June 13, 2008
R&FF Retailer: Safeway – Our Retailer Of The Year
By Warren Thayer, Editorial Director, Refrigerated & Frozen Foods Retailer
Through a special arrangement, what follows are excerpts of a current article from Refrigerated & Frozen Foods Retailer magazine, presented here for discussion.
Who knew?
Safeway, with a seven percent share of the country’s retail food market, owns better than half of all supermarket refrigerated soup sales. It’s also got the largest made-to-order sandwich business of any food retailer in the U.S. These are just further proof that the Pleasanton, Calif.-based chain is firing on all cylinders – innovating, leveraging meal opportunities and driving profitable sales.
Of course, there are other, larger indicators of how Safeway is differentiating itself:
- After
Safeway converts stores to its Lifestyle format, the remodeled units have
been turning in double-digit sales gains, and healthy increases in the years
after; - Safeway’s
O Organic corporate brand – one of the fastest-selling organic food brands
in America – is being marketed to retailers in the U.S. and overseas, along
with Safeway’s other stellar health and wellness brand, Eating Right; - Safeway
is successfully executing store-specific planograms tailored to the local
demographic; - Over
a 15-year period ending last Dec. 10, Safeway outperformed 97 percent of
the S&P 500 stocks.
Yes, Safeway is really kicking butt. What’s behind all this is not Lifestyle stores, O Organics, planograms or refrigerated soup. It’s big-picture focus on the consumer, pure and simple. Safeway is methodically building relationships with its shoppers via sophisticated analytical tools and well-oiled store-level execution.
In Cannondale Associates’ Power Ranking Survey for 2007, both manufacturers and retailers awarded Safeway drastically higher scores in nearly every category versus 2006: “Clearest company strategy,” up 7.5 points; “Best job of branding stores,” up 4.3 points; “Best retailers with which to do business,” up 4.5 points; “Best category management/buying teams,” up five points; “Most innovative consumer marketing/merchandising,” up 6.9 points; “Best practice category management,” up 7.2 points.
A group of frozen and dairy food manufacturers agreed that Safeway is very different from what it was only a few years ago, and is among the most receptive of any retailer in terms of trying new products and exploring new ideas for partnerships.
One broker notes that Safeway is more willing than most to give smaller vendors time to present their case for why their products might be a good fit for the chain’s shoppers. Buyers also work with vendors to get products only in appropriate stores rather than forcing chain-wide distribution, the broker adds, noting that the company is fair about introductory fees in such circumstances.
While never the low-price leader, Safeway is focused on providing a superior shopping experience via more in-store labor and better décor – especially in the Lifestyle stores.
“They do a mix of EDLP and hi-lo, with a nice shelf tag flagging the price reduction,” says one frozen food vendor. “They do quite a few multiples, but not many BOGOs anymore. All in all, it works very well for them.”
Discussion Question: What has been the underlying driver behind Safeway’s many recent successes? Which program has been most impressive in its recent run?
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Safeway has clearly made some innovations but I think they are blown out of proportion. The underlying driver behind Safeway’s many recent successes has mostly been their own press releases claiming they are successful. I’m not seeing results of improved sales and market share in Chicago, Houston, Philly, Baltimore-DC, or Western Canada. In those markets they have become “also ran” ineffectual competitors. In their own back yard in northern California, they do quite well.
Safeway has identified and executed things consumers want–fresh food, healthy choices and an easier shopping experience. The fresh produce, bakery, deli, signature soups and meals are all grouped together for quick pick-up. Grouping foods together for meal occasions in endcaps, wider aisles, and lighting simplify store navigation.
The range and quality of the Safeway organics have found an audience. The distinctive packaging for the Safeway O products invite purchase while making the label easy to locate throughout the store. Good tasting products, convenience, healthy selections, and pleasant experience will continue to build loyalty.
Safeway’s success is relative and overblown.
Their remodeled stores are much nicer looking than their older stores and they have long had a broad selection of private label food and beverages.
What irks me is that they still get it wrong. They still do not understand their customer and their staff knows little to nothing about their assortment. The result is stores that are completely devoid of customers.
I cannot say it often enough but demographics are changing. Families are getting smaller and singles are on the rise. This would suggest smaller stores with smaller portions would be commonplace. Until their Long Beach concept store becomes more than just a test I argue they are not doing enough. As for portions, take a walk through their bakery and you’d think the Partridge or the Brady family are their only customers. Take a hint from Fresh & Easy and offer a baguette that actually fits in a shopping bag.
Their staff are awfully cordial but that is not enough. Every time I shop at a Von’s, I get asked at least twice if they can be of help. When I actually tell them yes, I am looking for so and so, they take me through each aisle of the store and 15 minutes later say they must not have whatever I was looking but then by chance I find it on my own a minute later.
Also, as mentioned above, the merchandise beyond the bakery and groceries is presented poorly for the prices they charge. Cosmetics and health care could be presented in a much more attractive fashion and am confused why this has not been addressed in the remodeled stores.
