In Boise, WinCo Out-Prices Wal-Mart
A visit to Boise, ID, points out both Wal-Mart’s enormous strength and its vulnerability.
We visit Boise for the 28th iteration of the “Produce Business Wal-Mart Pricing Report,” and this makes six out of the last eight reports in which Wal-Mart has not been the lowest priced supermarket in terms of produce. This compares to only two out of the first 20 iterations in which it was not the low-price leader.
Since we began this study back in 2002, this gradual shift speaks to the gradual growth and development of concepts that can beat Wal-Mart. It also shows a shift in Wal-Mart’s thinking as to what position it wants to hold in the marketplace. After all, there was a time when local managers would have been commanded to respond to lower cost competitors by lowering prices.
Yet, even as Wal-Mart loses the low-price-leader flag in city after city, its produce, at least, remains far less expensive than most standard grocery chains.
In Boise, for example, Albertsons come in a full 40 percent over Wal-Mart on our fresh produce market basket! Forty percent! We have typically found that being even 10 percent over Wal-Mart in prices is sufficient to lead to losses in market share.
Fred Meyer, Kroger’s supercenter concept, came in with prices 11.74 percent over Wal-Mart, somewhat surprising for such a similar concept.
The low price leader in Boise, on produce at least, turns out to be WinCo foods, a mostly employee-owned concept that declares itself The Supermarket Low Priced Leader – a positioning confirmed by our study.
WinCo Worth Studying
WinCo is a distinctive concept. It does not accept credit cards and requires consumers to bag their own groceries. There is no in-store pharmacy. So, for these inconveniences, consumers might expect lower prices. On the other hand, all of the WinCo stores are open 24 hours, seven days a week, which is a substantial convenience to many such as shift workers. In addition, many stores offer online shopping with in-store pickup on some non-produce items.
WAL-MART VS THREE STORES IN BOISE, ID
| STORE NAME | WALMART | ALBERTSONS | FRED MEYER | WINCO | ||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Produce Item | How Priced |
Regular Price* |
Regular Price* |
% Over Wal-Mart |
Regular Price* |
% Over Wal-Mart |
Regular Price* |
% Over Wal-Mart |
||
| Apples – Golden Delicious PLU #4020 | Lb | $0.67 | $1.69 | 154.24% | $1.29 | 92.54% | $0.77 | 14.93% | ||
| Apples – Granny Smith PLU #4139 | Lb | $0.88 | $1.49 | 69.32% | $0.99 | 12.50% | $0.97 | 10.23% | ||
| Apples – Red Delicious PLU #4016 | Lb | $0.67 | $1.29 | 92.54% | $0.99 | 47.76% | $0.77 | 14.93% | ||
| Artichokes | Each | $2.68 | $3.99 | 48.88% | $2.99 | 11.57% | $3.98 | 48.51% | ||
| Asparagus | Lb | $2.97 | $4.99 | 68.01% | $4.99 | 68.01% | $2.98 | 0.34% | ||
