Phoenix Retailers Use Loyalty To Compete With Wal-Mart
At least for two retailers, Loyalty Card Programs are bringing these chains within striking distance of Wal-Mart.
How to battle Wal-Mart? This is the question that supermarket operators across the country have been wrestling with as Wal-Mart’s Supercenter concept rolls out in a region after region and finds success everywhere.
How to battle Wal-Mart? This is the question that supermarket operators across the country have been wrestling with as Wal-Mart’s Supercenter concept rolls out in region after region and finds success everywhere.
As we have traveled across the country to conduct this exclusive and continuing Produce Business study of the way supermarkets are pricing vis a vis Wal-Mart, we have found competitive markets, such as Salt Lake City, where supermarket chains had cut prices to come close to striking distance with Wal-Mart. Mostly, though, we found markets where Wal-Mart’s competitors had a kind of “price as usual and pray a lot” approach.
Wal-Mart Supercenter vs 4 Chains
Price Comparison — Phoenix, AZ
August 2004 – Prices Available To The General Public
| STORE NAME | WALMART | ALBERTSON’S | BASHAS’ | ||
|---|---|---|---|---|---|
| Produce Item | Price | Regular Price |
% Over Wal-Mart |
Regular Price |
% Over Wal-Mart |
| Apples – Granny Smith – Small | $1.28 | $1.59 | 24.22% | $1.29 | 0.78% |
| Apples – Red Delicious – Small | $0.97 | $1.29 | 32.99% | $0.99 | 2.06% |
| Artichokes | $1.50 | $1.50 | 0.00% | $2.49 | 66.00% |
| Asparagus | $2.93 | $3.99 | 36.18% | $2.99 | 2.05% |
| Avocados – Medium | $0.92 | $1.99 | 116.30% | $1.59 | 72.83% |
| Bananas – Yellow | $0.48 | $0.59 | 22.92% | $0.59 | 22.92% |
| Blackberries – Clamshell | $2.97 | $3.99 | 34.34% | $3.99 | 34.34% |
| Broccoli | $1.34 | $1.29 | -3.73% | $1.29 | -3.73% |
| Broccoli Crowns | $1.47 | $1.49 | 1.36% | $1.49 | 1.36% |
| Cabbage – Green | $0.48 | $0.79 | 64.58% | $0.50 | 4.17% |
| Cabbage – Red | $0.64 | $0.79 | 23.44% | $0.69 | 7.81% |
| Cantaloupe – Whole | $0.79 | $0.89 | 12.66% | $0.79 | 0.00% |
| Carrots – Bulk | $0.89 | $0.69 | -22.47% | $0.59 | -33.71% |
| Carrots – Whole 1# Bag | $1.50 | $0.69 | -54.00% | $0.59 | -60.67% |
| Cauliflower | $0.78 | $0.99 | 26.92% | $1.29 | 65.38% |
| Celery | $1.14 | $1.29 | 13.16% | $0.99 | -13.16% |
| Corn – Yellow | $0.33 | $0.13 | -62.12% | $0.59 | 78.79% |
| Cucumbers – English | $2.50 | $1.99 | -20.40% | $2.49 | -0.40% |
| Cucumbers – Regular | $0.50 | $1.00 | 100.00% | $0.79 | 58.00% |
| Dips – Other | $2.68 | $2.99 | 11.57% | $3.49 | 30.22% |
| Dressing – Other | $2.23 | $3.49 | 56.50% | $3.49 | 56.50% |
| Garlic | $0.57 | $0.33 | -42.11% | $0.50 | -12.28% |
| Grapefruit – Red | $0.47 | $1.29 | 174.47% | $0.59 | 25.53% |
| Grapes – Green Seedless | $1.97 | $1.99 | 1.02% | $2.99 | 51.78% |
| Grapes – Red Seedless | $1.97 | $1.99 | 1.02% | $2.99 | 51.78% |
