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Supermarket war heats up with customers the only clear winner

New Hampshire Union Leader

July 01. 2013 10:53PM
Market Basket's new store on Amherst Street in Nashua has a selection of specialty sections like the counter in the meat department that offers certified Angus beef. (Union Leader)

Just in time for July 4th cookout shopping, the local grocery war is heating up.

Late last week, Shaw's and Star Market announced they were doing away with their rewards card program, opting to launch lower "card-free" pricing on thousands of items instead.

Hannaford Supermarkets, in similar fashion, introduced a price-cutting program at its locations two weeks ago. Market Basket, with a new location in Bedford and a newly relocated and expanded store in Nashua, appears to be continuing to keep pressure on regional competitors.

In a war between supermarkets, there's always one clear winner.

"No doubt, it's the customer," said Mike Berger, senior editor of the Griffin Report of Food Marketing, a trade paper covering the supermarket industry. "Lower prices are never a bad thing. The more they drop to keep up with each other, the more it benefits the consumer."

Shaw's launched its "You're in for Something Fresh" advertising campaign last week, announcing it would drop the Rewards program cards on June 28.

The company laid off 700 employees last November, and was bought earlier this year by Cerberus Capital Management.

The Shaw's program required customers to have rewards cards to get sale prices at checkout. Shaw's spokesman Steve Sylven said customers who wanted rewards cards had to supply their names, home and email addresses. Shaw's sent mail or emails to customers frequently, informing them of special deals that might take part in, based on past buying habits mined from rewards card data.

Lower prices instead

Customers like Ray Gorman of Manchester, shopping Friday at the Shaw's market on South Willow Street, said he will not miss the reward cards program.

"I didn't like that you had to give them all that information to get the better prices," Gorman said. "Why did they need all that from me?"

Sylven was unable to supply data on how many rewards card customers Shaw's had, and said the move was not an attempt to keep up with Market Basket.

"Simply put, we eliminated the rewards card because we want to offer the same price to all customers without a card," Sylven said. "In general, the cards were used to allow customers access to sales prices, and we did not currently have any points program with the card. Our business strategy is customer-centric, and we knew that pricing is very important to customers.

"That's why we've cut prices on thousands of items across the stores," he said. "These lower prices are not a short-term promotion, or a sales price that will change with the next circular release. These are lower prices that customers can expect from us every time they visit."

Market Basket's presence

Analysts, however, say the move by Shaw's, and the one the prior week by Hannaford — where prices were dropped on more than 4,500 items — indicate that new entries into the regional market are taking a bigger share of the grocery market.

"There's no question Market Basket is in the driver's seat behind these moves," Berger said. "They continue to expand, and they're not afraid of anyone. Shaw's is under a lot of pressure right now."

The Market Basket store on Donald Street in Bedford opened in May. That followed a location opening on Elm Street in Manchester in April 2012, and one in Hooksett on Market Drive in 2011.

The Bedford location was the 30th Market Basket to open in New Hampshire. In June, the company also opened an expanded store at Somerset Plaza in Nashua, a city that includes two Market Basket stores. Shaw's operates 33 stores in New Hampshire, while Hannaford has 37 locations.

While Berger said he thinks "it's a possibility" that other major food retailers could also abandon reward card programs in the coming weeks, a spokeswoman for Stop & Shop said that company has no plans to do so.

"While we do not discuss promotional strategy, I can confirm Stop & Shop continues to promote its loyalty card programs, as our customers can realize multiple types of savings when they use their Stop & Shop card," said Suzi Robinson, spokeswoman for Stop & Shop's New England Division. "These include weekly specials, Real Deals, and other promotional programs, including Gas Rewards."

Efforts to reach someone at Market Basket headquarters in Tewksbury, Mass., for comment on the recent moves by competitors were unsuccessful.

Other competition

Supermarket chains are also facing competition from nontraditional food stores, including retailers Target and Walmart; the latter is the largest grocery retailer in the country. Upstarts have also made inroads: The Market Basket on Daniel Webster Highway in Nashua is across the street from Trader Joe's, a California-based specialty retailer that moved its Tyngsborough Mass., store there last year, marking its entry into New Hampshire.

Major supermarket chains, popular elsewhere in the country, have expressed interest in expanding into the Northeast.

"Call me in a few years, and I bet we're having this same conversation about reaction to a Wegman's coming to New Hampshire," Berger

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