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When opening a business, in any industry, positioning oneself effectively amongst your
competitors should be at the top of your priority list. If an entrepreneur cannot do that, the
business’s chances of attaining market share and building a strong and loyal customer base is
very small and often spells the demise for that business.
I. SWOT
Strength
● Emphasis on Quality: To continue its long standing model of being an upscale provider
of consumer goods for Midwestern residents, Reed Supermarkets wanted to retain its
high-end position. Within the past two decades, the grocery store chain had diversified
their product offerings with newer, higher margin departments which included expanded
seafood options, floral department and wide variety of specialty offers like 27 types of
mustard (2).
● Long Operating Hours: Reed’s provided a convenience for their customers by having
longer operating hours than competitors. This convenience allows consumers to shop at
their preferred time and not need to worry about rushing home or missing the opportunity
to purchase family necessities (2).
● Elegant Display Cases: For Reed Supermarkets, the days of drab display cases no longer
exist. In an effort to continue their trend of upping the quality of their products and the
value-added dynamism of the high-end retail mentality, Reed Supermarkets improved
their display areas to add both quality and esthetic appeal for consumers. We felt this
particular differentiator could appeal to consumers sense of style and increase the number
of impulse purchases made by consumers (2).
● Free Delivery to Vehicles: A trend which has increased to a national scale is a concept
Reed’s began – delivery of purchased goods to the consumer’s car free of charge (with no
need for gratuity). This 100% free service increases the high-end perception that Reed’s
wants to provide for its customers while adding convenience and thoughtful touches to
the end of the purchasing experience (2).
● Market Penetration: Compared to the other high-end retailers located in Columbus, Reed
had 25 locations boasting 26.4 million dollars in annual sales for each one of its stores. Its
● Perceived as being High Priced: Reed Supermarkets was used as the baseline for
comparison when consumers were asked about price sensitivity. Whole Foods, who can
arguably be called the closest competitor along with Delfina are 104.1 and 99.5
respectively with regards to a pricing index. Superstores and warehouses are often an
alternative that have a price sensitivity of between 95 and 96. But proliferation of low-
cost alternatives should not be ignored as they stand at less than 90 on the consumer price
index evaluation and make up a considerable amount of market penetration (12).
● $1 Special could Confuse Consumers: A weekly dollar special was run at Reed
Supermarkets showcasing 250 items to attract customers. This campaign, which was
launched in June 2010, was aimed directly at its low-cost leaders so as to combat the
perceived high-price image it retains. Signage and promotional campaigns spread the
word of the new pricing strategy but some feared that the consumers would be confused.
The reputation of being high-end was being muddied and now Reed has to decide
whether to move down market or to remain a higher pricing structure. What was
sacrificed was overall margins even as in-store traffic had increased 3% overall. One
might argue that the cost of discounts and lower profit margins is not worth the extra
foot-traffic the promotional materials aroused amongst consumers (7).
● High Pricing/Cost Structure: Reed Supermarkets made only modest profits yearly with
only 2.1 million in net revenue. Comparatively speaking, dollars stores, who make up a
majority of the low-end competition earn 8.5 million dollars after all expenses have been
accounted for. Remarkably, total operating expenses were only marginally higher than
Reed with 23.6 million for all dollar retailers. Thus, dollar stores have the capacity to
operate at a lower cost and pricing structure creating a high margin for success compared
to Reed (11).
Opportunity
In the case of Reed Supermarket, a grocery store operation that has long been a staple for
Columbus, Ohio consumers, the issue has become retaining a competitive edge over the now
flooded marketplace and providing customers - both previous and new customers - with a
valuable and enjoyable shopping experience. As a team, we have formulated a plan that we feel
will provide Reed Supermarket with the ability to regain its once formidable position in the
Columbus grocery store segment while continuing to exceed the standards that it has set for
customer service and product offerings.
Reed Supermarkets has a longstanding history amongst consumers in the Midwest; the
chain which was opened by William H. Reed originally establishing itself in 1939 in Kalamazoo,
Michigan (Quelch 2). Reed would not be the owner of a sole supermarket which held his sir
name for long as his empire grew to more than 190 retail locations, multiple distribution centers
and was place for employment for some 21,000 Midwesterners less than a half century later (2).
