Food Lion’s Not So Extreme Makeover
Last summer, Food Lion began surveying its customers about
what they would like to see in its stores. The grocery chain has responded
and last week began testing a number of changes in stores in the Raleigh, NC
and Chattanooga, TN markets. Food Lion has cut prices on 6,000 items, increased
staffing levels for better service, upgraded its produce departments and reorganized
shelves to make it easier to shop its stores. If the test proves a success,
Food Lion plans to roll out the changes to all its 1,200 stores in the Southeast.
Cathy
Green Burns, president of Food Lion, said the changes are intended to keep
the chain competitive over the long haul.
"The model is not broken; it’s still a very profitable operation," she
told The News & Observer. "We just want to make sure it’s going to
be sustainable."
The retailer is also opening new stores, including a 35,000
square-foot unit in March located in Fayetteville, NC, that was the chain’s
second Leadership in Energy and Environmental Design (LEED) certified store
in the state.
The store’s produce section, according to The Fayetteville
Observer, is set up to look like a farmers’ market. Organic products
are available throughout.
Greg Beaman, a merchandise specialist for Food Lion,
said the store includes another green initiative that you don’t see in
other supermarkets. "To
encourage bicycle travel, we got a little bicycle shop where we can fix your
tire, and spaces out in the parking lot to encourage carpooling," he
told the Observer.
Discussion Questions
Discussion Questions: What types of changes do you think consumers most want from supermarkets? What changes are most effective for those looking to create a sustainable competitive advantage?
I think shoppers have always wanted good prices, good service, short checkout lines, and a good selection. The problem is, what defines “good” is a very individual thing and there is no “shopper”–there is a diversity of “shoppers.” Some will trade off service and/or selection for price, some want the least expensive products alone. I’d like to think shoppers are smart enough to get that price and service are complimentary–as one is improved, the other usually has to suffer.
In order to be sustainable, the question may be, “what’s available in my trading areas?” Given a TA has many different types of shoppers, where’s the hole? What’s missing may be what’s sustainable. Food Lion dominates markets like Fayettville NC with Piggly Wiggly as its competition. What is different from Piggly Wiggly and appealing to shoppers is what’s likely to be sustainable.
I am impressed that Food Lion is taking these steps now, in light of the current economy. The points in the article I found inviting are the produce area built to look like a farmer’s market and a bicycle repair shop. I read this morning that Publix is placing restrictions on coupon usage. That is a negative compared to Food Lion’s upgrading and making shopping more inviting.
A year ago it was Food Lion’s goal to become the low price leader. I guess that didn’t work. What was their goal the year before that and the year before that?
Large conventional supermarket chains have a problem. They don’t stand for anything. Therefore they cannot establish a sustainable competitive advantage.
Compare Food Lion’s positioning over its history to Wegmans’ positioning. In the last 40 years, Food Lion seems to have changes at least 20 times. During that same time Wegmans’ positioning has not changed at all.
Of the list outlined in the discussion, there is nothing unique that the conventional supermarket across the street can’t do in the blink of an eye.
Interesting to see that the number of responses for price are nearly as much as all other answers combined in the poll so far. We talk about all the different ways to create a sustainable difference in this space quite often, but gut instinct response often comes down to the lowest price. It’s got to be tough to convince people you’re not in a commodity business when you treat your business like a commodity.
Food Lion can maintain its market share with its lower prices and increased service, but it will definitely affect their bottom line. Gaining a huge increase in customer count is almost impossible with the economy, and lack of growth, and all of us must get more out of each customer that walks in the door.
When and if the economy gets better, Food Lion and the rest of us can slowly raise our prices back up, and our bottom lines will start to improve. I have committed to keeping all of my prices down for the remainder of the year, just to keep sales where they are now, but my profits will shrink as well. I want our customers to remember that we are thinking about their pocketbooks, and Food Lion is smart to do this also. Everyone in my industry needs to bite the bullet, and maintain their high standards of service, quality, and yes…price to move ahead.