Wegmans Holds Line on Rising Prices
Higher food prices are definitely getting the attention
of Americans and Wegmans wants its customers to know that it feels their pain
and is taking steps to alleviate it. This week, the 77-store family-owned chain
announced that it was freezing prices on 40 top items through the end of the
year.
The items tabbed for the freeze come right out of many consumers’ weekly
shopping lists. Included are bananas, cereal, orange juice, ground beef, coffee,
cold cuts, canned and frozen vegetables, pasta and sauce, peanut butter, rotisserie
chicken, yogurt and more.
"We considered the importance of an item to a family when choosing our
list of 40," said Colleen Wegman, president of the chain, in a statement. "Such
things as bananas, pasta, frozen vegetables, and laundry detergent are in most
shopping carts every week. They are products that families can’t do without,
so what they pay for these items really matters."
Nearly all of the items
on Wegmans’ list are the chain’s own brand.Â
"We can be more aggressive with pricing for our own brand because we
have better access to information on the factors that determine costs," said
Jo Natale, director of media relations for Wegmans. "These products are
already the best value in their respective category, and for that reason, they
are also usually the top-selling brand in a category."
"Costs for many of these products have risen and may continue to rise
over the next 9 months. If retail prices reflected the true cost of goods,
it would mean an additional $350 to $400 annually for a family of four."
The
chain is launching a campaign to make shoppers aware of the freeze. This week’s
ad will include the statement: "We commit that the 40 products
in this ad will not change price through the end of 2011. That’s what
we mean by consistent low prices. We hope this helps you and your family in
planning your weekly food budget."
Discussion Questions
Discussion Questions: What is your reaction to Wegmans’ price freeze? Will this message be more effective in keeping existing customers or bringing in new ones?
Wegmans is pursuing a smart strategy and we can expect to see a lot of other food and non-food retailers follow suit. Of course, 40 key items out of a typical food store’s large assortment will not offset likely price increases in other categories–but they will at least help the perception that Wegmans is fighting for the consumer. Look for a lot of tactics like this as stores fight each other for market share while facing the reality of higher wholesale prices.
I have a lot of respect for Wegmans. However, holding the line on items that are probably not Walmart priced to begin with won’t take much effort. Supply and demand may even cause the prices of those 40 items to actually fall. Now if a rock bottom priced company like Aldi said they were going to hold the line on pricing, that would be different. But when a high gross margin operation says that, I’m not too impressed. I would be more impressed if Wegmans vowed not to charge higher prices than Walmart for the same identical items. Or that their private label pricing would be the same as Aldi. Now that would get my attention.
The actual financial impact of not raising the prices on the top 40 items for the customers and Wegmans may not be overly significant. What is significant is the impact this might have on the customers’ perception of Wegmans from both a company and price point of view. Promising to not raise pricing for 9 months when the press is full of stories about the increasing cost of commodities and therefore various foods items certainly will get them favorable press and reinforce the customers’ perception of them as a good place to shop.
I think it’s great. It probably does help hold existing customers more than it attracts new ones, but, that said it’s not a bad way to market yourself to potential customers either.
Wegmans is doing the right thing for their loyal shoppers. Especially in the hard hit areas in NY state, the promise to protect against pricing increases will help. Always better to get ahead of negative news and reassure shoppers–they will test Wegmans against this promise, but will be better off–why Wegmans is so well regarded.
Acme has been doing one better in the Philly and Jersey markets for several months now. It is selling milk at the Pennsylvania Milk Marketing Board minimum and has reduced several hundred items everyday, those food products shoppers use most.
Sure I can see Great A&P and others following the lower price or price freeze trend. Great A&P has a distinct advantage over its competition when it reduces prices on its exclusive private label products. It can also shake up the markets where it competes because of its market advantage during bankruptcy.
Wouldn’t you think that Wegmans understands your world when seeing or hearing this strategy? Great way to connect with consumers and let them know you “get it” and want to help.
Wegmans’ success has always been its understanding and connection to its customers. But this is a most disingenuous promise. 40 items versus the tens of thousands they stock. Raise all the others a penny and Wegman’s is ahead of the game.
Come on…customers are smarter than this. I have admired almost every move Wegmans has made over the last 40 years, but this one deserves a “shame on you!”
This move is a smart way to foster the loyalty of current Wegmans shoppers for a few reasons:
1. Products are important to shoppers. These Wegmans products are top items and often the top-sellers in their categories.
2. National brand competitors are raising prices. This is the year Sara Lee is raising prices up to 9%, ConAgra is considering increases up to 25%, and Kraft has been crafty in reducing content (e.g. shorting two slices in every package of American Cheese).
3. Compare and save behavior is already rising. Nearly three-quarters of shoppers say they have shifted to private label in food and household products, according to Epsilon Targeting in this forum yesterday.
David is right that this announcement may mean little to shoppers who value EDLP banners. But it positions Wegmans’ private brands as heroes for both their faithful and fickle shoppers and reinforces their family-owned, family-champion ethic.
