Grocers Ready to Fight Over Ukrop’s Shoppers
Ahold may have bought the Ukrop’s grocery chain but there
is no guarantee that the shoppers who were loyal shoppers at the local institution
will be coming around to shop in the renamed Martin’s Food Market locations.
As
a Richmond Times-Dispatch report points out, Food Lion, Kroger,
Wal-Mart and others will all be looking to slice off former Ukrop’s shoppers
from Martin’s.
David Urban, a professor of marketing and executive associate
dean at Virginia Commonwealth University, said he expected most Ukrop’s shoppers
to give Martin’s an opportunity to keep their business. "You can certainly
expect other grocery stores to try and make new pitches for the Ukrop’s customer
base," he
added.
To help hold onto former Ukrop’s shoppers, Martin’s is cutting prices
by five percent below previous levels.
"Loyalty in the food business is at an all-time low, and customers are
keenly aware of cross-shopping opportunities," Jeffrey Metzger, publisher
of Food
World, told the paper. "Customers are up for grabs every day."
Martin’s
is looking to retain many of the practices that make Ukrop’s a shopping destination
while cutting prices five percent below the former owner’s.
Stores in the
market are looking to gain an advantage by upgrading the customer experience
in stores. Food Lion and Kroger have either remodeled or are in the process
of making over stores.
Kroger has taken a page from the Ukrop’s playbook and
started taking groceries out to customers’ cars. The chain is also adding gas
stations at some locations.
"We feel like this is an opportunity," Carl York, a spokesperson
for Kroger, told the Times-Dispatch. "The Richmond market is
very important to us, and we’ve invested quite a bit. We feel like we’re well-positioned."
Food
Lion, for its part, has aggressively promoted a large-scale price reduction
at its stores.
J.J. Fleeman, vice president for Food Lion’s Northeastern markets,
said, "We
want to focus on customer service and need to make sure we serve our shoppers
every day."
Discussion Questions: Do you expect Martin’s to gain,
maintain or lose shoppers from the levels previously registered under Ukrop’s?Â
What must Martin’s do to build the business from where it had been? What must
others do to pull business away from Martin’s?
There are only too many case studies to look toward to see what happens here. Just revisit any national chain’s acquisition of a local chain and see what happened if they changed the name of the local store or not. I won’t name names, but there are some complete disasters in the past.
Bottom line, a shopper has to get pretty upset with their geographically closest grocery store to drive past it and shop the competitor long term.
I assume that Ahold did the necessary due diligence before changing the name of the iconic retailer, Ukrop’s to Martin’s Food Market. However, Ukrop’s appears to have had a following of dedicated customers that now may be up for grabs to the rest of the competitors who are certainly ramping up their stores, prices, and customer experience.
The concept of a larger chain retailer purchasing a well-respected and run independent seems to make sense assuming that the independent’s banner remains in place and the economies and efficiencies of the chain are applied to the acquired entity. Several years ago in Philadelphia, Safeway purchased a great brand, Genuardi’s, left the name on the front of the store but “Safewayized” everything in the customer’s experience. The results were disastrous.
A more recent acquisition by Ahold of another great Philadelphia independent, Clemens, followed the Ukrop’s model, namely, the name was changed to Giant, however the stores retained much of the cache that existed when operated by the Clemens’ family. It remains to be seen whether the Ahold approach will work.
However, as noted previously, why not leave the name as is, build on the years of consumer equity and bring greater efficiencies of scale to the operation?. Instead you run the risk of putting many of the former Ukrop’s customers out of play. Why do this?
Many chains like Great A&P, Kroger, Safeway, and even SuperValu maintained the names of the chains they acquired.
Martin’s owner doesn’t feel the same way. Definitely the Richmond Ukrop’s customer base is up for grabs. It’s not like the grocer has left the area, but it’s pretty close.
While Martin’s has maintained the original Ukrop’s stores and personnel, its name is indeed new to the Richmond market.
To keep the Ukrop’s customer, it has to ensure that the transition is seamless as well as beneficial to the customer base, giving it reasons not to shop someplace else.
What happens next to Ukrop’s shoppers depends mainly upon what Ahold does for them in the near future and what competitors will offer. Ukrop’s customers have high expectations from past experiences. So good luck Ahold.
