Albertsons: Testing To See What Sells

Discussion
Jun 02, 2004
George Anderson

By George Anderson


Albertsons may be seeking to attract a different customer than Wal-Mart but that’s little consolation for the grocer as it continues to see business siphoned-off by Supercenters
and Neighborhood Markets.


The chain just reported a drop in quarterly profits due, it says, to costs associated with the five-month grocery workers strike/lockout in Southern California. In fact, aside
from discontinued operations, the chain’s earnings were actually four cents a share higher than analysts’ consensus, reports Reuters.


So do the various interpretations of Albertsons’ numbers and those of its competitors suggest the chain is forging ahead or is it going around in circles?


Albertsons certainly has a number of initiatives it can point to as evidence it is tackling competitive issues head on.


The chain has left markets where it was not first or second in share to concentrate its energies in areas of strength.


It has adopted self-service checkouts to provide consumers with a choice of options at the front end. In Dallas, consumers have the option of scanning and bagging items as they
shop.


Albertsons’ spokesperson, Jennifer Vroman, told The Oklahoman newspaper, “We will be able to reinvest those employees in perimeter departments. We will put more people
in the bakeries and delis for additional service. We will put more associates on the floor to interact with customers and answer questions as they shop.”


Service is a key to Albertsons’ differentiation strategy, according to Bob Rader, senior vice president of Capital West Securities.


“Their prices might be a little bit higher, but they’ve got these superstores full of every type of merchandise and very popular brands, and one of their big draws is service,”
he said.


The chain’s desire to keep consumers coming back for more also led it to add 199 fuel pumping facilities and convenience stores onto its big box properties last year.


Albertsons is looking to broaden its appeal to shoppers with stores-within-the-store concepts, such as the Toy Box, the result of a multiyear partnership with Toys R Us.


It has also launched its 10 for $10 section where consumers find an inventory of products that changes weekly. Consumers have the option of choosing 10 of the same items for
$10 or they can mix and match.


Moderator’s Comment: Has Albertsons made itself more competitive with the changes it has made over the past couple
of years? What impresses you most about what Albertsons has done and what has left you scratching your head?


We’ve gotten a number of conflicting reports on Albertsons’ progress, depending on whom we speak to and what markets are being discussed. Reports are generally
positive for the Upper Midwest and Northwest and considerably less so on the coasts and in the Southwest.


If the chain really intends to deploy former front-end personnel to service positions around the store because of self-checkouts, then it will be taking
a step in the right direction. We must admit being concerned, however, based on Albertsons’ past labor negotiations that these positions will be either cutback or eliminated should
business falter. We’d also be interested in knowing what type of training program the chain has in place for service employees it plans to reposition around the store.


George Anderson – Moderator

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