Safeway Connects with Lifestyles
By George Anderson
By most accounts, Safeway’s lifestyle concept stores have been a hit with consumers from one coast to the other.
Some analysts have expressed concern over the costs of remodeling stores but the new look Safeways have seemed to connect with consumers.
Making that connection has been various parts art and science, say company executives. It has included typical changes, such as expanding perishables and organic products while going to a warmer interior feel with softer lighting and greater use of wood fixtures.
The company has also tried different merchandising approaches, for example: instead of placing dishwashing detergent in the same aisle as laundry detergent, it has placed the dish soap with dishware. Laundry detergent is in another aisle altogether.
Karl Schroeder, president of Safeway’s Northern California division, told the Inside Bay Area web site, “Some of this stuff we’re trying is still experimental.”
Bear, Stearns and Co. analyst Robert Summers is encouraged about the new format’s prospects. He recently wrote in a letter to investors: “The sales recovery story possesses credibility, in our opinion. The lifestyle brand appears to be resonating with consumers.”
Moderator’s Comment: Is the lifestyle store concept the answer to the challenges faced by Safeway? Will remodels
in areas where Safeway has lost shoppers, such as Chicago, Texas and Philadelphia/Southern New Jersey, be able to reverse the damage done in those places? –
George Anderson – Moderator
The above comments are the first positive ones I’ve read about Safeway in quite some time. I hope that’s a good sign.
What Safeway is doing in California, a geography where it has good, long established real estate sites and an even longer established reputation with the ever-growing number of affluent Californians, its “Lifestyle” approach is well suited to meet its current operating needs. So I applaud Safeway and its improving success in California, which I hope will continue.
Outside of California Safeway’s reputation is a mixed bag.
They have been lackluster in several operating areas. Their chances of having “Lifestyle” succeed is probably better in D.C. but the jury is still out elsewhere. If Safeway can create a better mousetrap and then implement it consistently well as a better mouse trap, it will improve the future of that formerly impressive food chain. So let’s wish Safeway well and just as avid fans cheering for their football team inspires improved performance, perhaps some positive responses will help Safeway overcome past clumsiness.
New store designs are nice, and I can’t wait to visit one. But I’m more impressed with what I’ve been hearing about Safeway’s new consumer-focused marketing approach. The “Ingredients for Life” campaign is backed by new staff training, fresh uniforms, and (pinch me I must be dreaming) a change in stance on trade promotions. I’ve even seen some of the new store brands on the shelves here in Arizona – you should try the whole wheat pasta and organic marinara sauce.
Fellow RW commentators and industry suppliers, please confirm or correct me: Is it true that Safeway is backing away from the voracious pursuit of trade dollars in favor of net costing and choosing instead to earn its profits on what it sells? If that’s true, I’ll take back every critical thought I ever had about Mr. Burd.
The sad thing about the Dominick’s Division is that under the leadership of Robert Mariano in the mid to late 1990’s, Dominick’s was ALREADY doing lifestyle “Fresh Stores.” Then Safeway purchased Dominick’s and for cost efficiencies, many of the Dominick’s Fresh Stores were renovated to the new Safeway (non fresh store) decor, which totally was a backward step in marketing Dominick’s as the Fresh Store.
The Dominick’s stores were doing revolutionary things prior to Safeway’s acquisition, such as stained concrete flooring, lighting trays above produce, floating ceilings above the deli, seafood and bakery, and extensive local Chicago product offerings from Vienna Beef Franks to S. Rosen’s breads…all of which were eliminated when Safeway bought the company out. The non Lifestyle Safeway remodeled Dominick’s stores have been referred to as “plain vanilla boxes.”
The Lifestyle stores are a step in the right direction at bringing Dominick’s back to what they were under Mariano’s and Dominick DiMatteo Jr’s leadership.