| Green Onions | $0.64 | $0.88 | 37.50% | $0.50 | -21.88% |
| Honeydew – Whole | $0.79 | $0.79 | 0.00% | $0.79 | 0.00% |
| Kiwi | $0.38 | $0.44 | 15.79% | $0.49 | 28.95% |
| Lemons | $0.44 | $0.50 | 13.64% | $0.50 | 13.64% |
| Lettuce – Green Leaf | $1.18 | $1.49 | 26.27% | $1.49 | 26.27% |
| Lettuce – Iceberg | $0.98 | $1.29 | 31.63% | $1.29 | 31.63% |
| Lettuce – Red Leaf | $1.18 | $1.49 | 26.27% | $1.49 | 26.27% |
| Limes – Bulk | $0.25 | $0.25 | 0.00% | $0.33 | 32.00% |
| Mangos | $1.17 | $1.29 | 10.26% | $0.99 | -15.38% |
| Mushrooms – White Bulk | $1.98 | $3.49 | 76.26% | $2.99 | 51.01% |
| Mushrooms – White Package | $1.48 | $1.50 | 1.35% | $1.79 | 20.95% |
| Onions – Red | $0.88 | $0.99 | 12.50% | $0.99 | 12.50% |
| Onions – Yellow | $0.88 | $0.89 | 1.14% | $0.89 | 1.14% |
| Oranges – Navel | $0.66 | $0.99 | 50.00% | $0.99 | 50.00% |
| Pears – Anjou | $0.94 | $1.29 | 37.23% | $0.89 | -5.32% |
| Peppers – Green Bell | $0.50 | $0.99 | 98.00% | $0.99 | 98.00% |
| Pineapple – Del Monte | $3.00 | $5.49 | 83.00% | $4.99 | 66.33% |
| Radishes | $1.28 | $0.88 | -31.25% | $0.79 | -38.28% |
| Raspberries – Clamshell | $2.88 | $3.99 | 38.54% | $3.99 | 38.54% |
| Salad – Caesar – Bag | $2.63 | $2.99 | 13.69% | $2.99 | 13.69% |
| Spinach | $0.97 | $0.99 | 2.06% | $0.99 | 2.06% |
| Squash – Zucchini | $1.34 | $1.49 | 11.19% | $1.29 | -3.73% |
| Strawberries – Clamshell | $2.00 | $2.99 | 49.50% | $7.99 | 299.50% |
| Tomatoes – Cherry on the Vine | $2.84 | $3.49 | 22.89% | $3.49 | 22.89% |
| Tomatoes – Grape | $2.62 | $2.99 | 14.12% | $2.49 | -4.96% |
| Tomatoes – Hothouse | $2.87 | $2.99 | 4.18% | $1.99 | -30.66% |
| Tomatoes – On the Vine | $2.84 | $2.99 | 5.28% | $2.99 | 5.28% |
| Tomatoes – Vine Ripe | $1.47 | $1.99 | 35.37% | $1.69 | 14.97% |
| Turnips | $0.84 | $0.99 | 17.86% | $0.99 | 17.86% |
| Watermelon – Seedless | $0.47 | $0.69 | 46.81% | $0.69 | 46.81% |
| MARKET BASKET | $75.68 | $92.56 | 22.30% | $94.83 | 25.30% |
| STORE NAME | WALMART | FRY’S | SAFEWAY | ||
|---|---|---|---|---|---|
| Produce Item | Price | Regular Price |
% Over Wal-Mart |
Regular Price |
% Over Wal-Mart |
| Apples – Granny Smith – Small | $1.28 | $0.99 | -22.66% | $1.29 | 0.78% |
| Apples – Red Delicious – Small | $0.97 | $0.99 | 2.06% | $1.29 | 32.99% |
| Artichokes | $1.50 | $2.00 | 33.33% | $1.99 | 32.67% |
| Asparagus | $2.93 | $3.49 | 19.11% | $2.99 | 2.05% |
| Avocados – Medium | $0.92 | $1.49 | 61.96% | $1.99 | 116.30% |
| Bananas – Yellow | $0.48 | $0.59 | 22.92% | $0.59 | 22.92% |
| Blackberries – Clamshell | $2.97 | $2.99 | 0.67% | $3.49 | 17.51% |
| Broccoli | $1.34 | $1.29 | -3.73% | $1.29 | -3.73% |
| Broccoli Crowns | $1.47 | $1.69 | 14.97% | $1.69 | 14.97% |
| Cabbage – Green | $0.48 | $0.49 | 2.08% | $0.59 | 22.92% |
| Cabbage – Red | $0.64 | $0.59 | -7.81% | $0.69 | 7.81% |
| Cantaloupe – Whole | $0.79 | $0.79 | 0.00% | $0.99 | 25.32% |
| Carrots – Bulk | $0.89 | $0.69 | -22.47% | $0.59 | -33.71% |