For what it’s worth, I usually get an earful from vendors whenever I interview them about specific retailers. You’ll recall I even got negative feedback recently about Wegmans, perhaps one of the best retailers out there. I won’t pass judgment here on how justified such criticism is; various people here have pointed out in the past, justifiably, that vendor comments are very often self-serving. When retailers refuse interviews, as an increasing number do, you have to rely on vendors, consultants and business partners.
At any rate, I did find a significant turnaround in vendor comment this time, vs. about three years ago when I did a Safeway story where vendors essentially trashed it. Vendors by and large, at least the ones in frozen/dairy that I interviewed, had really good things to say this time, which surprised me as much as the negative input I got about Wegmans.
I’ll add here that the Cannondale surveys of vendors also pointed out strong improvements in Safeway in recent years. And, I agree that the West Coast stores are very likely performing better than the ones elsewhere. Most Lifestyle stores I’ve been in appear to be doing well, and I’m personally very impressed with Safeway’s innovative PL program.
Is Safeway a paradigm of perfection? Of course not. But it’s cleaned up its act, is doing a lot of things right, and most market share figures I’ve seen show it doing just fine.
The reports of their successes are greatly exaggerated. This is a good company with incredible potential. They are stumbling over processes, and dealing with a highly frustrated vendor community. If you are the vendor partner for the category, then you essentially are in charge. Much leadership has been surrendered, and there are a lot of inexperienced people in key positions.
I cannot agree with the statement regarding the success of the store level planograms. There is either flaws in the data, or mischief with the category partners. Were it not for their massive size and inertia, the problems would be more evident.
Having said that, there are some very dedicated and loyal people in the ranks that are trying to institute change and assert better business processes. Safeway will do fine.
Apparently, the market in which Safeway is operating plays a big role in their vaunted “success.” While I am not privy to numbers, the suburban Chicago area Dominick’s (Safeway) stores and parking lots are empty most hours of the day. I have been “invited” to the “grand re-opening” of a third Dominick’s store this evening.
The closest Dominick’s location to me no longer carries 2 liter bottles of Dr. Pepper, or my favorite brand of yogurt, or freezer tape, and is regularly “out of stock” on advertised specials I have made a trip to buy. Yet, there are two long facing aisles of overpriced wonderful smelling lotions, home fresheners and “cut your own slab” natural soaps, and another half aisle of ceramic dishes and serving pieces such as are available almost anywhere. The deli counters of several other local groceries are usually two deep with customers waiting for service. At Dominick’s deli, there is rarely anyone in line, and as you go past with your cart the personnel often call out to see if you would like to try a free sample of something they have in the case. (They probably get lonely for human interaction.) Unfortunately, the item I most regularly want to buy at their deli, the heavenly Artichoke Asiago dip, is not available at least half the time.
This all does not make me happy–there needs to be healthy competition and differentiation in the grocery business. I hope Safeway/Dominick’s can pull it off. But the article about Safeway I just read does not track with my actual experiences and observations inside their stores.
Safeway is clearly the most innovative traditional grocer in the industry. They were very quick to move on the improved experience and then even quicker to roll it out. Their private label moves have been exceptional and, as mentioned, their in-house foodservice exemplary.
They opened a restaurant (Citrine)! And, they’ve also been very quick to open a small market grocery model (Von’s Market, Long Beach).
It’s one thing to have new ideas and test them, but Safeway’s ideas WORK, and they roll them out. They have mastered the art of being a “fast, profitable second.” Cheers.
One area where I’d like to see even greater improvement is for a more aggressive approach in health & beauty; in particular, to have a better understanding of niche, specialty, and premium brands and products that do not “rank” as high as high volume commodities. These types of items need to be included in the mix because the consumers that buy these items are high spending niche consumers that want to have a complete shopping experience at one store.
You can sum it up in two simple labels.
Safeway stopped being a distributor.
Safeway became a marketer.
Safeway really focuses on the consumer. All their programs, from PL to the online nutrition tools, really add value to the customer’s shopping experience. Newer stores have great layouts and they deliver on the whole Lifestyle experience. In the few Safeways that I have been to on the West Coast, I have had really great customer interactions withe the floor associates. Product knowledge is a real priority for staff. This enhances the already excellent shopping experience.
The article says it all. Safeway, after several years of acquiring great regional chains and “Safewayizing” them, realized that all retail is a local phenomenon. In addition, the renewed focus on the customer has allowed for positive differentiation of the various chains in its portfolio. Safeway realized that the “big middle” was not the place to be. Instead, its various new offerings give customers particular reasons to shop (besides simply price).
They are not finished innovating and focusing on the customer. Their newly minted banner, The Market, a 15,000 square foot offering, looks to be a well-executed response to Tesco’s Fresh & Easy. Stay tuned.
