Reed Supermarkets: A New Wave of Competitors - Essay Example

?Reed Supermarkets: A New Wave of Competitors SWOT ANALYSIS FOR REED Strengths Reed Supermarkets has around 192 retail outlets with almost 21,000 employees operating in the United States. Reed also has two distribution centers for satisfying the demand of its wide-ranging customers effectively. Reed offers a wide range of products which include groceries, meats, paper goods, baked food products, sea foods, pharmaceutical products and health as well as beauty care products. Reed seeks to provide quality products to its customers which have in turn added to its high degree of customer loyalty. The outlets of Reed Supermarkets are attractive and offer services for long hours. Moreover, the outlets are decorated with well-designed serving-case displays. Reed has also adopted various promotional activities in order to improve its attractiveness amid customers which have increased customer preferences towards the organization. The employees of Reed are well-trained. Additionally, the organization follows a high-staffing level which ensures that customers are provided with quality services. Reports depict that Reed’s quality index has been stable at around 8.4 over the years 2008 to 2010. The margin was apparently better than many market players which reveal that the company has been able to obtain a leadership position in the industry. Weaknesses The customers of the market segment of Columbus are observed to be less loyal toward a particular product or company and thus, Reed may not be able to acquire a permanent base of customers. The customers of the food retail industry are price sensitive and are inclined towards low-priced products. These factors may affect the performance of Reed, as the products are offered at high prices. This can be observed with reference to the below chart. Figure 1: Feedback of 250 Columbus non-customers for not shoping at Reed Source: (Quelch and Carlson, “Reed Supermarkets: A New Wave of Competitors”) The locations of Reed outlets are observed to be affecting its operations, as its stores are located far from customer reach. The marketing strategies of Reed proved ineffective at the time of the economic downturn, during the year 2008-10. This depicts that its marketing approach lacks flexibility to adjust with the external market environment. Opportunities The stable market conditions of Columbus are likely to assist Reed in operating its business operations successfully. The customers are perceived to be health conscious deciphering greater demand more for organic food products. Hence, Reed has an opportunity of enhancing its business operations and performances as it focuses more on quality and organic products. The demand for retail food products has increased in Columbus which can aid Reed to enlarge its business operations. Political/legal The US political and legal systems are stable as well as strong which may assist Reed to operate its business functions efficiently without much government interventions. The political and legal systems of the US are favorable toward various business expansion strategies. In this context, the US attracts huge amounts of foreign investments in its corporate sector which may assist in improving the economic condition and thus prove beneficial for Reed. Economical The US has faced recessionary effects during the period of 2008-2010. However, the economy revived from the crisis situation rapidly which in turn increased the spending capacity of customers. After the recession period, spending on grocery items was observed to be around $5,200. In this respect, the performance of Reed can improve with better profitability margin (Quelch and Carlson, “Reed Supermarkets: A New Wave of Competitors”). The disposable income for households was reported to be around $52,000 in Columbus in the year 2010 depicting a substantial increase in the spending of customers for grocery and food products (Quelch and Carlson, “Reed Supermarkets: A New Wave of Competitors”). This factor is further quite likely to assist Reed to perform at a better profit margin. Socio -cultural The targeted customers of Reed are observed to be increasingly concerned about health. Thus, they tend to demand more for organic products. Reed is mainly concerned about offering quality assured nutritional organic products to its customers. This might in turn be beneficial for the organization to attract a larger proportion of the targeted customer base. The customers are attracted towards stores which offer wide range of product lines. This particular socio –cultural trend will assist Reed in attracting additional customers as it offers a wide variety of products. Technological The development of technological factors have facilitated many retail marketers to introduce frozen products and refrigerated dairy food products. Reed, with the assistance of refrigerators, can also be able to increase its product range variety and satisfy the demands of its customers effectively. Environmental The development and growth of the food retail industry in the market segment of Columbus will assist Reed to perform its operations successfully. Threats In the market segment of Columbus, intense competition amid food retailing companies can be witnessed. Consequentially, Reed is observed to face intense competition from Delfina, Galaxy Chain (Supervalu), TopVal and Dollar stores among others. Demands for private label products have increased immensely within the market segments of Columbus. The growing demand for private label products further tends to pose significant threats for branded products offered by Reed. Political/legal The political and legal systems of