Investor Steve Cohen added to his stake in The Fresh Market (TFM), a hedge fund reduces its ownership in Safeway (SWY), and Kroger (KR) reports disappointing third-quarter earnings—and all this action happened in earlier this month.
The action marked another frenzied period in the grocery industry, as behemoth competitors fight for consumer dollars and loyalty on a daily basis. In a fiercely competitive environment, the chains must cater to all types of shoppers, their wants and needs, tend to the little idiosyncrasies and keep customers coming back. That’s no easy task. One bad experience can easily send a shopper packing for another store.
Welcome to the world of grocers, where repeat business is king and the key to success.
Individualized deals boost sales
So, what do the big grocery companies have in store for shoppers in 2014? Some are taking a page from Amazon’s (AMZN) book and working toward a targeted individual approach. Safeway has already had success with its Just for U program, which sifts through a shopper’s buying tendencies and offers special offers based on personal habits.
For example, families who shop at Safeway for gluten free-foods frequently and sign up for the Just for U program will receive discounts and deals for gluten-free products via Safeway’s app.
According to Todd Morris, an executive VP at Catalina Marketing, every $1 given away in grocery promotions generates $8 in extra sales. The special offer model has done wonders for Safeway, where about 45% of sales—up from nearly zero in 2011—are derived from shoppers who get personalized coupons online or via mobile apps. The program, with some 6 million registered users, has boosted Safeway’s revenue by 1%.
“It’s not enough to turn the company around, but it’s definitely enough to move them in the right direction,” said Andrew Wolf, an analyst at BB&T Capital Markets.
The concept of personalizing coupons based on past purchases isn’t new, but offering the weekly or even daily deals online or through an app is in the grocery store business. For example, Kroger (KR) customers began receiving 150 personally relevant coupons a week this summer. The goal, of course, is to retain customers and grow sales, possibly even make prices less relevant and the frequent personal touch more so.
So, with that competitive landscape in mind, let’s take a look at how some of the major food chains are faring as they head into a new year.