Reed Supermarket

A New Wave of Competitors

Group 6

Date : 13-07-2015.

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Contents
Introduction................................................................................................................ 3
Situation Analysis:...................................................................................................... 3
Customer Satisfaction:............................................................................................ 3
Competition Faced:.................................................................................................. 4
Opportunities in Market place:................................................................................4
Problems Faced by Protagonist...................................................................................4
Solution to the Problem and Implementation:............................................................5
Group Members.......................................................................................................... 7
Jitendra Bherulal Jain - DM 16219...........................................................................7
Ankil Kumar Sanghavi DM 16106..........................................................................7
Nitish Nijhawan DM 16232.................................................................................... 7
Shruti Balabhadra DM 16144................................................................................7
Shubham Agarwal - DM 16245................................................................................7

Introduction

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Reed has been established in 1939 by William H Reed in Kalamazoo, Michigan.

And by 1960, 25 stores had been opened in Michigan and Illinois. Company had
purchased two medium sized chain in Ohio, Indiana and Wisconsin. And by 2010
they opened around 192 retail shop, two regional centers. They have 21000
employees working in their retail shops. From last two decades reed stores had
been considered high end super market. They are famous for fresh sea food.
They are also famous for quality of their produce and its emphasis on organic
produce. If we talk about Columbus market, reads have 25 stores in Ohio to
serve around 2 million people. In 2010, Columbus's median household income is
$ 52000 which is higher than National median. Population Growth is 11% and
Unemployment rate is 8.5%. And in both the aspects Columbus bus is better
than National average rate. The major problem with reed is that in last two
years, the market share of reeds had been constant. Even 5 years down the line
the market share was close to 15% percent which has been decreased to 14%.
And now they want to increase their market share to 16%. Reeds had always
emphasized quality and service in their operation and adverting and because of
that consumer had pursued this brand as higher price brand.

Situation Analysis:
Customer Satisfaction:
Reed supermarkets has utilized all its resources to provide best customer
satisfaction to its clients. The two major points which Reed has used is
differentiators and location.

If we talk about differentiators reed has created an aura about itself by

having several features like attractive stores, long hours, elegant service case
displays and great customer services. Reed also has given special emphasis
on product variety and range.
Second is location as Reed super marketing are available in several locations
and target customers in 1to 3 miles location. If we compare Reed on basis of
location with competitor reed holds an edge as its competitors are not that
frequently available. Dollars stores also add the edge as they are even more
easily accessible by the customers.
Like any other company some factors of customer satisfaction are lacking in
the Reed supermarkets and one of the major factor is the price. As an
economic slowdown has become evident the prices of the products become
one of the factors of customer satisfaction.
The exhibit 3 shows that customers perceives that over the year the prices of
reed supermarket has remained same even though there has been some
decrease in the competitors prices. The exhibit 4 also confirms the price
problem for reed as it has been consider high in terms of everyday prices.
So Reed supermarkets needs to work on its prices to improve its customer
satisfaction.

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Competition Faced:

Reed Supermarket was facing head on threat from Aldi Stores. However, the
competition it faced was from Super centers, specialty grocery retailers,
warehouse clubs, dollar store chains and limited selection stores.
Traditional supermarkets distinguished themselves on the basis of the range
and quality they offered. However, a customer opted for value (for money)
over privileges such as good customer service, attractive stores and high
staffing levels. In this scenario dollar store and Aldi took a chip of Reeds
market share.
Compared to its competitors Reed has a narrower range of private label
merchandise which was being promoted aggressively by its competitors due
to high margins.
Super Centers like Walmart offered large discounted products below the
standard MRP along with one stop shopping for multiple needs. Thus creating
an edge irrespective of its location.
Warehouses maintained no options with just one brand foe every product.
The prices were as low as 20% of MRP. Thus selling Bulk packets and hence
concentrating on both middle and affluent class.
Dollar stores worked on the basis of fill-in trips which make up 60% of the
purchasing trend. It has a lean cost structure, low maintenance and simple
operations. It occupied a niche which just 3% market share but still
considered a threat. Also they were located near the customers.
Limited selection stores specialized in private label foods with emphasis on
imported and limited edition food. The prices were heavily discounted and
had the maximum per square foot of sales.
Aldi, its direct competition has started planning expansion in Columbia.

