Making Shopping EasierA Safeway case study

By-Akshay Parihar

Bhaskar MaheshwariLuv Sharma

Ashok KumarNittya Balodiya

Company Profile• an American supermarket chain.

• second in North America, after The Kroger Company

• has 1,678 stores located throughout US and Mexico.

• The company is headquartered in Pleasanton, California. • Supermarket News ranked Safeway No. 4 in the 2011.

• "Top 75 North American Food Retailers" based on 2010 fiscal year estimated sales of $41 billion. 

• Based on 2009 revenue, Safeway is the 11th largest retailer in the United States.

Introduction

• UK’s retail grocery market increased from 44% in 1971 to over 80% in 1995.

• The typical household will now shop with a multiple retailer and, again typically, this will be done at one of the supermarkets owned by a national business such as Safeway.

• Challenge for the company:regularly bring customers back to their stores.closest attention to what their customers want and

ensure that it is delivered consistently at high standards.

Safeway 2000 - the rationale for change

• The focus of competition was shifting to customers’ perception of value for money and it soon became clear to Safeway’s management that, in this area at least, the company’s performance stood in need of improvement.

• ‘Safeway 2000’ a fundamental review of the business was initiated and completed within 18 months.

• Through this review the company identified the following weaknesses:

Price perception was poor - Safeway was seen as too expensive.

Product ranges lacked real focus.In-store availability of products was not reliable

enough.It was strongest with the under 30s, particularly

single people and pre-family couples, but lost too many of these customers to its competitors once they started their families.

• It refocused the Safeway ‘offer’ on families, particularly those with young children.

• Emphasis moved on to restructuring the business and changing its predominant style of management in order to deliver the new offer to its customers.

Key Decisions

• For a food retailing chain the following issues are critical: Retail positioning Store location Product range and services Price Store atmosphere

Retail positioning• This involves choosing the target market and differentiating the

brand from the competition. • The benefit of targeting is that it allows the retailer to focus the

marketing mix (including product assortment, service levels, store location, prices and promotion) on the needs of the chosen segments.

• Differentiation provides the reason to shop at one store rather than another.

• Creating and keeping a competitive advantage requires innovation – a constant stream of new ideas for products and services aimed at the target customers.

Store Location

• Store location is critical to consumers as it provides convenience, which is a powerful influence on the decision where to shop. • Identifying suitable locations depends on factors such as the disposable income of the catchment area. • The presence of other competitors as well as individual site conditions such as access to major trunk roads or motorways and space for parking.

Product Range and Services• Supermarkets are likely to offer a wide range of non-food

products, together with customer services such as coffee shops, as well as their normal range of fresh, chilled and frozen foods and packaged groceries.

• The choice is determined by the positioning strategy of the

company as well as customer expectations.

• As price differentials have narrowed, retailers have sought to differentiate themselves on customer service, around the store.

• Customer research shows that many people regard supermarket shopping as a chore, so retailers are taking a range of initiatives to make the experience more attractive.

Price

• For some customers price is a key factor in choosing a store, particularly on basic commodity foods where the advantages of bulk buying come into play and are passed on to consumers in the form of lower prices.

• A small number of supermarket chains focus on offering a relatively narrow range of commodity food products at low prices.

• The big national chains, however, combine everyday low pricing on certain commodity products with frequent promotional activity on a range of other lines.

• Promotions are important because they encourage impulse-buying.

Store Atmosphere

• Design, layout and in-store signage are carefully planned to meet customers’ needs.

• Colour, the width of the aisles and lighting are all important when providing an atmosphere conducive to comfortable and enjoyable shopping.

The Customer Offer

• This offer has two major elements – “getting the basics right every time” and “making shopping more convenient and extra special”.

• “Getting the basics right everytime” means: offering excellent value providing helpful, friendly service making sure products are in stock offering a wide choice of products and services

ensuring Safeway’s products are fresh and of the highest quality making things easy to find keeping the stores clean.

• “Making shopping more convenient and extra special” means:

helping to take the stress and effort out of shopping. reducing the time it takes. delighting customers with specially targeted products and services. finding new ways to be pleasantly surprising.

Getting the basics right has resulted in:

• improving Safeway’s value for money perception.• An economy-priced range of commodity food lines,

‘Safeway Savers’, was launched covering over 100 products.

• Several new Safeway-branded products (for example, Select Cola, Oracle dental care and Vecta household cleaners) have also been launched, offering better value than the relevant brand leader.

• A sustained effort to communicate the offer to customers more effectively, both through Safeway’s award-winning ‘Molly’ advertising campaign and by better point of sale material.

• Providing crèches in store where mothers can leave their children in professional care while they do their shopping.

• Launching the Safeway loyalty (or ‘ABC’) card, which enables customers to accumulate points and then gives them a choice between straight cash savings or a range of other, attractive products and services.

• Pioneering time-saving technology such as ‘Shop & Go’, a field in which Safeway is the world leader. The system greatly reduces time spent in queuing at check outs by avoiding the need for unpacking and repacking purchases.

• Extending the own-brand product range to include children’s clothes and babywear.

Organizational Change

• Basic processes and structures of the business were redesigned and simplified to help Safeway people implement these changes and get new ideas to the market place as quickly as possible. 

• These changes in roles and structures resulted in 3,500 redundancies or early retirements but also opened up new or substantially different roles for 9,000 people and promotion for a further 3,000.

Measuring Progress

• Safeway’s declared aim, announced in 1995, was to increase average sales per square foot from £12.86 to £15.00 within 3 years. It achieved that target,one year ahead of schedule.

• Total sales in 1996/97 grew by 10% to stand at £6.627 bn.

• The proportion of target customers who did their main shopping with Safeway grew from 17.1% in 1995/96 to 17.8%.

• Value perception improved significantly with around half of Safeways’ customers buying at least one ‘Savers’ product.

• Safeway’s own-brand range of Vecta household cleaners gained a 25% market share and Oracle mouth care products a 20% share of their respective markets in Safeway.

• The Company also launched a range of kids’ toys and an innovative range of produce for children. Over the year as a whole, Safeway launched or upgraded around 3,200 product lines.

Improving Efficiency

• improving quality of service while reducing the cost base.

• The distribution network is now centred on six major sites, supported by a similar number of smaller ones.

• The supply base is also being consolidated as suppliers fall increasingly into two categories: volume producers with relatively large shares of Safeway’s business, who are both low cost and innovative in product development and specialists who provide the range, quality and innovation needed for regional and local markets.

 

• Accurate sales forecasting, effective communication with suppliers, using electronic data interchange to transmit orders, moving products through the depots as fast as possible and reducing waste in the stores.

• “Make a Difference!” programme introduced by Safeway in 1995 is aimed at improving behavior within the employees and towards the customers.

Conclusion

• Safeway shows how large food retailing business can fundamentally change way it works and re-invent its brand offer, experience intensive and disruptive reorganization and simultaneously improve its sales and profit.

• Safeway 2000 was a major restructuring and repositioning of the brand to prepare business for next century but delivering longer-term benefits will require further, continuous improvement. 

• By focusing most of its current effort on delivering the customer offer, Safeway recognises that the ultimate arbiters of its success are the millions of customers who visit its stores everyday.