May 14, 2013
Does Marketplace Give Kroger an Answer to Walmart?
So much emphasis in chain retailing today seems to be on shrinking the big box. But some companies such as H-E-B, Kroger and Meijer who go head-to-head with Walmart’s Supercenters every day are opening big and sometimes even bigger boxes to compete with the world’s largest retailer.
A case in point is Kroger, which according to The Toledo Blade, has opened 78 Marketplace stores in Arizona, Kentucky, Ohio, Tennessee and Texas. The company’s Fred Meyer division operates similar big boxes in the Pacific Northwest. The typical Marketplace store offers expanded general merchandise categories in addition to the groceries found in other Kroger stores.
"When you go to a [Kroger] Marketplace store and see furniture — which shocked me the first time I saw it — it’s pretty evident that having bigger stores has let capable retailers put their toes into new markets for growth," Bill Bishop of Willard Bishop Consulting told the Blade. "And I think what you’re going to see is a lot more of that."
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Discussion Questions
Is the Marketplace format a winning response for Kroger in its competition with Walmart? Which of the supercenter or supercenter-like formats such as H-E-B Plus, Kroger Marketplace, Meijer, etc. do you think poses the greatest head-to-head challenge for Walmart?
Poll
While the Marketplace stores have a clear point of differentiation from Walmart—in a broader selection of hard goods to complement disposables—I am not sure that those stores interact with Walmart as directly as the article suggests. Walmart shoppers appreciate the selection, but also want to purchase at the rock-bottom lowest prices. Marketplace is designed to offer the selection, but not the rock-bottom prices.
The Marketplace stores are most likely to steal share from the warehouse store concepts—Costco and Sam’s Club, where the assortment is huge and the pricing competitive, but not guaranteed to be the lowest.
I do not think that any of those store concepts truly will steal the low-priced shopper from Walmart, even though they will drive trial from the less price sensitive customer segments.
As huge and perplexing as Walmart has grown, numerous formats are potential winning responses to competing with Walmart, particularly Kroger’s Marketplace formula. The same could be said for H-E-B Plus, Meijer and a few others, but such a victory is elusive.
Retailing’s mighty law is change and Walmart, while a very efficient retailer, has gotten to be a little “old hat” save for its pricing—its greatest asset. Thus WM has a lot of inter-facings and territories to protect while Kroger is throwing its fishing line into the gigantic Lake Walmart.
Kroger has long observed how Meijer has grown its Thrifty Acres big box formula into decades of success and now Kroger appears to be challenging Walmart, at least for those many customers who prefer a more atmospheric ambiance that Kroger offers. But since victory often changes her side, we must wait to see what forces evolve in the future.
The Marketplace store I visited was bright, clean, well organized, and fun to shop. That has never been a description I have used for a Walmart Supercenter. The stores are appealing to customers who want a different shopping experience, a different selection of products, but still enjoy one stop shopping.
One of the challenges for Kroger or any of the other big box entrants is to provide the right selection for the customers frequenting that store and to provide an experience they appreciate.
My head just spins with all this discussion almost every day about Walmart. There are plenty of formats to discuss that compete against Walmart, and do it quite well, big or small businesses alike.
I know as much as I want to know about the 800lb. gorilla, and have competed against them for many years, and IMO, there is more than just price to drive sales.
Ignoring a great deal is hard to do, and the new Kroger format better bring the VALUE, or it’ll end up creating a lot of slow moving SKUs, which could hurt them in the long run. The service at Kroger, judging from my few trips there, was always very good, but the pricing needs to be sharpened in order to play the Marketplace game. Even if they take the top 200 SKUs in food, and match or beat Walmart, people will notice, and prefer the service levels of Kroger any day of the week.
I think Kroger can do this, if they are conscious of getting the staples right. Good luck!
Maybe. The true key is whether or not Kroger can be competitive and actively guide consumers, as it offers non-grocery items. How these items compare to their grocery items, in returns and ROI, will only be learned over time.
I’m a grocery guy and from a grocery standpoint, Meijer, H-E-B and Kroger Marketplace do grocery much better than Walmart. Super Target seems to be on par with Walmart when it comes to non-supermarket comparable products.
I look at percent of total store of grocery comparable merchandise. H-E-B Plus and Kroger Marketplace are pushing 90%. Meijer about 80% and Walmart 60%. Super Target I’m guessing about 50% and Target Pfresh about 35%. The Marketplace format is fine but Kroger is careful where they place them. I doubt we will see them in the small county seat communities, but rather in higher-income sections of larger metro areas.
“Winning strategy”? I guess that depends on what “war” one is trying to win. The “lowest price” war? Probably not. The “nicer store/better merchandise” war? Probably. The “still staying in business” war? Only Kroger knows that. Though not really mentioned in the article, I suspect much/most market share growth Kroger experiences comes not from WM but from OTWs (Other-than-Walmart chains) and independents…the few that are still left.