the US are favorable in attracting huge sums of foreign companies which has in turn increased competition in the market segments of Columbus. Economical Figure 2: Perception of Customer in relation to Supermarket Chains in Columbus Market Source: (Quelch and Carlson, “Reed Supermarkets: A New Wave of Competitors”) The financial crisis and recession risk, in the US, is the major threat for the food retail industry. It has also hampered the performance of Reed by a significant extent, as the prices of its products are higher as compared to other food retailing stores. The customers have been observed to be price sensitive and spend greater proportions of their income on purchasing value added products due to the economic downturn occurred within the US. As Reed offers products at high prices, the company had to witness a reduced profitability ratio. Socio -economic The preferences of customers have changed substantially. Also, there has been a decline in customer loyalty which has affected the business operations of Reed by making the customer preferences trend, highly unpredictable. The customers are more concerned about shopping in stores which are situated nearby. This changing attitude of the customers has affected the performance of Reed due to the location problem. The development of near-national brands, including Supervalu and Kroger among others, has affected the regional food retailing stores such as Reed. Moreover, customers are observed to be more attracted toward warehouse clubs and supercenters as compared to supermarkets, principally due to better availability of a variety of products and quality services. This particular trend can also affect the competencies and sustainability of Reed. Technological The competitors of Reed, which mainly include Dollar stores, have introduced frozen and refrigerated products in the market segment of Columbus which has intensified the market atmosphere. Environmental The competitive market conditions and recessionary situations have adversely affected the operations and performances of Reed and may affect in the future as well. Greatest Threat Reed is perceived to face intense competition from national and international food retailing companies. The development of the food retailing industry in the US has facilitated foreign companies to enter the national market segment with better and innovative products. Moreover, the companies have entered the market segment with an assortment of marketing strategies, which include a mixture of private labels as well as national and international products, with the objective of creating a better impact on customers providing them with better innovative products in Columbus. Moreover, these companies have been offering products at a lower cost as compared to Reed, which might also affect Reed’s competitiveness largely. In this regard, competitors can be affirmed as the greatest threat for Reed which is hampering its competitive position and profit margin (Quelch and Carlson, “Reed Supermarkets: A New Wave of Competitors”). Dollar Specials Reed has adopted a marketing campaign, which is identified as ‘dollar specials’, with the intention of combating with its image of a high priced product offering company. Reed offers around 250 food items at a discounted rate for attracting and building a larger customer base. The campaign is promoted with the assistance of online advertising, print and broadcast medium in order to develop loyalty amid customers for ensuring better customer retention. Moreover, this campaign is determined to be closely related to the marketing strategies of dollar stores. The campaign has assisted Reed in attracting new along with existing customers amid various chains in the different market segments of the US. In future, this campaign shall assist Reed to improve its competitiveness and to execute its operations effectively, with better profitability margin. The management of Reed, with the assistance of this campaign, shall also be able to create better awareness amid consumers about products offered at lower prices. In this context, the campaign should continue to acquire more customer base (Quelch and Carlson, “Reed Supermarkets: A New Wave of Competitors”). Strategic Options In order to improve its operational performances, competitive positioning and profitability margin, Reed is required to adopt certain strategies with the objective of developing its business. In this regard, Reed has served its customers with various special offers, principally, in relation to low-priced products, with the motive of attracting more customers and attaining a greater level of satisfaction from the targeted market. Reed has also adopted strategies for expanding its product line with the inclusion of private branded products, which are in great demand within Columbus. Additionally, Reed has acquired a ‘double couponing’ strategy with the aim of targeting price-sensitive customers. In accordance with this strategy, Reed also intends to offer additional coupon discounts to customers. The ‘double couponing’ strategy will be the most appropriate strategy for Reed in order to improve its business operations and profitability margin. It is because of the fact that with the assistance of this strategy, Reed will be able to target price-sensitive customers deciphering greater efficiency (Hess and Gerstner, “Double Couponing: Pricing and Consumer Perspective”). Works Cited Hess, James D. and Eitan Gerstner. “Double Couponing: Pricing and Consumer Perspective.” Marketing Letters 4.2 (1993): 153-163. Print. Quelch, John A. and Carole Carlson. “Reed Supermarkets: A New Wave of Competitors.” Harvard Business School (2011): 1-12. Print. Read More