| Bananas – Yellow | Lb | $0.74 | $0.59 | -20.27% | $0.59 | -20.27% | $1.15 | 55.41% | ||
| Beets | Bunch | $1.98 | $2.99 | 51.01% | $2.49 | 25.76% | $1.88 | -5.05% | ||
| Brussel Sprouts | 1# Bag | $2.88 | $2.99 | 3.82% | $2.99 | 3.82% | $0.98 | -65.97% | ||
| Cabbage – Green | Lb | $0.58 | $0.99 | 70.69% | $0.69 | 18.97% | $0.58 | 0.00% | ||
| Cabbage – Red | Lb | $0.54 | $0.99 | 83.33% | $1.49 | 175.93% | $0.78 | 44.44% | ||
| Cantaloupe – Whole | Each | $1.98 | $2.99 | 51.01% | $3.99 | 101.52% | $2.38 | 20.20% | ||
| Carrots – Baby | 12 oz Pkg | $1.38 | $1.20 | -13.04% | $1.08 | -21.74% | $0.84 | -39.13% | ||
| Celery | Bunch | $0.98 | $0.69 | -29.59% | $0.79 | -19.39% | $0.98 | 0.00% | ||
| Cucumbers – English | Each | $1.98 | $1.99 | 0.51% | $1.79 | -9.60% | $1.28 | -35.35% | ||
| Cucumbers – Regular | Each | $0.68 | $0.99 | 45.59% | $0.79 | 16.18% | $0.68 | 0.00% | ||
| Dips – Other | 15.5 oz Bottle | $2.98 | $3.88 | 30.20% | $3.88 | 30.20% | $1.86 | -37.58% | ||
| Dressing | 13 oz Bottle | $3.64 | $5.07 | 39.29% | $4.69 | 28.85% | $3.38 | -7.14% | ||
| Eggplant | Lb | $1.78 | $1.99 | 11.80% | $0.99 | -44.38% | $1.78 | 0.00% | ||
| Fresh-cut Veggies | 2# Pkg | $4.88 | $13.76 | 181.97% | $8.00 | 63.93% | $8.00 | 63.93% | ||
| Grapefruit – Red | Each | $0.98 | $1.49 | 52.04% | $1.29 | 31.63% | $0.98 | 0.00% | ||
| Green Onions | Bunch | $0.94 | $0.99 | 5.32% | $0.99 | 5.32% | $1.48 | 57.45% | ||
| Guacamole | 8 oz. Pkg | $4.78 | $2.88 | -39.75% | $2.40 | -49.79% | $2.96 | -38.08% | ||
| Jicama | Lb | $1.28 | $2.49 | 94.53% | $1.29 | 0.78% | $1.28 | 0.00% | ||
| Kale | Each | $1.18 | $1.69 | 43.22% | $1.29 | 9.32% | $0.98 | -16.95% | ||
| Kiwi | Each | $0.45 | $0.69 | 53.33% | $0.50 | 11.11% | $0.48 | 6.67% | ||
| Lemons – Bulk | Each | $0.33 | $0.99 | 200.00% | $0.99 | 200.00% | $0.98 | 196.97% | ||
| Lettuce – Green Leaf | Each | $1.78 | $1.49 | -16.29% | $1.29 | -27.53% | $1.58 | -11.24% | ||
| Lettuce – Red Leaf | Each | $1.78 | $1.49 | -16.29% | $1.29 | -27.53% | $1.48 | -16.85% | ||
| Lettuce – Romaine Bulk | Each | $1.78 | $3.49 | 96.07% | $1.29 | -27.53% | $1.78 | 0.00% | ||
| Limes – Bulk | Each | $0.20 | $0.33 | 65.00% | $0.33 | 65.00% | $0.20 | 0.00% | ||
| Mushrooms – White Package | 1# Pkg | $3.94 | $2.49 | -36.80% | $4.49 | 13.96% | $4.00 | 1.52% | ||
| Onions – Red | Lb | $0.88 | $1.29 | 46.59% | $0.99 | 12.50% | $0.98 | 11.36% | ||
| Onions – Yellow | Lb | $0.68 | $0.79 | 16.18% | $0.69 | 1.47% | $0.38 | -44.12% | ||
| Onions – Yellow | 3# Bag | $1.44 | $2.49 | 72.92% | $1.38 | -4.17% | $1.49 | 3.47% | ||
| Peaches | Lb | $1.28 | $2.99 | 133.59% | $1.99 | 55.47% | $1.98 | 54.69% | ||
| Pears – Anjou | Lb | $1.27 | $1.99 | 56.69% | $1.29 | 1.57% | $1.48 | 16.54% | ||
| Pears – Bartlett | Lb | $0.97 | $1.99 | 105.15% | $0.99 | 2.06% | $0.98 | 1.03% | ||
| Pears – Bosc | Lb | $1.27 | $1.99 | 56.69% | $1.69 | 33.07% | $1.58 | 24.41% | ||