As his empire constantly evolved through acquisition and expansion, Reed’s position among his
[Reed Supermarkets] CONFIDENTIAL
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competitors changed too. When William Reed opened his first grocery store locations, he had
positioned his business as a low-end retailer and as time progressed so did his company’s
positioning model (2). More than 80 years later, Reed Supermarkets had gone through a fierce
period of diversification by offering its customer base an expanded selection of higher-end and
higher margin products(2). Commented [2]: I added "later" to the sentence, but still
doesn't make sense to me. Not exactly sure how you want it to
sound.
For the past 20 years, Reed Supermarkets has considered itself no longer be in the low-
Commented [3]: I added supermarkets after Reed
end retailer segment it once was. During the period of reinvention, the supermarket chain wanted
Commented [4]: I rewrote the sentence to be more clear.
to provide guests with a more high-end and unique customer buying experience. Upon reviewing What do you think?
the case, which was published by the Harvard Business School, we put together a comprehensive Commented [5]: Splendid! :)
SWOT analysis for Reed Supermarkets that profiles what we think they do well, what they do
poorly and where they could improve their business models to make higher margins:
III. Relevant Factors & Analysis & IV. Recommendations? Commented [6]: Should I put recommendations here too?
Commented [7]: Yes, I think having recommendations here
is appropriate
In order for Reed Supermarkets to succeed and potentially increase market share in
Commented [8]: I agree.
Columbus, Ohio, the company needs to lower their pricing structure in order to compete with
other retailers. One way the company can do so is to offer more private label brands in their
stores. Private labels have become an increasing trend, with an increase in market share from
14% to 17% since 2005 (3). There is a low cost involved with private labels yet they yield high
margins for supermarkets. According to the Reed email survey in March 2010 of 400 Columbus
areas customers, 75% of those customers indicated that better prices were an important factor
when it came to grocery shopping followed by 62% indicating that better discounts and coupons
were most important to them. Reed Supermarkets have definitely differentiated themselves
amongst other supermarkets with their “attractive stores, long hours, elegant (and often creative)
serving-case displays, and exceptionally attentive customer service” (2) but it seems as though
customers are more concerned with value these days as opposed to the exquisite shopping
environment.
Switching over to more private labels could also increase foot traffic, even if the company
continues to promote unique store experiences. The case study states, “Everything we’re doing to
build up our premium private labels and organic produce selections positions us for growth when
the 10% to 15% of Columbus’s most prosperous customers get tired of big boxes and picking
their cans off pallets” (8). Provided that Reed Supermarkets continue to push and expand their
private labels, they can regain customers that they have lost to their competitors while gaining
higher margins.
The recommendation above was made with the assumption that past, current and future
Reed’s customers will see the value in the supermarket’s private label and all that the
supermarket has to offer and want to shop at this store. Evidence from the case points us in the
direction to stress price and value in our recommendation. The pro of the first recommendation is
that the store can retain its current customers, while attracting new customers with the high
A potential con to this recommendation is that competitors can begin to offer specials on
their own private labeled goods, which might end up costing less than those at Reed
Supermarkets. If competitors do this, then Reed’s will have a difficult time selling their private
labels. Another con is that Reed’s may not be able to attract the 10% to 15% from their
competitors. Loyalty programs, convenience and habit might keep those potential customers at
the stores where they are currently shopping.
Reed Supermarkets needs to do away with the “Dollar Specials” that have been
implemented. It might have seemed like a good way to generate foot traffic, which it did increase
store traffic by 3% (7). The company must also ask one question and that is at what cost? The Commented [9]: Not sure if I formatted this correctly?
Should it be a comma instead? Hyphen? Okay as is?
