Kroger’s CFO, Michael Schlotman reports that the traditional supermarket industry is “doing just fine” at yesterday’s investor conference in Orlando, FL. I hope he is right. Mr. Schlotman cites the viability of Wegmans, Hyvee, WinCo, HEB and of course, Kroger as sterling examples of successful traditional supermarkets. It is very difficult to argue with his logic or examples.
If we look deeper at his example retailers, they all share some very important business practices. They are aggressive in capital investment, they have invested in human resources, they price competitively, they are deeply involved in local marketing, and consequently, they have all found a profitable niche in their respective marketplaces through innovation and differentiation.
One last comment about this elite group of retailers. They all have taken the “long view” in terms of financial investments. Not everything they do has to “ROI” immediately. In fact, Kroger has taken “heat” from Wall Street for many of their investments in fuel programs and customer database marketing over the past few years. Both of which are cited today as key elements of their on-going success.
I am still not convinced the traditional supermarkets as a group, are “doing just fine. Certainly those that take the long view and have a clear vision of what it takes to compete are positioned very well to continue to prosper. However, dozens of other traditional chains continue to struggle, close stores, freeze wages, cut staff and continually retrench. These chains would benefit from at least attempting to replicate the investments and practices of the successful few. Easier said than done!