| Peppers – Green Bell | Each | $0.88 | $0.99 | 12.50% | $0.69 | -21.59% | $0.68 | -22.73% | ||
| Peppers – Red | Each | $1.38 | $1.29 | -6.52% | $2.29 | 65.94% | $0.88 | -36.23% | ||
| Pineapple | Each | $2.48 | $3.99 | 60.89% | $3.79 | 52.82% | $2.48 | 0.00% | ||
| Pistachios – Bag | 8 oz Bag | $4.98 | $5.00 | 0.40% | $6.64 | 33.33% | $3.98 | -20.08% | ||
| Plums | Lb | $1.98 | $2.99 | 51.01% | $1.99 | 0.51% | $1.18 | -40.40% | ||
| Potatoes – Red Bulk | Lb | $0.58 | $0.99 | 70.69% | $0.69 | 18.97% | $0.48 | -17.24% | ||
| Potatoes – Russet Bulk | Lb | $0.28 | $0.69 | 146.43% | $0.69 | 146.43% | $0.28 | 0.00% | ||
| Radishes | Bunch | $0.64 | $0.99 | 54.69% | $0.69 | 7.81% | $0.58 | -9.38% | ||
| Salad – Caesar | 14.5 oz Bag | $3.48 | $5.51 | 58.33% | $2.90 | -16.67% | $3.63 | 4.31% | ||
| Salad – Garden | 12 oz Bag | $0.88 | $3.96 | 350.00% | $1.98 | 125.00% | $1.98 | 125.00% | ||
| Salad – Organic | 5.5 oz Bag | $3.28 | $3.85 | 17.38% | $3.19 | -2.74% | $3.30 | 0.61% | ||
| Salad – Spring | 5 oz Pkg | $2.98 | $2.15 | -27.85% | $1.98 | -33.56% | $1.78 | -40.27% | ||
| Spinach – Bulk | Bunch | $1.47 | $1.99 | 35.37% | $0.99 | -32.65% | $1.48 | 0.68% | ||
| Squash – Zucchini | Lb | $1.48 | $1.49 | 0.68% | $1.29 | -12.84% | $1.48 | 0.00% | ||
| Sweet Potatoes | Lb | $1.28 | $1.99 | 55.47% | $0.99 | -22.66% | $1.88 | 46.88% | ||
| Tomatoes – Cherry | 12 oz Pkg | $2.98 | $4.56 | 53.02% | $3.96 | 32.89% | $1.86 | -37.58% | ||
| Tomatoes – Grape | Pint | $2.48 | $2.99 | 20.56% | $1.49 | -39.92% | $1.48 | -40.32% | ||
| Tomatoes – Hothouse (PLU 4799) | Lb | $1.88 | $1.99 | 5.85% | $1.29 | -31.38% | $1.28 | -31.91% | ||
| Tomatoes – Plum/Roma | Lb | $0.98 | $1.79 | 82.65% | $0.99 | 1.02% | $0.98 | 0.00% | ||
| Turnips | Bunch | $1.58 | $1.59 | 0.63% | $1.29 | -18.35% | $1.48 | -6.33% | ||
| Yams | Lb | $0.88 | $1.99 | 126.14% | $0.99 | 12.50% | $0.88 | 0.00% | ||
| MARKET BASKET | $100.91 | $141.38 | 40.11% | $112.76 | 11.74% | $97.10 | -3.78% | |||
| Red Prices is adjusted price. | ||||||||||
WinCo is a concept well worth studying. Its name has a double meaning — WinCo being a portmanteau of Winning Company — but it is also true that WinCo combined the first initials of all the states where WinCo operated when adopting that name: Washington, Idaho, Nevada, California and Oregon. Since then, the chain has expanded into Utah, Arizona and Texas, with an expected expansion into Oklahoma next. Burt Flickinger III, managing director of New York City-based Strategic Resource Group, was quoted as saying Winco was “Walmart’s worst nightmare,” a line that was picked up by Time magazine.
With over 100 large stores and growth continuing, WinCo seems likely to be a major headache not just for Wal-Mart but for all retailers in the markets it will be expanding into in the years to come.
