Differentiation is the name of the game and the question becomes how best to do that when the competition you fear most is Wal-Mart.
In St. Louis, Schnuck Markets is taking a dual track approach. First, the company looked to increase operational efficiency to lower costs and, ultimately, do the same on price-sensitive staples.
In fact, according to a St. Louis Post-Dispatch report, there is something of a price war going on now over bananas. Schnuck's, along with Dierberg Markets and Shop 'n Save, have dropped prices on bananas more than once since the middle of January.
Schnuck Markets' price-cutting, however, has gone far beyond bananas. Last month, the chain lowered prices on more than 10,000 items sold in its stores.
The second prong of Schnuck Markets' strategy is to go more upscale with its product offerings and customer service. The chain is expanding its prepared foods area, organic food offerings, recipe kiosks and adding coffee cafes with wireless internet access to some locations.
"They are trying to neutralize price vulnerability and at the same time add
upmarket products and services you wouldn't find at a low-price retailer," said Jon Hauptman, a partner at Willard Bishop Consulting.
Scott Schnuck, chairman and CEO of the family-owned chain, said the company's two-track strategy is the right way to go. "We have to strengthen our food image," he said. "We have to convince customers we are experts so they will want to come to us for answers on nutrition and entertaining. At the same time, we have to be competitively priced."
Carrie Thum, a Wal-Mart spokesperson, did not offer a number for the total amount of Supercenters planned for the St. Louis market.
Discussion Questions: Is Schnuck Markets taking the right approach to compete against Wal-Mart's Supercenters? Are there other local chains that have successfully faced a heavy build-up of Wal-Mart Supercenters in other parts of the country? What can be learned from the experiences of these businesses?