The one problem though, is that 40% of the Chicago area is “extreme grocery discounter orientated” and Lifestyle grocery stores won’t cut it. Dominick’s has closed at least 20 stores in the Southern suburbs of Chicago and adjacent NW Indiana, which has an unusually high number of deep discount grocery stores such as Kroger’s Food 4 Less, Meijer and Centrella’s Stack and Van Til and Ultra Foods. Dominick’s once THRIVED in NW Indiana from 1991-1998 in Schererville with their Omni Superstore discount division. The store’s 24 registers were always all open and full of long lines…then the store was converted to a Fresh Store in 1998 and immediately only one register was the only one open because the sales immediately dropped.
The Southern suburbs valued minded consumers will not support a regular Dominick’s. I think Safeway Dominick’s should take a different approach to the value minded consumers and re open select Omni Superstores in the areas where Omni once thrived such as Orland Park, Crestwood, Naperville, etc. They probably still own all the Omni Superstore trademarks and name. They could base the store décor off of what they did with Omni, but run it like Safeway’s Pak’n and Save stores.
The Lifestyle Stores are a key building block in Safeway’s strategy to recapture market share and generate stronger same-store sales growth. But, the new store design cannot by itself provide the entire solution. There are two other essential areas.
>Establishing a price image/reputation that gives shoppers the confidence to do more of their shopping at Safeway.
>Ensuring that the store staff supports the new initiative in terms of both customer service and personal productivity.
There’s reason to believe that Safeway is making progress in all of these areas and that the other efforts will build on the success of the Lifestyle Store.
Yes, and now you see why my name is Omni Superstore…it was probably one of THE best grocery operations Chicago ever had to shop at and it’s never been given the credit it deserved. Does anyone remember Omni Superstore or agree with me that in the “blue collar” Southern Suburbs of Chicago, this might be a way for Safeway to win back former Omni/Dominick’s consumers?
I doubt Safeway will be successful with the Lifestyles stores. They do not have the wherewithal to pull it off nor do I think they have the patience. The competition has beat them to the punch and no matter what Safeway does, the competition will do it one better. As soon as Safeway needs to “make numbers” for the stockholders the same old story will be told again — cut labor, raise prices, lower quality, cut back on service.
Safeway is one of our largest customers, and although I have been in many of the new life style stores, until this weekend we have never had one close enough to call our home store. The new store that opened last Friday in Alameda, CA is located directly across for a thriving Trader Joe’s. The old store that was in the same shopping area was never a threat, the new one is a complete different story. It was very interesting hearing a TJ’s person express some worries about a Safeway Store, any Safeway!
Many retailers can “buy” customers. The retailers can overspend on advertising, cut their margins to nothing (or negative), pay insanely high rents for the best possible locations, etc. It isn’t clear that the new Safeway model will produce a high enough return on investment to be able to continue rolling it out. Most new retail formats, new locations, and renovations take time to reach sales maturity. For a new bookstore, it can take 4 years to reach that point. For certain small mall specialty stores it only takes a week. Certainly the new Safeway format will deliver better sales. But will it be a good investment? I can’t tell yet. It might simply be a case of “buying” customers unprofitably.
To follow up on omnisuperstore’s comment — he is absolutely correct. Bob Mariano did a great job in implementing the lifestyles concept in the Dominick’s stores. Randall Onstead did a great job doing the same thing with the Randall’s Flagship stores in Houston. Safeway’s answer was to turn them into vanilla Safeway stores, strip the service, and lower quality. They couldn’t handle lifestyles then, what makes anyone think they can do it now? They lost billions in market cap tearing them down and it will cost billions to put them back together.
Is the lifestyle store concept the answer to the challenges faced by Safeway? The question cannot be answered as a yes or no. To give a simple answer would not be giving Safeway the credit it deserves for the time, thought and dollars they have invested in this concept.
Safeway is to be applauded for trying something new. They are trying hard to create a more positive customer experience. I have long held that customer experience is defined as sales + customer service = customer experience.
Safeway is obviously listening to their customers, giving them better customer service and offering good products to purchase. That is always a winning formula.
Curiosity window-shoppers will come to see the new format, but the question becomes can Safeway convert these people to shoppers and more importantly, to customers. You can have the greatest store format, but if you don’t combine the good products and customer service, you will be doomed to failure.