Wal-Mart’s stock tumbled recently because company executives projected that earnings in 2017 will drop six to 12 percent because of enhanced investment in online and in higher payroll. These steps may be necessary, but they also create a kind of umbrella where others, say Aldi, can slip in and gain the low-cost-leader mantle.
It is unclear why this is precisely. What is clear is that concepts such as WinCo have a kind of “secret sauce,” allowing them to offer a value proposition that appeals to consumers and supports expansion.
What’s A Conventional Store To Do?
As for conventional supermarkets, if more sales move online and you have more specialized retailing such as Costco, Trader Joe’s, Aldi, Whole Foods and more convenience concepts such as Ahold’s Bfresh and Everything Fresh, where does that leave retailers such as Albertson’s? They can’t beat Wal-Mart, Aldi or WinCo on price, more and more of the business is moving online, and specialty retailers such as Trader Joe’s and Costco are more interesting and fun to shop.
In many cases, these conventional retailers are just milking the cow, living on consumers with old habits and perhaps maintaining a familiarity halo with store associates. It is hard to imagine there will be much of a place for these concepts when today’s internet-savvy Millennials reach 50.
In the A&P bankruptcy, many stores have gone unsold and others have been sold to real estate interests, not grocery store companies. Sure, these stores are often dated and in need of major investment, etc., but they are mostly in the New York metro area where real estate is tight. One can argue that it is a function of too much real estate being put on the market at one time, but it could also be argued that this is the market expressing that there is too much square footage in conventional grocery.
No One Wants To Go Toe-to-Toe
Fred Meyer’s role in this market is a reminder of both what might have been and, perhaps, a portent of the future. Perhaps the most interesting question for food retailing at the turn of the century is why no supermarket chain decided to compete with a similar concept even though it was obvious that Wal-Mart was planning to role supercenters out across America.
How They Stack Up Against Wal-Mart Supercenter
| Region | Store | % over Wal-Mart |
Store | % over Wal-Mart |
Store | % over Wal-Mart |
|---|---|---|---|---|---|---|
| Connecticut-5/02 | Super Stop & Shop | 23.00% | Shaws | 34.00% | Big Y | 36.00% |
| Salt Lake City-10/02 | Harmons | 2.00% | Smith’s | 6.00% | Albertsons | 12.00% |
| South Florida-2/03 | Super Target | 22.00% | Publix | 31.00% | Winn-Dixie | 52.00% |
| Dallas, Texas-10/03 | Albertsons | 23.00% | Brookshire’s | 7.00% | Kroger | 19.00% |
| Neighborhood Market | -1.2% | TomThumb | 27.00% | |||
| Portland, OR-3/04 | Albertsons | 30.00% | Fred Meyer | 22.00% | Haggen | 27.00% |
| Safeway | 37.00% | |||||
| Phoenix, AZ-8/04 | Albertsons | 22.00% | Bashas’ | 25.00% | Fry’s | 15.00% |
| Safeway | 17.00% | |||||
| Palm Springs-10/04 | Albertsons | 19.00% | Jensen’s Foods | 60.00% | Ralphs | 16.00% |
| Vons | 20.00% | |||||
| Detroit, MI-1/05 | A&P Food Basic | -17% | Farmer Jack | 24.00% | Kroger | 28.00% |
| Meijer | 3.00% | |||||
| St. Louis, MO-5/05 | Dierbergs | 22.00% | Schnucks | 14.00% | ||
| Houston, TX-9/05 | H-E-B | 15.00% | Kroger | 30.00% | Fiesta Mart | -0.3% |
| Atlanta, GA-11/05 | Harry’s | 18.00% | Ingles Market | 16.00% | Kroger | 25.00% |
| Publix | 13.00% | Target | 3.00% | |||
