Stats Don’t Lie

One of the statistics from our retailing book that I found interesting was the one about how much a retailer is hurt by hiring a drug user. It says, “a retailer incurs an additional $7,000 to $10,000 of expenses in medical costs, absences, turnover, and lost productivity when it hires a drug user.”

That one surprised me, because I had never thought about it that way before. I always knew that regular drug users would cost the company some lost productivity, but I had no idea it was such a large amount of money. But now that I think about it I can understand the absences, turnover, and even medical costs as well.

Another statistic that I thought was crazy was the one about a company replacing an employee. It says, “The U.S. Department of Labor estimates that it costs a company one-third of a new hire’s annual compensation to replace an employee.” I really thought that this was outrageous. That isn’t so bad when we’re talking a McDonald’s employee, but when we’re talking an employee who makes $60,000 a year would cost $20,000 to replace! This shows that it really does pay for companies to keep their employees if they have good ones. They will try to keep you as long as you are doing good work.

EDLP vs. High/Low Pricing

There are two pricing strategies that dominate today’s retail market, and they are EDLP and High/Low. Many retailers use an everyday low pricing strategy (EDLP). This strategy sets the retail prices at a level between the regular nonsale price and the deep-discount sale price of the retailer’s competitors. Although they may not always be the absolute lowest price, they have consistently low prices. A wholesale club or a sale price at a competing store may have a lower price on an item. Wal-Mart, Home Depot, Save-a-Lot and Aldi all use everyday low pricing as their strategy. Many of the eBay online stores have adopted this strategy as well.

High/Low pricing is the second most common type of pricing strategy. With this strategy, the retailers have prices that are sometimes above their competitors who use EDLP. However, they use advertising to promote frequent sales. The sales from these retailers have become more intense as time goes by. In the past, retailers only marked items down at the end of the season or when items were overstocked, or their vendors offered them special deals. Today, retailers deal with increased competition and value-conscious customers by having more regular sales. Examples of high/low pricing strategy use would be Khol’s, Meijer, Family Fare, D&W, and many others.

I personally like Wal-Mart’s use of EDLP. It has helped them to become the market leader in every market that they enter, and become the largest retailer in the world. It’s nice to know that on almost everything I need, I can find it at a good price at Wal-Mart. Sometimes I just don’t have the time or energy to shop around and watch all of the sales out there. To deal with this, I just shop at Wal-Mart to avoid the hassle of going from store to store. I am still selective about what I buy there. Usually I stick to the basics such as toiletries, since it is hard to beat their prices on those everyday use items. It seems like some of their produce and other foods are not always as fresh as Family Fare’s or D&W’s.

I like to shop at stores where my money goes a long way. I used to shop at Family Fare for almost everything that I needed, but then I decided to try Aldi for my groceries. I found that I like some of Aldi’s products better than the name brand ones. In addition, I saved a lot of money on my grocery bills. When you consider how often you shop for these items, you are talking a lot of money in the long-run. Anything I didn’t like at Aldi I would go to Family Fare or some other store for.

When I’m at a store that uses high/low pricing, I usually always go for the sales or clearance items anyway. For example, when I shop for clothes I go straight to the clearance racks of my favorite stores. If I don’t see anything I like, I don’t buy anything. I basically have all of the clothes I need, and only buy new things to update my wardrobe. Since I don’t buy trendy clothes, they last me a long time. I don’t pay the full-price for the items I see in the front of the store, I just wait a few months and pay 1/3 of the price later!

All-in-all, I’m a big fan of EDLP since I can always count on a low price.

Sears Through the Years

Thinking back to the video that we watched about Sears in class, I recall several things mentioned. Sears began in 1886 as Sears Roebuck. They originally sold products to farmers through their magazine. Since then they began to emphasize several things. One thing is to treat their customers fairly at all times. A second emphasis is customer service. Third is to remember that the Sears culture is family. Fourth is to continually build relationships with new and existing customers. Finally, they stress remembering that they are usually serving families, and want to continue to do so.

Today they have 860 stores and continue to drive profitable growth. They are customer-centric, and are currently looking for new growth opportunities. Recently Sears has been sold-out, and the company is in different hands now. I wonder how successful they actually are though… In Holland Sears moved from their large space in the Westshore Mall, to a small individual building near the mall. I’m not sure why Sears did this. It was either because of the change in ownership, or because the mall is becoming a ghost town. Either way, Sears doesn’t look like much of anything in Holland. It is smaller than most of the buildings surrounding it, and looks like the oddball. I haven’t bothered to go inside it because I can get everything I need at the other stores. At least when it was in the mall I would casually walk through it sometimes to check out their stuff. Now that I have to go to a separate building I’m not interested in bothering.

Sears is going to need to do something different to get my attention. Possibly I will become more interested in this company when I become older since I do like the Craftsman tools. My perception of Craftsman tools is that they are a good value (quality is good for the price.) In the meantime, I’ll stick with the bigger stores that I already go to. Hopefully Sears can stay afloat in the meantime…

Moving on to Bigger and Better...