Having spent significant time in the Fred Meyer Stores, and being in a handfull of Marketplace Stores in a few different spots, I can say these Marketplace Stores are not very similar to a Fred Meyer at all when it comes to general merchandise. Various categories are missing. Fred Meyer has all categories; everything Walmart has, they have, and in many cases, they have even more. These Marketplace Stores are missing many categories completely or have a very abbreviated mix in other categories (such as toys). Where the Marketplace Stores match a Fred Meyer offering is with seasonal goods, garden (in Arizona only), bed/bath, kitchen, and the odd furniture/lamp area.
My view of the Marketplace Stores is Kroger takes the grocery program of the specific region and executes it very, very well in these marketplace stores. Then, the general merchandise is added as a distraction or on the side. I think it helps keep customers in the store longer, but the focus is still very much on the food side of things in these Kroger Marketplace stores. In the Fred Meyer stores, much more focus is on the non food.
Fred Meyer competes head to head with Walmart, very successfully, on all categories, in their established Pacific Northwest markets.
Kroger has proved to be one of the best at being both an innovator, and a “fast-imitator.” That’s not easy with the number of banners and stores that they operate from sea-to-shining-sea.
Kroger has dutifully learned a great deal from their Fred Meyer stores in the Pacific Northwest. The Marketplace model provides the leverage to capture new margin and added revenue from a box built in the right neighborhoods.
Kroger, top to bottom, is a fair-minded, tough competitor, taking nothing for granted. H-E-B is much the same timber. The Marketplace offers great upside.
One of these days, people are going to figure out Walmart is better at being Walmart than anyone else.
Fred Meyer—and Fred Meijer, for that matter—are great formats FOR THEM. Why try to take a formula that works and degrade it?
I believe (or maybe hope is a better way to put it) the Marketplace Stores are a “bridge” for Kroger to operate true, full size Fred Meyer Stores in regions outside the Pacific Northwest.
There are some merchandising issues with Fred Meyer that make transporting the format outside the Pacific Northwest somewhat difficult, especially on clothing, but I think they can “get it” with time; we know they move slowly and listen to customers.
Operationally the entire Kroger operation including its food business has become much, much more like Fred Meyer in recent years. From the presentation of items, to pricing, to how the front ends operate, to the format of the weekly print advertisements, it is clear that various Fred Meyer ideas have made their way across the entire company.
I agree with Dr. Schuster that merchandise selection is very important and key to the Marketplace stores, and I agree with Mr. Livingston that the Marketplace stores must be located correctly. The few that I have been able to visit were bright, attractive, and impressive, but with a limited selection of “dry good,” or non-grocery offerings, which seem to be very purposefully chosen. (This IS very different from Fred Meyer which is a general merchandise store with—everything.)
I am certain that Kroger has learned from Fred Meyer and uses that knowledge for Marketplace. As has been stated, Walmart is Price Price PRICE and Kroger can peel off customers who want more than just price, as well as take customers from the other competitors as well.
I really hope that these stores can help them. They will still have larger numbers of traditional stores in which they offer terrific merchandise at fair value with great service. (BTW Meijer is also really great and really in direct, head to head competition with WMT and they do a MUCH better job with service compared to WMT, but WMT is the price king and often wins the customer on that alone.)
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While the Marketplace stores have a clear point of differentiation from Walmart—in a broader selection of hard goods to complement disposables—I am not sure that those stores interact with Walmart as directly as the article suggests. Walmart shoppers appreciate the selection, but also want to purchase at the rock-bottom lowest prices. Marketplace is designed to offer the selection, but not the rock-bottom prices.
The Marketplace stores are most likely to steal share from the warehouse store concepts—Costco and Sam’s Club, where the assortment is huge and the pricing competitive, but not guaranteed to be the lowest.
I do not think that any of those store concepts truly will steal the low-priced shopper from Walmart, even though they will drive trial from the less price sensitive customer segments.
As huge and perplexing as Walmart has grown, numerous formats are potential winning responses to competing with Walmart, particularly Kroger’s Marketplace formula. The same could be said for H-E-B Plus, Meijer and a few others, but such a victory is elusive.
Retailing’s mighty law is change and Walmart, while a very efficient retailer, has gotten to be a little “old hat” save for its pricing—its greatest asset. Thus WM has a lot of inter-facings and territories to protect while Kroger is throwing its fishing line into the gigantic Lake Walmart.
Kroger has long observed how Meijer has grown its Thrifty Acres big box formula into decades of success and now Kroger appears to be challenging Walmart, at least for those many customers who prefer a more atmospheric ambiance that Kroger offers. But since victory often changes her side, we must wait to see what forces evolve in the future.
The Marketplace store I visited was bright, clean, well organized, and fun to shop. That has never been a description I have used for a Walmart Supercenter. The stores are appealing to customers who want a different shopping experience, a different selection of products, but still enjoy one stop shopping.
One of the challenges for Kroger or any of the other big box entrants is to provide the right selection for the customers frequenting that store and to provide an experience they appreciate.
My head just spins with all this discussion almost every day about Walmart. There are plenty of formats to discuss that compete against Walmart, and do it quite well, big or small businesses alike.