As a previous Ukrop’s shopper, it only took two visits to determine we weren’t going back and that seems to be the general feeling of our friends as well. Ukrop’s was usually the highest priced grocer in this market which kept shoppers on the bubble of going there or other places. Now Martin’s has come in and raised prices even higher which is driving the customers away. The only thing that will keep the shoppers returning is the fact that Martin’s has retained the Ukrop’s Kitchen HMR items, but as soon as they begin changing the quality of those products even more shoppers will leave for other retailers.
Any time a large, sterile, plain vanilla, publicly held grocery company such as Ahold takes over a well accepted regional grocery, you can usually expect a 15% to 20% decline in sales. There are many reasons for this. This loss in sales is usually taken into account when doing the due diligence. The hope is that the acquiring company will gain from the economies of scale more than in the loss in sales and market share.
I wonder if there was a clause in the sale contract which stated that if alcohol was sold or if the stores were open Sunday they could not be called Ukrop’s? Inquiring minds want to know.
Martins is in a unique position to take advantage of the strengths of Ukrop’s like their food service and bakery offerings and of course, their customer service. But they also have the opportunity to enhance a great base with additional offerings (liquor and Sunday shopping options) that may keep the core Ukrop’s customer along with picking up customers that may have felt they did not have a complete or convenient shopping experience.
Here in Chicago, we saw the changes that can happen when the local supermarket chains are purchased. The issue is not that there is ownership, but rather what does the buyer do to the things that made the stores the places you wanted to shop. Much of this may simply be perception–most of the items, etc, are not going to change. However, as the new buyer brings its private label items, etc, and other aspects of their business model to bear, it risks altering the points of differentiation which make its existing customer base choose it.
I agree that many people will not drive out of their way to shop at a different supermarket, but some will. How many? Ah, that is the question. If enough do, the buyer will find that what they thought they bought and what they now have are two very different things.
This will be a journey for Martin’s; shoppers are loyal until their expectations are not met. The number of stories about “things were never the same” after a takeover are legion. That is an opportunity to change for the better, as perceived by Ukrop’s shoppers who have other choices. While they will give the new owners a fair chance, they will “shop around” if not satisfied.
I am a now-former Ukrop’s customer in Williamsburg. Having been to the new Martin’s twice, I’m not sure I have a compelling reason to go back. Ukrop’s was not the closest grocery to my home but it was friendly, clean, supported community functions, and offered some products that I couldn’t get elsewhere so I regularly made the trip. While the interior remodeling was not a complete overhaul, in my opinion the new Martin’s is stripped of the intimacy and character of the old Ukrop’s. It’s ordinary, it feels much larger, and much less personal. The change feels like a real loss to the community. Many of my friends feel similarly.
I always made a point and looked forward to going to Ukrop’s when I visited the Richmond area. I thought they were a cut above the other grocers; not only regionally, but in many cases nationally. They certainly knew and preached customer service.
Others, in today’s comments, have cited the legions of failures when a successful grocery chain was taken over and changed the previous successful company name. I think it will prove to be a mistake on Martin’s part if they do change the name. Ukrop’s is known in that market place. I do not know or think Martin’s is. Plus the name “Ukrop’s” is distinctive and stands apart from the other brands. Why tinker with success when you will already be starting out with the problem of proving yourself at least equal to the previous ownership and management?
Cathy Green, President of Food Lion, a major competitor for the Ukrop’s customer base said in a comment I read earlier today “we want to be so ingrained in the community that people think about us first.” Name and brand recognition does this. So I am opposed to the name change at the start of the transition. Later maybe it will work but only if the Martin’s group sticks to the brand Ukrop’s built over the years.
It’s in the Ukrop’s family’s best interest that the name be changed. Face it, Ahold has ruined many past acquisitions and Ukrop’s is ripe for the ruining. In order for the family not to be humiliated, the name needs to be changed.
To DJL, when’s the last time Ahold ruined an acquisition? Over ten years ago. Ahold’s on a roll; they’ve got fresh competitive formats, good merchandising and now, improved pricing.
Top’s and BI-LO come to mind. Ahold had to unload them after they failed. Compare Giant’s market share in the Baltimore/DC area today compared to when Ahold bought them. Then you will get the idea. It doesn’t matter how pretty the stores are or their offerings, they can’t get them to perform better after an acquisition. Usually the competition jumps for joy when they know their competition is being acquired by Ahold. Sure they aren’t a total wreck like A&P or Winn-Dixie. But take a look at the skeletal remains of the closed Top’s stores in Ohio and you can see what Ahold is capable of doing.