| Carrots – Whole 1# Bag | $1.50 | $0.99 | -34.00% | $0.59 | -60.67% |
| Cauliflower | $0.78 | $1.29 | 65.38% | $1.29 | 65.38% |
| Celery | $1.14 | $0.99 | -13.16% | $0.79 | -30.70% |
| Corn – Yellow | $0.33 | $0.33 | 0.00% | $0.50 | 51.52% |
| Cucumbers – English | $2.50 | $1.99 | -20.40% | $1.49 | -40.40% |
| Cucumbers – Regular | $0.50 | $0.69 | 38.00% | $0.99 | 98.00% |
| Dips – Other | $2.68 | $2.99 | 11.57% | $3.49 | 30.22% |
| Dressing – Other | $2.23 | $2.99 | 34.08% | $3.49 | 56.50% |
| Garlic | $0.57 | $0.59 | 3.51% | $0.59 | 3.51% |
| Grapefruit – Red | $0.47 | $0.79 | 68.09% | $0.99 | 110.64% |
| Grapes – Green Seedless | $1.97 | $1.99 | 1.02% | $1.99 | 1.02% |
| Grapes – Red Seedless | $1.97 | $1.99 | 1.02% | $1.99 | 1.02% |
| Green Onions | $0.64 | $0.50 | -21.88% | $0.50 | -21.88% |
| Honeydew – Whole | $0.79 | $0.79 | 0.00% | $0.99 | 25.32% |
| Kiwi | $0.38 | $0.25 | -34.21% | $0.33 | -13.16% |
| Lemons | $0.44 | $0.50 | 13.64% | $0.50 | 13.64% |
| Lettuce – Green Leaf | $1.18 | $1.49 | 26.27% | $1.29 | 9.32% |
| Lettuce – Iceberg | $0.98 | $1.49 | 52.04% | $1.49 | 52.04% |
| Lettuce – Red Leaf | $1.18 | $1.49 | 26.27% | $1.29 | 9.32% |
| Limes – Bulk | $0.25 | $0.25 | 0.00% | $0.50 | 100.00% |
| Mangos | $1.17 | $0.99 | -15.38% | $0.99 | -15.38% |
| Mushrooms – White Bulk | $1.98 | $2.99 | 51.01% | $2.99 | 51.01% |
| Mushrooms – White Package | $1.48 | $2.49 | 68.24% | $1.99 | 34.46% |
| Onions – Red | $0.88 | $0.99 | 12.50% | $1.29 | 46.59% |
| Onions – Yellow | $0.88 | $0.89 | 1.14% | $0.89 | 1.14% |
| Oranges – Navel | $0.66 | $0.99 | 50.00% | $0.79 | 19.70% |
| Pears – Anjou | $0.94 | $1.29 | 37.23% | $1.29 | 37.23% |
| Peppers – Green Bell | $0.50 | $0.69 | 38.00% | $0.99 | 98.00% |
| Pineapple – Del Monte | $3.00 | $3.99 | 33.00% | $3.54 | 18.00% |
| Radishes | $1.28 | $0.79 | -38.28% | $0.79 | -38.28% |
| Raspberries – Clamshell | $2.88 | $2.99 | 3.82% | $3.49 | 21.18% |
| Salad – Caesar Bag | $2.63 | $2.99 | 13.69% | $2.99 | 13.69% |
| Spinach | $0.97 | $1.29 | 32.99% | $1.99 | 105.15% |
| Squash – Zucchini | $1.34 | $1.29 | -3.73% | $1.29 | -3.73% |
| Strawberries – Clamshell | $2.00 | $3.49 | 74.50% | $2.99 | 49.50% |
| Tomatoes – Cherry on the Vine | $2.84 | $2.99 | 5.28% | $2.99 | 5.28% |
| Tomatoes – Grape | $2.62 | $2.99 | 14.12% | $2.99 | 14.12% |
| Tomatoes – Hothouse | $2.87 | $2.99 | 4.18% | $2.99 | 4.18% |
| Tomatoes – On the Vine | $2.84 | $2.99 | 5.28% | $2.99 | 5.28% |
| Tomatoes – Vine Ripe | $1.47 | $1.99 | 35.37% | $1.99 | 35.37% |
| Turnips | $0.84 | $1.49 | 77.38% | $0.89 | 5.95% |
| Watermelon – Seedless | $0.47 | $0.79 | 68.09% | $0.69 | 46.81 |
| MARKET BASKET | $75.68 | $86.84 | 14.75% | $88.38 | 16.78% |
In other words, in markets ranging from Connecticut to Salt Lake City to South Florida to Dallas to Portland, OR, most chains had no identifiable strategy for being price-competitive with Wal-Mart.
