How Winn-Dixie and others can succeed as low-cost leaders
Winn-Dixie launched a new tactic last summer in Central Florida to gain ground on market-leader Publix. They cut prices on 400 items, then soon afterward trimmed prices on more. Their aim, the company told the Orlando Sentinel, is to be the low-price leader in its markets.
The strategy seems to be working, CEO Ian McLeod told the paper. The goal: To win back more loyal shoppers and sell more to make up for lower prices.
Winn-Dixie is also hoping to continue to grow by targeting higher-income areas that have large Hispanic and black populations, McLeod told the Sentinel.
Does a low-price strategy against such competitors as Walmart, Aldi and, soon, Lidl – which aims to “blanket” the East Coast with its low-price stores over the next few years – make sense? You have to wonder, when the look and feel of those self-proclaimed low-price leaders' stores appear to be cheaper. And perception is important to food shoppers.
More than 30 years ago, a then-prominent supermarket chain introduced what has to be one of the worst marketing campaigns the industry had ever seen – and its mind-boggling lack of logic still hasn't been topped. The chain, Grand Union, declared that it would offer “the lowest prices, forever.” Surely, a minimum bit of research would have revealed to its ad agency that promising anything “forever” is not a good idea.
But that slogan attracted consumers' attention and their dollars. The company's fortunes, which had been in and out of trouble for a few years, rose – for a while. But then offshore (British) management, seeking more eggs from this golden goose, expanded into new stores and remodeled some older ones, running up debt as they did. By the late '80s, the company headed toward insolvency. Their low-price strategy ultimately cost them the company.
Retailers can learn a few things from Grand Union's experience and a few more positive ones from others' experiences. Don't blindly follow the advice of ad agencies — and never say “forever.” Pay attention to details for expansion and upgrading – particularly when you are aiming to be a low-price leader. Can you afford to do either, or will the debt plus your low-cost strategy make your stores “forever” unprofitable? Don't try to remain full-service, with a custom-order deli, and an onsite butcher. Try practices like having shoppers “rent” shopping carts, or provide their own bags. And consider displaying merchandise in the boxes it arrives in.
No significant change in how you do business will be stress- or effort-free, and major changes affect shoppers, too. Some will like the changes, some will resist. But you can teach old shoppers new tricks!
- Orlando Sentinel Winn-Dixie: Low-price strategy succeeding, CEO says