The mall in Holland is facing difficulties like the grocery stores in the area. Originally built in the late ‘80s, the Westshore Mall was a huge success. It was built in an area where there was nothing but cornfields previously, alongside US-31 which leads north towards Grand Haven. I was young, but remember this mall being built since it was such a major part of Holland. Growing up I remember begging my mom to take me to the Westshore Mall on Saturdays so that I could walk around and be amazed by the people and busy stores. I played in the arcade Aladdin’s Castle with my friends. I played laser tag at the small arena called Laser Storm. Even in middle school to high school, kids my age hung out at the mall, only to have their parents pick them up later on. Kids would go on “dates” with their young boyfriends and girlfriends in big groups and walk around the mall and eat fries at County Fair Fries.

Then one day, there was news of a new mall being built in Grandville. “What’s Grandville?” many of us asked, wondering why anyone would want a mall in a place like that. Once the mall was built, word didn’t take long to spread. “Go to Grandville, the RiverTown Crossings mall is AWESOME!” and they were right… This new mall became the place to go for us high school students. We found shops that we had only heard about before, and some we never had. The mall was huge, and exciting. This was so wonderful, why would anyone want to shop in Holland anymore? This mall is well-worth the drive!

So, sadly began the demise of the Westshore Mall. Apparently everyone began to think similar thoughts as me when they discovered the RiverTown Crossings mall. It was closer than the Grand Rapids malls, and better. Slowly but surely, stores began closing in the Westshore Mall; and the parking lot became less and less filled. Soon, there wasn’t anyone left besides the older mall-walkers in the mornings. The mall’s anchor stores stayed for the most part, but the little ones really struggled. Sears moved out of their large space, and into a tiny little building near the mall. Chucky Cheese moved in, making the little kids happy and driving away any teenagers that were left.

So now the Westshore Mall has to start making some decisions. I believe that they had trouble paying their bills, and were sold to another company that wanted to try to revive the mall. Since then their never-updated website is mediocre. It now has mall events posted, and has an updated store directory and phone numbers. They are working to have events that coordinate with the season. For example they now have Santa coming in for children to visit, and other events posted.

Will these ideas create new life for the Westshore Mall or is it on a downward spiral? It’s hard to say, but we do know that the situation is not looking good.

The Days of the Traditional Grocery Store Are Over

When Meijer presented their challenges there was no mention of the Spartan Stores such as Family Fare, and no mention of D&W as getting in the way of their progress. This is a little sad for me, because I worked at one of the newer Family Fare stores in Holland for 6 ½ years. I noticed a lot of changes to Family Fare while I was there. It was sold out to Spartan Stores, and expected to grow significantly. However, that didn’t really happen. In many ways the store slowed down, and employees hours were cut. This resulted in many long-term employees becoming frustrated with their job and leaving.

In Holland, our Wal-Mart was converted into a supercenter, Meijer added another store on the north side of town and expanded their older store, and Target built a new and bigger store. However, D&W upgraded to a newer store several years back, and today is struggling to keep customers in that big store. There was a new Family Fare built in the Zeeland area not long ago that was expected to really get a lot of business, but now the employees sit around waiting for customers. In Holland there are 3 stores, and none of them get the business that they used to. The store that I worked at on Washington Ave. is the newest and biggest of them all, but still doesn’t get many customers compared to a few years ago. The other two Family Fares do very poorly from what I understand. They have remodeled one of the stores, and now have added Family Fare gas stations next to some of them. They expect this to help business, but we’ll see.

I think that the problem is people don’t want to pay the higher prices of Family Fare or D&W, when they can go to Target, Meijer, or Wal-Mart and make one trip to get everything they need and save money in the process. I don’t really know how traditional grocery stores can get themselves out of this mess, because I can’t imagine that things will get better for them. They’re too small to be competitive on price like Wal-Mart is. The only advantage that some of them have is their location. For example, the store that I worked at is the only big store in the area. People come from Saugatuck/Douglas, Hamilton area, and the south side of Holland to this store because it is close for them.

Family Fare and D&W of course are very focused on customer service now. Possibly their new idea of the gas stations next to the stores will be a success for them. I really hope that it is because I was part of this company for such a long time.

Meijer Today

While I couldn’t make it to the Loosemore Auditorium to hear the Meijer speaker, I still found it interesting to hear the summary in class. Meijer is a $10 billion dollar a year business, and they consider themselves a small business in the industry that they are in. This is crazy to me, because that sounds like a very large business, but I suppose it’s who you compare yourself to. The speaker used the examples of the elephant and target as their competition.

Meijer finds it very important to have good vendor/supplier relationships. They have found that today’s customers are less impressed with the big promotions of high/low pricing, and are more interested in EDLP (everyday low pricing).

Some goals that Meijer has are the following:
-Meijer tries to create value, and focuses attention on their signage in their stores.
-They also want to consistently improve customer service at their stores. They say that training their employees correctly is key to making this happen.
-Meijer also feels like they need to become a destination for shoppers. In fact, they want each department to be a destination for that particular specialty.
-They also want to expand into new markets. They are currently looking at the Chicago area, and they feel that they could expand from 35 to 300 stores in that area. Meijer wants to experience a 6% growth rate each year, which would amount to 400 stores.

Some challenges that Meijer is experiencing are the following:
-Updating their older stores.
-They don’t want to have a “cookie cutter” feel to their stores, however they want the stores to be similar so that customers can easily find the items that they want.