a very small pool of the total market. Pricing strategies have been a major problem of the company. Presently the company has the third lowest pricing index. Add to this the dollar special campaign has not been very helpful too. The dollar special was launched by the company in the month of June in 2010. The main objective was to combat the high price image of the company. During this campaign the company would provide dramatic discounts on 250 items on each week. However, the campaign ended up confusing the consumers and decreased the quality status of Reed. Also the retailer has been operating at a low operating margin of 2% of the gross sales compared to the other competitors (Kotler, 401). Opportunities Political Government compliances and regulations may not appear as an opportunity. However, such regulation can actually help the company strengthen the corporate governance structure. Economic After the recession the economy is slowly becoming stable and hence provides a lot of opportunities to the retailers in terms of growth. Social Changes in consumer behavior offer the company to focus on the distribution strategy and focus on customer convenience to increase the level of customer satisfaction. Technological Rise of the digital medium provides a lot of opportunity for the retailer to reach the customers directly and increase the level of engagement. Environmental The customers now days prefer to do business with companies that are providing green and healthy products. Hence this provides opportunity to the marketers to position themselves as a green and sustainable brand. Other There is opportunity for the company to setup businesses in the emerging economies. Threats Political One of the major threats would be the compliance and regulations. The conventional regulatory interactions are being complemented by various contradictory pressures regarding various environmental impacts as well as security of key infrastructure. Economic The major threat would most certainly be the effect of the economic downturn. Despite of the growth coming back to the world economy after the recession, the risks still seem to be significant. The recession has lead to a structural shift to a low demand growth environmental environment. Social The retail companies have failed to adapt to the shifting consumer behavior. The consumers have become lot more selective in the decision making. The change in the consumer behavior continues to be trend in the post recession era. Technological The retailers have not yet been able to take major befit from e-commerce. Consumers are now looking to stay in-house and buy product through the online medium. Although there has been effort to develop strong digital strategy, but still the digital presence of the retailers is not strong enough. Environmental The objective of decreasing the carbon emission from power generations still continues to be driving factor for transformation in the industry. Social and environmental activists along with the government tend to keep a strong eye on the retailer to ensure that the business practices do not lead to increased amount of carbon emission. Other One of the major threats would be the entry of Aldi in to the Columbian market along with the volatility in the commercial real estate market. Major Threats The shift in the consumer behavior would most certainly be the major threat. Due to the economic circumstances, the disposable income of the people has gone down. As a result the consumers prefer staying in house and shopping through the digital medium. All these would mean that the company has to work on all the aspects of the marketing mix along with the digital marketing strategy. Dollar Specific Campaigns One of the probable options available for the company would be provide weekly customer appreciation sales. The dollar sales have not helped the issue of price perception, but have increased the market share. The customer appreciation sales would help in separating the store from the dollar stores. Also it would help the retailer to continue to maintain quality perception. It may also help in improving customer loyalty. However here it needs to be said that effectiveness of the campaign may not ensure success. Therefore it is suggested that the retailer review the campaign for six months. Probable strategic options The focus of the companies should be on staples. The retailers have to understand that the problem is not price, but rather the perception of the price. The company has to should compare the price items with that of the competitors. This should be considered even if it is under variable cost. The results may not be instant as the beating the high price perception would in time increase the market share. There would be also potential for the customers to buy low priced items. The company should also concentrate on offering more private label brands. The private labels would likely to carry larger margins and also increasing market share. The private label brands with the low cost model and high margin would have an application in the customer loyalty programs. The objective of the company is to gain 2% of the market share. However, it is to be said that without developing customer retention methods the company is very unlikely to do so. When a customer visits a store, the total store expenditure is recorded as $500. The customer is notified of $5 off the next purchase. If the customer retention techniques are not applied this will grow. $5 may not be a budget changer, but this would be good enough to notify and reinforce customer desire to shop at the store again. Conclusion Based on the above analysis it can be said that the ability of the retailer to adapt to the various environmental issues would be the key to the success of the retailer. Also it is advised that the company might have to discontinue the dollar campaign and reposition itself as an EDLP store to prevent confusion among the customers. Works cited Kotler, Philip. Marketing Management. Prentice Hall: UK, 2001, Print. Read More