Wegmans listens to and watches their customers better than any other chain of 50+ stores in the country. And, because they listen to those consumers, they continuously come up with innovative and important ideas that resonate with their customers, attract new customers, and have folks on panels like this, singing their praises.
In the monthly Consumer Intentions & Actions (CIA) Survey, when consumers across the country are asked “How likely is it that you recommend this store to a friend or colleague?” (think Net Promoter Score), Wegmans has a +71.5. That figure surpasses every other grocer in the country. It’s the type of NPS that Apple receives from their customers–phenomenal in a retail business that experiences nearly two trips per week to their establishment.
We all know that Price, Location, Selection, and Quality stand out as the most important factors for reasons as to why consumers shop a particular grocer. In comparing the Wegmans shopper to other grocers’ shoppers, the question “What are the reasons you buy your Groceries there Most Often?” is revealing.
On “Price,” the Wegmans shopper is at parity compared to other Grocers. When it comes to “Selection” they index at 156, “Quality” at 178, “Service” at 216, “Trustworthy Retailer” at 253, “Knowledgeable Employees” at 347. The list of 15 other reasons–meat department, deli, bakery, produce, store appearance and layout, frequent shopper programs, ethnic food, etc., etc. show Wegmans having an index comparison of of 150 to 450 in all categories.
This type of innovation leads to loyalty–average Wegmans shoppers have stayed with them for 11.9 years, vs. an industry average of 10.2 years. It attracts the ‘carriage trade’ and ‘everyman/woman’.
I just wish that they had stores near my homes in Columbus, Ohio and Naples, Florida–and, I think that I have some impressive merchants in those communities. Listening to the customer is the right thing to do. Colleen and the Wegmans team do that very effectively.
I guess the real question here is: are they really trying to save people money or are they just trying to create the perception of doing so? And if the latter, should we applaud their marketing savvy or condemn them for misleading people?
It’s hardly a bold move of ‘innovation’. It’s 40 items. It’s items that are nearly all their own brands. Freezing them is not lowering them. It’s 40 items, not 200 or even 100. It,s 40. Did I mention 40?
For a store with a likely SKU count of over 100,000 it’s not much. It’s certainly not worth blowing your horn about. You’ve not given anyone a ‘deal’. The price isn’t reduced. The price is frozen? What does that really mean? For me it says they raised these items to tolerable level to withstand a few months of price fluctuation and we are telling you we’ve really done something. Really?
Wegmans’ customers are smart folks aren’t they?
I’ve always admired Wegmans from afar. In this case, not so much. I wish they hadn’t done it. They dropped down a big notch in my level of admiration. If it wasn’t Wegmans, I’d chuckle over it. Since it is, I’m just thinkin’; huh?
Hooray for Wegmans. They feel our pain and understand what we, the typical shopper on a somewhat fixed income are going through. I applaud them and say thanks for thinking about us. I wish there were more Wegmans around so more people could take advantage of their consideration.
I am not so happy with the gas chains lately. Prices here have jumped close to $.30 a gallon in the past two days. I rode by a station at 4 PM on Tuesday. The price of unleaded was $3.11.9. Fifteen minutes later the price was up a nickle. the next morning another six cents. Today we are at $3.39.9. This is for gas that was in their tanks and paid for before the increases started. Tell me why this is allowed to happen?
Good for Wegmans.
I know there’s some difference of opinion, but this is a significant enough amount to matter. These are 200 SKUs, not 40,(see the announcement) and these are highly shopped categories. Having seen the sales distributions of grocery items and the impact of the top 1000 SKUs, I see real value here for shoppers.
I think it’s good marketing in the form of perception. These “40 items” I’m sure are the “sensitive” items. Items like milk, bread, eggs, cheese, butter, ground beef and bananas, to name a few. These items are generally sold roughly at cost or at least kept very low not only to entice the consumer in, but more importantly, quite often the consumer subconsciously bases the entire pricing structure of a store on these items. These items are purchased most often so it is easy to remember what you paid for them last, therefore you can always compare. Most of the other stuff, not so much.
Remembering specifically what you paid recently for more than 40 items is going to be hard for Suzy consumer. They could easily raise the prices on everything else by a nickle to help offset any loss, and no one would probably notice. Especially at a time when everyone is starting to creep up their prices to cover the rising cost of food.
Wegmans is doing the right (and smart) thing by better managing their store brands to become a destination category instead of a comparison category. This not only better positions their store brands, but also Wegmans itself. In addition to this, Wegmans is forced to better manage their logistics and costs of the store brand since their commitment for the next 8 months depends on this. What a great product positioning, store positioning and brand creation strategy! Everyone wins!
This makes “cents” for consumers and for Wegmans’ brands. A price freeze, even if on only 40 items, builds loyalty and creates conversation. Making a price freeze statement early on is also key.