Reynolds Spar
kle Markets is located in rural western Pennsylvania and operates 4 traditional independentgrocery stores. In 1997, a Wal-Mart Super Center opened seven miles north of one of our stores. At first, it didn’t seem to affect us too badly, our sales volume dropped about 10% but we were able to maintain profitability. As years two and three came, the sales continued to drop and by the end of the third year we were down 25% from the pre-Wal-Mart days.
In an effort to try to compete we began to lower prices, trying to be competitive and save market share. It wasn’t working. Sales flattened and all at the sacrifice of gross profit. The store broke even for the next five years. We ran hot specials in our ads and tried other pricing strategies with the same results.
2006 brought even more bad news. A second Wal-Mart was opening six miles south of us. This new Wal-Mart would actually be located on the same highway as our store. Within the first year of being sandwiched by the Wal-Mart’s, our sales were down 50% from where they had been less than a decade earlier. We couldn’t seem to stop the bleeding, to the point where we were considering closing this location. It was putting a drain on our other three stores. We had become an 18,000 square foot convenience store with low prices and a total store gross profit hovering around 20%. In our daily thoughts, the end was near.
One day as we were looking at the P&L we noticed, despite overall gross profit loss, our meat department was still doing fine. It was at that point we decided to make some changes and give the store six more months to try and turn around. We implemented a 3 step process.
The first step was to talk with our wholesaler to see if they were willing to work with us on a strategy centered on our perishable departments. We felt that if they could come through with some special pricing we could focus more on these areas and grow our gross profits here. Once they stepped up and agreed, we were able to move on to step two.
We began to raise prices in the grocery, dairy and frozen food departments to reflect more of a traditional grocery store. There was a concern that the increased prices would drive customers away. The result was we had very few comments regarding prices and our grocery, dairy and frozen sales stayed the same. With the increase prices, came improved margins in all departments.
The third step was to contact our local newspaper and work out a special rate for the next six months. By doing this we were able to increase our ads to two per week and one of them in color. Our strategy was to push quality in the perishable departments and highlight that we sold only USDA choice beef, government inspected pork and Grade A poultry. We stressed that our meat was cut fresh daily in the store, not hundreds of miles away and gassed to preserve it while trucked to the stores. Produce was highlighted as the freshest and finest available.
Within a few months we noticed a 5 % increase in total store sales, with meat up 10%. We started noticing new faces in the store. These were most likely people who had never gotten our flyer in the mail and hadn’t been able to see our ads. We began to realize that if people were willing to drive seven miles to Wal-Mart, then they would be willing to come here for quality meat at good prices. Our customer base was beginning to grow.
After six months, we started doing a three-day sale once a month which would take place in every department. The first attempt at this brought our store profit up 20% from what it was that week in the previous year. By the eighth month our sales were up 8% over the prior year, with the store’s gross profit up 10%.
Fourteen months later we still take out two ads, the first being the front page of our flyer. The second ad is usually a repeat ad of the best meat and produce items from the first ad, plus other meat items. We still run the three-day sale which brings people in from all over the area. And our wholesaler can’t believe how much meat our store is selling.
In a little over a year, our total store sales have gone up almost 11% while store gross has gone from 21% to 26.5%. The meat department has grown from a 13.6% distribution to over 20%. This store has gone from the verge of closing to a very profitable business; all while being surrounded by two Wal-Mart Super Centers. This proves that people are still looking for quality and service; all you have to do is give it to them!
Tony Modarelli
Reynolds Sparkle Market
kle Markets is located in rural western Pennsylvania and operates 4 traditional independentgrocery stores. In 1997, a Wal-Mart Super Center opened seven miles north of one of our stores. At first, it didn’t seem to affect us too badly, our sales volume dropped about 10% but we were able to maintain profitability. As years two and three came, the sales continued to drop and by the end of the third year we were down 25% from the pre-Wal-Mart days.In an effort to try to compete we began to lower prices, trying to be competitive and save market share. It wasn’t working. Sales flattened and all at the sacrifice of gross profit. The store broke even for the next five years. We ran hot specials in our ads and tried other pricing strategies with the same results.
2006 brought even more bad news. A second Wal-Mart was opening six miles south of us. This new Wal-Mart would actually be located on the same highway as our store. Within the first year of being sandwiched by the Wal-Mart’s, our sales were down 50% from where they had been less than a decade earlier. We couldn’t seem to stop the bleeding, to the point where we were considering closing this location. It was putting a drain on our other three stores. We had become an 18,000 square foot convenience store with low prices and a total store gross profit hovering around 20%. In our daily thoughts, the end was near.
One day as we were looking at the P&L we noticed, despite overall gross profit loss, our meat department was still doing fine. It was at that point we decided to make some changes and give the store six more months to try and turn around. We implemented a 3 step process.
The first step was to talk with our wholesaler to see if they were willing to work with us on a strategy centered on our perishable departments. We felt that if they could come through with some special pricing we could focus more on these areas and grow our gross profits here. Once they stepped up and agreed, we were able to move on to step two.
We began to raise prices in the grocery, dairy and frozen food departments to reflect more of a traditional grocery store. There was a concern that the increased prices would drive customers away. The result was we had very few comments regarding prices and our grocery, dairy and frozen sales stayed the same. With the increase prices, came improved margins in all departments.
The third step was to contact our local newspaper and work out a special rate for the next six months. By doing this we were able to increase our ads to two per week and one of them in color. Our strategy was to push quality in the perishable departments and highlight that we sold only USDA choice beef, government inspected pork and Grade A poultry. We stressed that our meat was cut fresh daily in the store, not hundreds of miles away and gassed to preserve it while trucked to the stores. Produce was highlighted as the freshest and finest available.
Within a few months we noticed a 5 % increase in total store sales, with meat up 10%. We started noticing new faces in the store. These were most likely people who had never gotten our flyer in the mail and hadn’t been able to see our ads. We began to realize that if people were willing to drive seven miles to Wal-Mart, then they would be willing to come here for quality meat at good prices. Our customer base was beginning to grow.
After six months, we started doing a three-day sale once a month which would take place in every department. The first attempt at this brought our store profit up 20% from what it was that week in the previous year. By the eighth month our sales were up 8% over the prior year, with the store’s gross profit up 10%.
Fourteen months later we still take out two ads, the first being the front page of our flyer. The second ad is usually a repeat ad of the best meat and produce items from the first ad, plus other meat items. We still run the three-day sale which brings people in from all over the area. And our wholesaler can’t believe how much meat our store is selling.
In a little over a year, our total store sales have gone up almost 11% while store gross has gone from 21% to 26.5%. The meat department has grown from a 13.6% distribution to over 20%. This store has gone from the verge of closing to a very profitable business; all while being surrounded by two Wal-Mart Super Centers. This proves that people are still looking for quality and service; all you have to do is give it to them!
Tony Modarelli
Reynolds Sparkle Market