I know as much as I want to know about the 800lb. gorilla, and have competed against them for many years, and IMO, there is more than just price to drive sales.
Ignoring a great deal is hard to do, and the new Kroger format better bring the VALUE, or it’ll end up creating a lot of slow moving SKUs, which could hurt them in the long run. The service at Kroger, judging from my few trips there, was always very good, but the pricing needs to be sharpened in order to play the Marketplace game. Even if they take the top 200 SKUs in food, and match or beat Walmart, people will notice, and prefer the service levels of Kroger any day of the week.
I think Kroger can do this, if they are conscious of getting the staples right. Good luck!
Maybe. The true key is whether or not Kroger can be competitive and actively guide consumers, as it offers non-grocery items. How these items compare to their grocery items, in returns and ROI, will only be learned over time.
I’m a grocery guy and from a grocery standpoint, Meijer, H-E-B and Kroger Marketplace do grocery much better than Walmart. Super Target seems to be on par with Walmart when it comes to non-supermarket comparable products.
I look at percent of total store of grocery comparable merchandise. H-E-B Plus and Kroger Marketplace are pushing 90%. Meijer about 80% and Walmart 60%. Super Target I’m guessing about 50% and Target Pfresh about 35%. The Marketplace format is fine but Kroger is careful where they place them. I doubt we will see them in the small county seat communities, but rather in higher-income sections of larger metro areas.
“Winning strategy”? I guess that depends on what “war” one is trying to win. The “lowest price” war? Probably not. The “nicer store/better merchandise” war? Probably. The “still staying in business” war? Only Kroger knows that. Though not really mentioned in the article, I suspect much/most market share growth Kroger experiences comes not from WM but from OTWs (Other-than-Walmart chains) and independents…the few that are still left.
Having spent significant time in the Fred Meyer Stores, and being in a handfull of Marketplace Stores in a few different spots, I can say these Marketplace Stores are not very similar to a Fred Meyer at all when it comes to general merchandise. Various categories are missing. Fred Meyer has all categories; everything Walmart has, they have, and in many cases, they have even more. These Marketplace Stores are missing many categories completely or have a very abbreviated mix in other categories (such as toys). Where the Marketplace Stores match a Fred Meyer offering is with seasonal goods, garden (in Arizona only), bed/bath, kitchen, and the odd furniture/lamp area.
My view of the Marketplace Stores is Kroger takes the grocery program of the specific region and executes it very, very well in these marketplace stores. Then, the general merchandise is added as a distraction or on the side. I think it helps keep customers in the store longer, but the focus is still very much on the food side of things in these Kroger Marketplace stores. In the Fred Meyer stores, much more focus is on the non food.
Fred Meyer competes head to head with Walmart, very successfully, on all categories, in their established Pacific Northwest markets.
Kroger has proved to be one of the best at being both an innovator, and a “fast-imitator.” That’s not easy with the number of banners and stores that they operate from sea-to-shining-sea.
Kroger has dutifully learned a great deal from their Fred Meyer stores in the Pacific Northwest. The Marketplace model provides the leverage to capture new margin and added revenue from a box built in the right neighborhoods.
Kroger, top to bottom, is a fair-minded, tough competitor, taking nothing for granted. H-E-B is much the same timber. The Marketplace offers great upside.
One of these days, people are going to figure out Walmart is better at being Walmart than anyone else.
Fred Meyer—and Fred Meijer, for that matter—are great formats FOR THEM. Why try to take a formula that works and degrade it?
I believe (or maybe hope is a better way to put it) the Marketplace Stores are a “bridge” for Kroger to operate true, full size Fred Meyer Stores in regions outside the Pacific Northwest.
There are some merchandising issues with Fred Meyer that make transporting the format outside the Pacific Northwest somewhat difficult, especially on clothing, but I think they can “get it” with time; we know they move slowly and listen to customers.
Operationally the entire Kroger operation including its food business has become much, much more like Fred Meyer in recent years. From the presentation of items, to pricing, to how the front ends operate, to the format of the weekly print advertisements, it is clear that various Fred Meyer ideas have made their way across the entire company.
I agree with Dr. Schuster that merchandise selection is very important and key to the Marketplace stores, and I agree with Mr. Livingston that the Marketplace stores must be located correctly. The few that I have been able to visit were bright, attractive, and impressive, but with a limited selection of “dry good,” or non-grocery offerings, which seem to be very purposefully chosen. (This IS very different from Fred Meyer which is a general merchandise store with—everything.)
I am certain that Kroger has learned from Fred Meyer and uses that knowledge for Marketplace. As has been stated, Walmart is Price Price PRICE and Kroger can peel off customers who want more than just price, as well as take customers from the other competitors as well.
I really hope that these stores can help them. They will still have larger numbers of traditional stores in which they offer terrific merchandise at fair value with great service. (BTW Meijer is also really great and really in direct, head to head competition with WMT and they do a MUCH better job with service compared to WMT, but WMT is the price king and often wins the customer on that alone.)