Wal-Mart Supercenter vs 4 Chains
Price Comparison — Phoenix, AZ
August 2004 – Prices Available To Loyalty Cardholders
| STORE NAME | WALMART | ALBERTSON’S | BASHAS’ | ||
|---|---|---|---|---|---|
| Produce Item | Price | Regular Price |
% Over Wal-Mart |
Regular Price |
% Over Wal-Mart |
| Apples – Granny Smith – Small | $1.28 | $1.59 | 24.22% | $1.29 | 0.78% |
| Apples – Red Delicious – Small | $0.97 | $1.29 | 32.99% | $0.99 | 2.06% |
| Artichokes | $1.50 | $1.50 | 0.00% | $2.49 | 66.00% |
| Asparagus | $2.93 | $1.99 | -32.08% | $1.99 | -32.08% |
| Avocados – Medium | $0.92 | $1.99 | 116.30% | $1.50 | 63.04% |
| Bananas – Yellow | $0.48 | $0.59 | 22.92% | $0.59 | 22.92% |
| Broccoli Crowns | $1.47 | $0.99 | -32.65% | $1.49 | 1.36% |
| Cantaloupe – Whole | $0.79 | $0.89 | 12.66% | $0.25 | -68.35% |
| Celery | $1.14 | $1.29 | 13.16% | $0.99 | -13.16% |
| Corn – Yellow | $0.33 | $0.13 | -62.12% | $0.33 | 0.00% |
| Cucumbers – English | $2.50 | $1.00 | -60.00% | $1.50 | -40.00% |
| Dips – Other | $2.68 | $2.99 | 11.57% | $2.99 | 11.57% |
| Grapes – Green Seedless | $1.97 | $1.99 | 1.02% | $2.99 | 51.78% |
| Grapes – Red Seedless | $1.97 | $1.99 | 1.02% | $1.89 | -4.06% |
| Green Onions | $0.64 | $0.50 | -21.88% | $0.50 | -21.88% |
| Honeydew – Whole | $0.79 | $0.79 | 0.00% | $0.79 | 0.00% |
| Mangos | $1.17 | $1.29 | 10.26% | $0.99 | -15.38% |
| Mushrooms – White Bulk | $1.98 | $2.99 | 51.01% | $2.99 | 51.01% |
| Oranges – Navel | $0.66 | $0.99 | 50.00% | $0.79 | 19.70% |
| Pineapple – Del Monte | $3.00 | $5.49 | 83.00% | $4.99 | 66.33% |
| Radishes | $1.28 | $0.50 | -60.94% | $0.79 | -38.28% |
| Salad – Caesar Bag | $2.63 | $2.99 | 13.69% | $2.99 | 13.69% |
| Squash – Zucchini | $1.34 | $1.49 | 11.19% | $1.29 | -3.73% |
| Strawberries – Clamshell | $2.00 | $2.50 | 25.00% | $5.99 | 199.50% |
| Tomatoes – Cherry on the Vine | $2.84 | $2.50 | -11.97% | $3.49 | 22.89% |
| Tomatoes – Grape | $2.62 | $2.50 | -4.58% | $2.49 | -4.96% |
| Tomatoes – Hothouse | $2.87 | $2.99 | 4.18% | $1.99 | -30.66% |
| Tomatoes – On the Vine | $2.84 | $2.99 | 5.28% | $2.00 | -29.58% |
| Watermelon – Seedless | $0.47 | $0.50 | 6.38% | $0.49 | 4.26% |
| MARKET BASKET | $75.68 | $85.65 | 13.17% | $86.96 | 14.90% |
| STORE NAME | WALMART | FRY’S | SAFEWAY | ||
|---|---|---|---|---|---|
| Produce Item | Price | Regular Price |
% Over Wal-Mart |
Regular Price |
% Over Wal-Mart |
| Apples – Granny Smith – Small | $1.28 | $0.79 | -38.28% | $1.29 | 0.78% |
| Apples – Red Delicious – Small | $0.97 | $0.79 | -18.56% | $1.29 | 32.99% |
| Artichokes | $1.50 | $2.00 | 33.33% | $1.00 | -33.33% |
| Asparagus | $2.93 | $3.49 | 19.11% | $2.99 | 2.05% |
| Avocados – Medium | $0.92 | $0.99 | 7.61% | $1.99 | 116.30% |
| Bananas – Yellow | $0.48 | $0.59 | 22.92% | $0.25 | -47.92% |
| Broccoli Crowns | $1.47 | $1.69 | 14.97% | $1.69 | 14.97% |
| Cantaloupe – Whole | $0.79 | $0.79 | 0.00% | $0.39 | -50.63% |
| Celery | $1.14 | $0.79 | -30.70% | $0.79 | -30.70% |
| Corn – Yellow | $0.33 | $0.33 | 0.00% | $0.50 | 51.52% |
| Cucumbers – English | $2.50 | $1.99 | -20.40% | $0.75 | -70.00% |
| Dips – Other | $2.68 | $2.99 | 11.57% | $3.49 | 30.22% |
| Grapes – Green Seedless | $1.97 | $1.69 | -14.21% | $1.69 | -14.21% |
| Grapes – Red Seedless | $1.97 | $1.69 | -14.21% | $1.69 | -14.21% |
| Green Onions | $0.64 | $0.50 | -21.88% | $0.50 | -21.88% |
| Honeydew – Whole | $0.79 | $0.79 | 0.00% | $0.36 | -54.43% |
