Schnucks Bows Out in Memphis

Discussion
Sep 07, 2011

Schnucks was always seen as a long-shot bet when it entered the Memphis market. Hindsight being 20-20, we now know the gamble didn’t pay off as the chain has sold most of its stores to Kroger and left the area.

Schnucks originally entered Memphis in 2003 when it purchased 12 stores from Albertsons. The locations had originally been owned by Seessel’s, a long-time fixture in the area. At the time it entered Memphis, Schnucks’ new stores accounted for just under 12 percent of the market, accordng to Trade Dimensions, while Kroger (40 percent) and Walmart (16.5 percent) were on a growth path.

At the time, Michael Collins, vice president of retail at Bain & Co., told the St. Louis Post-Dispatch, "It’s very aggressive to enter the market with an established No. 1 and No. 2. There is a high level of risk."

One reason given for Schnucks’ failure was that it wasn’t enough like Seessel’s. Jennifer Biggs, a columnist for The Commercial Appeal, wrote, "They promised to bring back Seessel’s recipes, which they did, in a limited way, at the beginning…"

Ultimately, however, Schnucks was Schnucks and not Seessel’s. "I don’t believe Schnucks really could deliver what we wanted. And of course, what we wanted was Seessel’s, so it was a losing game for everyone."

Lori Willis, a Schnucks spokesperson, told the Post-Dispatch, "In the last couple of years, we’ve noticed our (market) share drop off, and we didn’t see any way to turn that around. … It came down to how many grocery retailers will one market support."

Discussion Question: What lessons can be learned from Schnucks’ experience in Memphis?

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10 Comments on "Schnucks Bows Out in Memphis"


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David Livingston
Guest
9 years 8 months ago

It’s always tough entering a market where you have no name recognition. Generally you have to be 20% above average just to be average when you have no name recognition. In my past experience, when acquiring stores in a new market you must discount the current sales level for no name recognition and also for the learning curve of understanding the new market and dealing with disgruntled employees and customers. Ahold is going through this now with Ukrops in Virginia.

Many times executives have a false sense of confidence that they will improve the level of operations of the previous owner. That rarely happens. Schnucks had success after taking over the Logli stores in Illinois. Then again, Logli was a very well run operation. Albertsons was a flop from coast to coast and most companies that did buy Albertson stores anywhere have found they purchased a money pit. The lesson is always to go in knowing you will probably see sales volumes drop 20%.

David Biernbaum
Guest
9 years 8 months ago

I live in the St. Louis market where Schnucks is home-based. Schnucks dominates the supermarket channel in this market because of its long history, advertising, sponsorships, community relations, and its strong presence by the number of stores. However, whereas Schnucks is all about St. Louis, it wasn’t necessarily all about Memphis, and it would be very difficult for any “local” heavyweight to get its grip on any new market without all the same energy and history it offers at home. The supermarket business is like politics; it’s all local!

Ryan Mathews
Guest
9 years 8 months ago

It’s easy to talk about how difficult it is to “break” into a market until you remember Walmart.

The real lesson here isn’t that you shouldn’t expand, it’s that you can’t expand on your terms if they are different from what the market wants or needs.

Memphis wanted a Memphis style retailer which, when you think about it, makes perfect sense. Schnucks is a great operator but sometimes that just isn’t enough to win the day.

Mark Burr
Guest
9 years 8 months ago
I think the lessons learned are very clear just in the two comments of the article itself. Consider the two completely different views of the resulting failure of the local commentator and Schnucks’ themselves. In commenting on the failure, it’s clear that Schnucks, like many others that attempt this type of venture, completely miss the real cause of their own failure. While Schnucks bases their failure simply on too many grocers for the market, the market viewed the failure on Shnucks’ lack of delivery and lack of coming through on their promises. The act or art (however you view it) of retailing is essentially the same from one geographic market to another — the basics. The larger factor is that merchandising is NOT the same. The leadership at Schnucks may want to read and digest Ms. Biggs comments, understand them, let them sink in and then take heed before they try this again. If they do, they may understand it was likely not the easy excuse of too many stores that caused their failure and… Read more »
Roy White
Guest
Roy White
9 years 8 months ago

The irony here is that Schnucks is the Seessel’s of St. Louis. Schnucks operates beautiful stores in St. Louis, where they are a major player and the hometown guys. The citizens of St. Louis appear to love Schnucks. So, I think lesson #1 is that an iconic brand in one town is apparently meaningless in another. Lesson #2, an obvious one, is that entering a market which already features extremely powerful and growing competitors requires that a retailer bring something very innovative that provides a totally new retail experience, product line or service for customers that does not exist in that market. The critical word is innovative and the meaning is that the innovation has be something startling, appealing and really different to differentiate an invading retailer from the incumbents. Schnucks chose to suggest that it was recreating Seessel’s, but once a brand is gone, it’s gone and very difficult to resuscitate. Perhaps that’s lesson #3.

Camille P. Schuster, Ph.D.
Guest
9 years 8 months ago

The physical stores were in locations where consumers went to Seessel’s stores. They expected Seesel’s stores and, apparently, wanted Seesel’s stores. Being Schnucks was not what the consumers wanted — especially in the location of Seessel’s stores. Schnucks needed to satisfy consumer needs in better ways than Seessel’s did to be successful.

Doron Levy
Guest
Doron Levy
9 years 8 months ago

Schnucks forgot about the importance of market localization in retail. This holds true especially for the grocery end of things. If you can’t cater to your market, you have no market. I have to comment on Ms. Willis’ comment ‘how many grocery retailers will one market support’. If you cater to your market and offer something different, then the market will support you. Give the customer a reason to come to you instead of cloning what is already out there.

Ed Rosenbaum
Guest
9 years 8 months ago

Walmart and Target make the growth opportunities for regional companies fair at best. If they continue to grow within their safety zone (where they are known), the chances improve to good. When they venture out of their name recognition area, the chances decrease quickly.

Craig Sundstrom
Guest
9 years 8 months ago

“Albertsons was a flop from coast to coast”

True, that…and proof that sometimes 1+1+1+1=0. Building on Ms. Biggs remarks: here in California, where SaveMart (who took over some of the wreckage from Albertsons’ failed effort) really DID bring back the Lucky name, I would call the reincarnation effort only semi-successful: same name, same clip-on ties…but different house brands and a feeling of something “just not being the same”; Thomas Wolfe may have been as adept at marketing as writing.

newu ser
Guest
9 years 8 months ago
Like most operators who bought stores from Albertsons, they failed. Stater Bros. is the only one who has successfully purchased and operated Albertsons Stores. The poster who brings Save Mart up raises good points. Their “Lucky” feels nothing like the old American Stores Lucky did. They seem to, like the old ASC Lucky, offer lower product quality than Safeway, but unlike the old ASC Lucky they are not much lower in price than Safeway. Further, while the old ASC Lucky was getting into running the larger combination stores with lots of drug/GM, Save Mart cannot fill those spaces in the larger stores and has resorted to things like removing aisles, making aisles shorter, or various other tricks. They can’t fill up the old Albertsons service departments either; delis with everything “spread out” and bakeries with paper plates and cake decorations in half of the donut case and where the bagel cases used to be, in every location now. I honestly don’t know how Save Mart/Lucky even makes it. They are the worst operator for their… Read more »
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