| Denver, CO-5/06 | Albertsons | 16.00% | King Soopers | 21.00% | Safeway | 25.00% |
| Portland, OR-10/06 | Albertsons | 32.00% | Fred Meyer | 21.00% | QFC | 54.00% |
| Safeway | 30.00% | |||||
| Toronto Canada-7/07 | A&P | 35.00% | Bruno’s Supermarket | 28.00% | Loblaws | 0.13% |
| Sobeys | 45.00% | |||||
| Kansas City, KS-10/07 | Dillons | 20.00% | Hen House | 15.00% | Hy-Vee | 18.00% |
| Price Chopper | 13.00% | |||||
| Los Angeles-4/08 | Fresh & Easy | 15.00% | Stater Bros. Markets | 8.00% | Ralphs | 0.25% |
| Vons | 14.00% | |||||
| Orlando, FL-10/08 | Publix | 32.00% | Super Target | 22.00% | Whole Foods Market | 0.38% |
| Winn-Dixie | 28.00% | |||||
| Phoenix, AZ 4/09 | Wal-Mart Marketside | 23.00% | Wal-Mart Neighborhood | 7.00% | Bashas’ | 0.30% |
| Fresh & Easy | 32.00% | Fry’s | 27.00% | Safeway | 37.00% | |
| Raleigh, NC 9/09 | Food Lion | 24.00% | Fresh Market | 31.00% | Harris Teeter | 0.35% |
| Kroger | 21.00% | Super Target | 11.00% | |||
| Philadelphia 4/10 | Acme | 17.00% | Genuardi’s | 22.00% | Giant | 0.26% |
| Super Fresh | 21.00% | Wegmans | 5.00% | |||
| New Jersey 10/10 | Food Basics | -1.00% | Pathmark | 15.00% | ShopRite | 0.80% |
| Dallas 10/11 | Albertsons | 25.00% | Central Market | 19.00% | Kroger | 21.00% |
| Sprouts Farmers Market | -7.00% | Super Target | 10.00% | TomThumb | 51.00% | |
| Savannah 6/12 | Food Lion | 7.00% | Fresh Market | 51.00% | Kroger | -2.00% |
| Piggly Wiggly | 27.00% | Publix | 22.00% | |||
| Lake Worth, FL 11/12 | Supermercado El Bodegon | -9.50% | Presidente Supermarkets | -18.40% | Publix | 29.00% |
| Sedano’s | 6.47% | Winn-Dixie | 17.40% | |||
| Tulsa, OK 10/13 | Resor’s | 43.60% | Sprouts Farmers Market | -1.90% | Target Supercenter | 12.90% |
| Warehouse Market | 8.80% | Winn-Dixie | 17.40% | |||
| Des Moines, IA 6/14 | Dahl’s Foods | 24.84% | Hy-Vee | 40.48% | Target Supercenter | 25.11% |
| Trader Joe’s | 3.98% | |||||
| Omaha, NB 6/15 | Baker’s | 29.51% | Hy-Vee | 43.49% | Trader Joe’s | 21.13% |
| Whole Foods Market | 62.26% | |||||
| “Bosie, ID 10/15” | Albertsons | 40.11% | Fred Meyer | 11.74% | WinCo Foods | -3.78% |
| Red Prices are adjusted price. | ||||||
Meijer was never purchased, and when Fred Meyer was purchased by Kroger, observers thought Kroger would use it as the basis for a national rollout of its own supercenter concept, but it never did. Right now, as Aldi and, soon, Lidl, roll out discount concepts, and as Trader Joe’s spreads its epicurean concept, the response from conventional supermarkets is to try to make incremental improvements in their concepts to resist these competitors, but, nobody seems to be interested in creating their own Aldi or Trader Joe’s.
It is unclear why this is precisely. What is clear is that concepts such as WinCo have a kind of “secret sauce,” allowing them to offer a value proposition that appeals to consumers and supports expansion.
Nothing in this 28th iteration of “The Produce Business Wal-Mart Pricing Report” offers much solace to Wal-Mart, which is facing competitors that undermine its low-price image, nor is there much solace for a conventional supermarkets such as Albertson’s, which is simply not price-competitive.
One senses hope for specialized concepts such as WinCo, which can offer low prices, but one looks at the big picture – new small-store concepts and internet shopping – and one wonders if the opportunities in food sales won’t be very different in the future than they have been in the past.
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