case study stated, “the average price reduction was from $2.70 to $1.50, and since few if any of
Commented [10]: I re-formated it
the items were purchased “on deal,” they lowered overall margins” (7). Reed Supermarkets
cannot afford to have even lower margins and that is what this promotional program is causing
the retailer. In 2010, the quality index for Reed’s in Columbus was 8.4 while Whole Foods
Market’s was 8.6 (11). Doing away with the “Dollar Specials” can keep their quality and image
high. One benefit of getting rid of the “Dollar Specials” campaign is that it will separate itself
from its dollar store competition. As stated in the case, the offering “…seemed to be too close to
the offerings of dollar stores, and several executives worried that this would at least confuse
customers, and at worst muddy Reed’s image through association” (7). Reed’s is already having
a difficult time regaining market share in the Columbus area and the dollar specials do not help
because Reed’s is taking a loss by promoting the campaign. Discontinuing the “Dollar Specials”
will continue to promote Reed Supermarkets as being a high-end grocer. A con to discontinuing
the campaign is that Reed’s could potentially lose the 3% of increased foot traffic that was
brought in and the additional 4% in sales. The increased foot traffic is beneficial, but if
customers buy numerous dollar specials, Reed’s is not benefiting in the long run and will be
losing money.
Smaller, yet still specialized stores, can help bring down Reed’s costs. The company
should roll out smaller stores going forward. Looking at the square footage of competitor stores
and the sales per square foot, if Reed’s attracts and retains customers and provides the experience
that Reed’s customer’s desire, the company can do with smaller locations. Aldi locations are
typically 15,000 square feet and it is believed that the same store could generate the same
amount of sales in a 35,000 to 40,000 square foot supermarket size location (5). It is not the size
of the store that is attractive for customers, yet the quality, price and variety of the goods offered.
Locating in smaller facilities will allow Reed’s to specialize in private labeled goods and save on
rent. Smaller locations can have a negative effect on Reed Supermarkets by swaying customers
to the other grocers, dollar stores and warehouse stores because smaller stores might indicate a
lesser quality in goods and services.
V. Marketing Plan
The Marketing Plan that our team has proposed for Reed Supermarkets contains target
market, product, price, promotion, and place.
Target Market:
We have concluded that Reed Supermarkets will have a target market composed of the
middle class and people who are health conscious.
Product:
Our team believes that Reed Supermarkets should continue what it does best - that is to
produce high quality products, have great customer service, as well as to place emphasis on their
organic produce. We also believe that Reed Supermarkets should expand their health and organic
products and departments to fit the needs of their health conscious consumers. Our team also
believes that their products and merchandise should be private labels. According to the case,
private labeling has been growing and a trend in many supermarkets. Private label foods were
17% of total food and beverage sales in 2005 (3).
Pricing:
Reed Supermarkets should have everyday low prices to fit the budget of their target
market - middle class and health conscious consumers. This will also allow them to compete
with other stores nearby such as the Dollar General Store as well as other competitors.
Promotion:
Reed Supermarkets should emphasize in advertisements on the ways that they
differentiate from their various competitors. As mentioned above, Reed Supermarkets should
focus on their strengths of high quality and organic products as well as their exceptional
customer service.
Television Commercials: Reed Supermarkets should have commercials on stations like the Food
Network, Cooking channel, local team sport stations, and also fitness channels.
Direct Mail:
In order to reach their target market and to raise awareness of their new positioning, Reed
Supermarkets should send out postcards to their consumers. On these postcards, Reed
Supermarkets should give out special promotions such as double couponing to entice this new
target market to the store. According to the case, the loyal weekly shopper has been replaced by
a savvy consumer who shopped several different stores and formats in search of the best deals.
Website:
Reed Supermarkets should redo their website to fit their new target market. On their
company website, they should have blogs and organic food recipes. Reed Supermarkets will use
inbound marketing, like Hubspot, to have their customers come to their stores instead of pushing
information on their customer.
Social Media:
Reed Supermarkets should use sites such as Facebook, Twitter, and Pinterest. Like the
website, these social media sites could also show organic food recipes. In addition, there could
be a campaign where customers can take a picture of their organic dishes and then post and share
them on the social media website.
Place/Distribution:
As recommended in earlier sections, we believe that Reed Supermarkets should open
smaller stores. This will lead to lowering the current operating costs in the future.
VI. Measurement:
In order to measure our progress, we will measure market share after a couple of months
down the line once the new prices have been implemented into the stores. Reed will also
measure the sales they get after the fiscal year. Reed can also measure social media by seeing
how many qualified likes or followers on Twitter. Also, we will conduct market research about
the demographics of our customers and conduct surveys in order to conduct a perceptual map or
a map of what consumers think about Reed Supermarket stores compared to their various
competitors. Since Reed is establishing a loyalty program, we will measure how effective it is be
by looking at the data from the program.