| Mangos | $1.17 | $0.50 | -57.26% | $0.99 | -15.38% |
| Mushrooms – White Bulk | $1.98 | $2.99 | 51.01% | $2.99 | 51.01% |
| Oranges – Navel | $0.66 | $0.99 | 50.00% | $0.79 | 19.70% |
| Pineapple – Del Monte | $3.00 | $3.99 | 33.00% | $1.50 | -50.00% |
| Radishes | $1.28 | $0.79 | -38.28% | $0.79 | -38.28% |
| Salad – Caesar Bag | $2.63 | $2.50 | -4.94% | $2.99 | 13.69% |
| Squash – Zucchini | $1.34 | $1.29 | -3.73% | $0.79 | -41.04% |
| Strawberries – Clamshell | $2.00 | $2.50 | 25.00% | $1.50 | -25.00% |
| Tomatoes – Cherry on the Vine | $2.84 | $2.99 | 5.28% | $2.99 | 5.28% |
| Tomatoes – Grape | $2.62 | $2.99 | 14.12% | $2.00 | -23.66% |
| Tomatoes – Hothouse | $2.87 | $0.97 | -66.20% | $2.99 | 4.18% |
| Tomatoes – On the Vine | $2.84 | $0.97 | -65.85% | $2.99 | 5.28% |
| Watermelon – Seedless | $0.47 | $0.79 | 68.09% | $0.69 | 46.81% |
| MARKET BASKET | $75.68 | $79.13 | 4.56% | $79.46 | 4.99% |
When chains like Winn-Dixie allowed themselves to price produce at 52% over Wal-Mart, one suspects they are not interested in competing. Perhaps because supermarkets found their cost structure didn’t allow for profitability at Wal-Mart’s prices, the strategy often seemed to be to ignore Wal-Mart, price as needed to support the supermarket chain’s cost structure and then pray that enough customers keep coming to stay in business.
This month, however, the Produce Business Wal-Mart Pricing Report moves to Phoenix, AZ, and we start to see the first signs of a more sophisticated pricing approach to battling with Wal-Mart.
It is not obvious at first glance. If one looks at the prices available to any walk-in customer, Wal-Mart is still the pricing leader by a very substantial margin. Albertson’s prices come in at over 22% more than Wal-Mart, Bashas’ comes in at more than 25% over Wal-Mart, Fry’s (owned by Kroger) is the most competitive but still comes in at almost 15% over Wal-Mart, and Safeway is just short of 17% over Wal-Mart.
Considering Discounts
It seems the same old story we found in market after market. Closer examination, however, points to a real difference. If we look at the price for the same basket but consider the discounts that loyalty cardholders can earn, the competitive situation starts to shift.
Although Albertson’s and Bashas’ remain significantly higher than Wal-Mart — both coming in at almost 15% over Wal-Mart’s prices — even after adjusting for loyalty card discounts, Fry’s and Safeway discount to loyalty card holders so significantly that there price points for loyalty card holders come in at less than 5% over Wal-Mart’s prices.
This is probably very significant. On average, the markets we’ve explored prior to Phoenix have seen pricing at levels almost 25% over Wal-Mart’s. Even after the loyalty card discounts, where chains in Portland, OR, were pricing at almost 25% over Wal-Mart, Phoenix is the first market we’ve explored in which Loyalty Card Programs are bringing chains within striking distance of Wal-Mart.
It is unlikely that any combination of quality and service will keep the great middle class from defecting from supermarket chains if they are priced 25% over Wal-Mart, but if consumers find that with their loyalty cards, they can shop at a supermarket they prefer and pay less than 5% more than they would at Wal-Mart, then supermarkets have a shot at keeping the business.