Opportunities in Market place:

The economic slowdown is expected to end. And as per the research the
median income of reed shopper is 12% higher than the area household
average. So if the economic slowdown will end then Reed can expect more
traffic in their stores.
The biggest thread of reed is dollar stores but as per the market research
the market share of dollar stores is expected to not increase above 3%.
The company has previously experienced similar cycles of fluctuation in the
past and had grabbed the 10-15% share of prosperous customers, thus
making them experienced to face similar situations.
As per the market research they have 20% more customer who has pet, as
compare to the other supermarket. So, they can expand the business in pet
food.

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They are also known for healthy product so they can concentrate better on
healthy products.
As per the case, we can assume that, in Columbus, they have a huge market
of private label product. So, they should start private label products.

Problems Faced by Protagonist

The Columbus, Ohio market in spite of being stable caused a dent in the
market share and revenues of Reed supermarkets. Advent of various other
brands of supermarkets had taken a share of Reeds pie of the market share.
Reeds market share declined from 15% to 14%.
Since the time of inception in 1938, Reed supermarket always concentrated
on not only providing products but a better and happening shopping
experience and best quality products. The same was not the case with other
competitors thus they seemed to be less pricey. By this some of the
customers perceived Reeds our prices to be on a higher side.
Large companies associated with Reeds supermarket compelled Reed to
aggressively promote their brands in face of the growth of private labels
without any extra compensation for doing so. Private labels proved to be
competitive due to their high price competitiveness.
Due to low at their pricing points at the same time catering to all the
consumers demands, during the times of economic slowdown customers
were switching over to private labels in some categories.
Second generation and limited selection stores like Dollar stores and Aldi,
Traders Joes respectively have forayed into lower end of the market with
private labels providing products at cheaper rates. The composition of private
labels in their offering went up to 85% - 95%.
customers who were previously transacted with Reed supermarket have
started switching over to other supermarkets, warehouses clubs etc thereby
depicting a decrease in customer loyalty.

Solution to the Problem and Implementation:

Self-procurement of some products like grains, processed foods and
fresh foods, and selling them under a self-brand. Greater margin can
be obtained from these products as the cost of self-procuring will be less than
purchasing branded products. As a brand, Reeds has the reputation of
providing high quality products, and the sales of these products should
benefit from this reputation.
Create a new sub brand retail chain of Reeds to compete with low
cost stores like Aldi and Dollar stores. These stores would be branded
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with a different name and their sole purpose would be to provide products at
low prices. The reason for doing this is, instead of Reeds competing directly
with these low price and average service providing stores; competing with a
similar offering would be a better option. The sub brand stores product range
would consist of mainly private label merchandises, and the framework would
be to maintain low operating costs.
This way the sub brand will cater more to middle income and more price
conscious customers, while Reeds can continue to maintain its reputation of
proving high quality service and wide range of quality products.
We recommend terminating the dollar strategy. This is because data
showed that many customers only shopped for the dollar products. Also the
company were giving away these products at huge personal discounts.
Instead the Reeds should focus on providing a wider range of products (more
than the dollar scheme of 250) at a discounted price, which is not so low that
the companys margins suffer.
Reeds can also increase the number of promotional deals and combo deals.
This will attract customers and also ensure that they shop for a good amount,
rather than just a few dollar worth (like in the dollar scheme).

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Group Members
Jitendra Bherulal Jain - DM 16219
Ankil Kumar Sanghavi DM 16106
Nitish Nijhawan DM 16232
Shruti Balabhadra DM 16144
Shubham Agarwal - DM 16245

Group - 6

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