Supermarket industry - Essay Example

The United s Supermarket Industry Supermarkets in the United s are continuously competing for a share of the $1.5 billion that Americans happen to spend in their grocery shopping. As a result of the low profit margins that normally range between 1.5 to 2 percent, there exists severe cutthroat competition in the entire supermarket industry (Oz, 229). There are approximately more than 35,000 supermarket stores in the United States with each store stocking about 50,000 different products that are all competing for the buyers’ attention. As a result of this, there are several marketing strategies that have been employed by supermarkets to ensure that they are able to maximize on their profit margins. Supermarkets are currently employing a wide variety of various low-tech and high-tech tools in their never ending struggle to try and grab a larger share of the $500 billion that American happen to spend each years on their supermarket purchases (CNBC 2011). The Marketing Strategies and Concepts Used by Supermarkets Supermarkets are constantly trying as much as possible to learn about their customers and their respective buying habits. To do this, they analyze and trail their customers from the moment that they entire the supermarket store using a variety of technological tools such as video monitoring, heat maps that actively track shoppers as they move around the supermarket and the loyalty cards that the supermarkets have given to their customers (Ryals 139). Attractive and appropriate packaging Supermarkets encourage producers to package their products in attractive packaging materials so as to be able to attract shoppers into buying the products. Companies such as Henkel Consumer goods have employed a large team of engineers, artists and technicians whose main role and focus is to ensure that they work on constantly developing the bottle design and packaging. Careful consideration is placed on every label and word that appears on the bottle. Some of the factors that are taken into consideration seek to answer questions such as: do the customers find it easy to handle the packaging? Do they find it easy to physically pick up the product and store it in their shopping carts? Do they find it easy to pour the product from the container? And is it easy for them to store the product in their houses in light of the shelves used in the average homes? (CNBC 2011)? Shopping Presentations In efforts to try and enhance the marketing concepts and strategies that are in use within the supermarkets, supermarkets have taken to employing the services of professional companies that help them create appropriate designs for their stores that will help them in maximizing their sales. The designs take into account everything about the customer’s shopping experience down to the product placement that will be used in the shop so as to ensure that the customer’s senses are well appealed (CNBC 2011). These design companies create “Stopping presentations” of various products which they stage theatrically. Supermarkets employ the use of cartons that they artfully arrange so as to ensure that they make the actual real product on sale appear to be more abundant than it really is. The most valuable space is usually the space at eye-level and most new products are placed at this level so as to further attract the customers (Graf 46). Common purchase products such as butter, milk and cheese are placed at the farthest corner of the store so as to ensure that customers are tempted to purchase more products on their way to the isle where these products are place. Instead of the more traditional isle design where the isles are arranged in a meandering fashion instead of row after row of straight isles, there are now more twists and turns that have been placed so as to ensure that a shopper comes into contact with more tempting goods to purchase (CNBC 2011). Some of the best supermarket stores today ensure that they appease the shoppers senses by stimulating them using various scents and sounds such as ensuring that the aroma of fresh baked bread is sifting through the supermarket, preparing foods such that it becomes common for shoppers to view the sight of rotisserie chicken carefully being roasted over a flame and misting sprays of water over the vegetables on sale (CNBC 2011). Doubling of the Shopping Cart Sizes and Pricing Strategies Various supermarkets such as Whole Foods have double the size of the shopping carts that are used by their shoppers. This has resulted to a situation where shoppers have been seen to spend approximately 40% more on their average purchases (CNBC 2011). Supermarkets have also taken to causing their customers to think that they are getting good deals on the products they are buying although this might be to the contrary. They do this by ensuring that the prices they set for some of the more commonly purchased products such as bread, milk and eggs are actually cheaper as compared to the prices that have been set by their competitors. By doing this, they subsequently attract more customers to their stores. When customers see that the prices of these goods are actually cheaper than those that they are normally used to seeing, they think that the whole supermarket is actually cheaper. What the customers happen not to be aware of is the fact that the supermarket increases the prices of everything else by about 10% so as to be able to adequately recoup their profits (CNBC 2011). New Scanning Technology to Provide Customers with Coupons and More Information Although coupons and sales signs area seen to help customers make more savings, they also help the supermarket stores in learning more information about customers. Recent technological innovations such as the self check-out tool that was recently introduced by the 375-store Stop and Shop supermarket chain links to a customer’s loyalty card and keeps a record of all the customer’s purchases over a time period of the past 60 weeks. It monitors the customer’s current location at the supermarket store and based on this information, it provides information to the customer on the availability of offers for the products that are located at the customer’s current location. If the retailer happens to notice that the customer never purchases a certain category of products from the supermarket store, using the self check out tool, they will provide price reduction incentives to the specific customer so as to try and ensure that the customer purchases the product from the given supermarket store as opposed to their visiting another store for purchase (CNBC 2011). There have been a variety of privacy concerns over the use of such systems in supermarkets. This is because customer information is constantly being mined and used to create more tempting offers that have been tailor made to the customer. It has been argued that the supermarket stores should provide customers with the privacy policies on the use of these systems (CNBC 2011). Offering Premium Quality Products Some supermarket store chains such as whole foods have managed to develop systems that help them ensure that foods are delivered to customers as fast as possible while they are still fresh. They provide product samples that allow customers to sample the products before purchase. This is mainly because research has shown that offering samples to customers actually increases the possibility of the customer purchasing the product on offer. Some of the other marketing strategies employed by Whole Foods include displaying lush gourmet food displays and promoting the locally produced organic food supplies (CNBC 2011). Employing these marketing strategies and concepts has seen Whole Foods manage to average sales of about $33 dollars per shopping cart which is a figure that is about $4 dollars more than the average shopping cart purchase in an average supermarket. In light of the tens of thousands of customers that the supermarket chain is able to attend to daily, the increased average daily sales have seen the company netting profit margins that are basically about 3% more than the industry’s norms (CNBC 2011). Small Stores There are a small number of individual personally owned supermarket stores in the United States although the number of these stores is slowly decreasing as most of them are swallowed up by the larger supermarket chains or are forced to go under (CNBC 2011). Small supermarket stores find that they are unable to effectively compete with the large retailers such as Wal-Mart and Trader Joe on the pricing front and have resulted to using different marketing tactics so as to effectively combat these large retailers. These individually owned stores provide a different comfortable home to a customer base that has been seen to be fiercely loyal to them. They employ tactics such as treating their employees well so as to ensure that the employees reciprocate the same to the store’s customers. Employees are offered several benefits such as being given offs on Sunday so as to make sure that they have ample time out to spend with their families. The stores also partner with local vendors so as to ensure that they get the best deals which can be able to be passed on to the stores customers offering various home delivery services for the products and goods that have been purchased by customers. These stores are also able to offer credit facilities to their frequent customers where these loyal customers are given the option of purchasing goods on credit and their purchases are recorded on a tab (CNBC 2011). Works Cited CNBC. Inside a $500 billion Money Machine. Web. 11th Feb 2012. http://video.cnbc.com/gallery/?video=3000021001 Graf, Mitche. Power marketing, selling, and pricing: a business guide for wedding and portrait photographers. Buffalo, NY: Amherst Media. 2009. Print. Oz, Effy. Management information systems. Boston, Mass.: Thomson/Course Technology. 2009. Print. Ryals, Lynette. Managing customers profitably. Chichester, England; Hoboken, NJ: John Wiley & Sons. 2008. Print. Read More