It is easy for a consumer to justify paying a little more if the location is more convenient, the store easier to get around, if the consumer prefers the selection or quality or even the ease of parking. A price point of less than 5% over Wal-Mart makes it worth talking about other things.
It is interesting that the supermarket chains are building their efforts to be competitive around their loyalty card programs. Could it mean that they find there is a certain class of occasional shopper who uses a local supermarket almost as a convenience store and is thus not particularly price-sensitive?
Perhaps supermarket chains are finding a way to maintain high, margin-enhancing prices on these non-price-sensitive customers, while extending competitive prices to the everyday shoppers most likely to be wooed away by Wal-Mart. Perhaps supermarket chains are finding they can get inducements from producers to put items on loyalty card specials and that these inducements can compensate for the margin reductions the price discounts would indicate.
If consumers find that with their loyalty cards, they can shop at a supermarket they prefer and pay less than 5% more than they would at Wal-Mart, then supermarkets have a shot at keeping the business.
If this is true, meaning producers are funding the efforts of Wal-Mart’s competitors to effectively compete, it is not likely that Wal-Mart will ignore these inducements for very long.
Wal-Mart has always negotiated for the lowest price. But, perhaps, shippers are willing to pay for in-store specials if they are run when the shipper has excess volume. However, this is a payment that is difficult to capture through contract pricing.
Outside Insights
It is premature to judge all this. Phoenix is only one market, and we don’t even know if the supermarket operations are adequately profitable. Yet, by moving the industry to variable pricing, there is the possibility of a trend starting that should be watched closely. When American Airlines and the other big carriers, drove little People Express out of business, it was not because they became the low cost operators — People Express always operated more cheaply than the major carriers.
What Robert Crandall, then CEO of American Airlines, did was develop variable pricing so that major carriers could sell high-priced tickets to business travelers to cover costs and then sell the remainder of the seats on the plane very cheaply to leisure travelers. The great insight was that the cost of selling a seat that was going to remain empty was almost nothing.
Is it possible that supermarkets might find a way to sell high-margin groceries to non-price sensitive buyers and then work close with those who value low prices?
Is it possible that supermarkets might find a way to sell high-margin groceries to non-price sensitive buyers and then work close with those who value low prices? If so it could be a revolution in marketing and change the way supermarkets battle with Wal-Mart. It also would bring to the food industry a pricing model that is becoming ubiquitous in the modern economy.
Pick out a credit card from your wallet and call and ask the credit card company for a favor. Ask them to lower your interest rate or drop the annual fee. Then ask a friend with the same credit card company to do the same. Don’t be surprised if the company agrees to your friend’s request but denies your own.
How They Stack Up Against Wal-Mart Supercenter
| Region | Store | % Over Wal-Mart |
Store | % Over Wal-Mart |
Store | % Over Wal-Mart |
|---|---|---|---|---|---|---|
| Connecticut | Super Stop & Shop | 23% | Shaws | 34% | Big Y | 36% |
| Salt Lake City | Harmon’s | 2% | Smith’s | 6% | Albertson’s | 12% |
| South Florida | Super Target | 22% | Publix | 31% | Winn-Dixie | 52% |
| Dallas, Texas | Albertson’s | 23% | Brookshires | 7% | Kroger | 19% |
| Neighborhood Market | -1.2% | Tom Thumb | 27% | |||
| Portland, OR | Albertson’s | 30% | Fred Meyer | 22% | Haggen’s | 27% |
| Safeway | 37% | |||||
| Phoenix, AZ | Albertson’s | 22% | Bashas’ | 25% | Fry’s | 15% |
| Safeway | 17% |
The reason? It is not that the company has a set policy here. Instead, when you make a request, the credit card company can look up your complete history and see how profitable you are for the company. Do you pay your balance in full every month? If so the company won’t find you very profitable and will demand that annual fee.
If you carry a big balance at 24.99%, you are a very profitable account and they may waive that annual fee without a problem. Much effort has been put into figuring out how to become the low-cost provider.
But few supermarkets operate at 100% capacity. If through sophisticated pricing strategies supermarkets can offer competitive prices to those who value them and make higher margins on consumers who value other things, then it may not be necessary for supermarkets to be able to price competitively with Wal-Mart on their standard walk-in pricing.
Loyalty cards may be a kind of awkward first step to making this work. Let the record show that the first sighting of this new paradigm was in Phoenix, in the Produce Business Wal-Mart Pricing Report.