Safeway, like many other conventional grocers, has benefited greatly by the slowdown in new location expansion by Wal-Mart, Costco, and Sam’s Club. Fewer new competitive stores helps everyone’s profits. If the retailing industry went on a new store opening strike for 5 years, would retail profits double?
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Safeway has clearly made some innovations but I think they are blown out of proportion. The underlying driver behind Safeway’s many recent successes has mostly been their own press releases claiming they are successful. I’m not seeing results of improved sales and market share in Chicago, Houston, Philly, Baltimore-DC, or Western Canada. In those markets they have become “also ran” ineffectual competitors. In their own back yard in northern California, they do quite well.
Safeway has identified and executed things consumers want–fresh food, healthy choices and an easier shopping experience. The fresh produce, bakery, deli, signature soups and meals are all grouped together for quick pick-up. Grouping foods together for meal occasions in endcaps, wider aisles, and lighting simplify store navigation.
The range and quality of the Safeway organics have found an audience. The distinctive packaging for the Safeway O products invite purchase while making the label easy to locate throughout the store. Good tasting products, convenience, healthy selections, and pleasant experience will continue to build loyalty.
Safeway’s success is relative and overblown.
Their remodeled stores are much nicer looking than their older stores and they have long had a broad selection of private label food and beverages.
What irks me is that they still get it wrong. They still do not understand their customer and their staff knows little to nothing about their assortment. The result is stores that are completely devoid of customers.
I cannot say it often enough but demographics are changing. Families are getting smaller and singles are on the rise. This would suggest smaller stores with smaller portions would be commonplace. Until their Long Beach concept store becomes more than just a test I argue they are not doing enough. As for portions, take a walk through their bakery and you’d think the Partridge or the Brady family are their only customers. Take a hint from Fresh & Easy and offer a baguette that actually fits in a shopping bag.
Their staff are awfully cordial but that is not enough. Every time I shop at a Von’s, I get asked at least twice if they can be of help. When I actually tell them yes, I am looking for so and so, they take me through each aisle of the store and 15 minutes later say they must not have whatever I was looking but then by chance I find it on my own a minute later.
Also, as mentioned above, the merchandise beyond the bakery and groceries is presented poorly for the prices they charge. Cosmetics and health care could be presented in a much more attractive fashion and am confused why this has not been addressed in the remodeled stores.
For what it’s worth, I usually get an earful from vendors whenever I interview them about specific retailers. You’ll recall I even got negative feedback recently about Wegmans, perhaps one of the best retailers out there. I won’t pass judgment here on how justified such criticism is; various people here have pointed out in the past, justifiably, that vendor comments are very often self-serving. When retailers refuse interviews, as an increasing number do, you have to rely on vendors, consultants and business partners.
At any rate, I did find a significant turnaround in vendor comment this time, vs. about three years ago when I did a Safeway story where vendors essentially trashed it. Vendors by and large, at least the ones in frozen/dairy that I interviewed, had really good things to say this time, which surprised me as much as the negative input I got about Wegmans.
I’ll add here that the Cannondale surveys of vendors also pointed out strong improvements in Safeway in recent years. And, I agree that the West Coast stores are very likely performing better than the ones elsewhere. Most Lifestyle stores I’ve been in appear to be doing well, and I’m personally very impressed with Safeway’s innovative PL program.
Is Safeway a paradigm of perfection? Of course not. But it’s cleaned up its act, is doing a lot of things right, and most market share figures I’ve seen show it doing just fine.
The reports of their successes are greatly exaggerated. This is a good company with incredible potential. They are stumbling over processes, and dealing with a highly frustrated vendor community. If you are the vendor partner for the category, then you essentially are in charge. Much leadership has been surrendered, and there are a lot of inexperienced people in key positions.
I cannot agree with the statement regarding the success of the store level planograms. There is either flaws in the data, or mischief with the category partners. Were it not for their massive size and inertia, the problems would be more evident.
Having said that, there are some very dedicated and loyal people in the ranks that are trying to institute change and assert better business processes. Safeway will do fine.
Apparently, the market in which Safeway is operating plays a big role in their vaunted “success.” While I am not privy to numbers, the suburban Chicago area Dominick’s (Safeway) stores and parking lots are empty most hours of the day. I have been “invited” to the “grand re-opening” of a third Dominick’s store this evening.
The closest Dominick’s location to me no longer carries 2 liter bottles of Dr. Pepper, or my favorite brand of yogurt, or freezer tape, and is regularly “out of stock” on advertised specials I have made a trip to buy. Yet, there are two long facing aisles of overpriced wonderful smelling lotions, home fresheners and “cut your own slab” natural soaps, and another half aisle of ceramic dishes and serving pieces such as are available almost anywhere. The deli counters of several other local groceries are usually two deep with customers waiting for service. At Dominick’s deli, there is rarely anyone in line, and as you go past with your cart the personnel often call out to see if you would like to try a free sample of something they have in the case. (They probably get lonely for human interaction.) Unfortunately, the item I most regularly want to buy at their deli, the heavenly Artichoke Asiago dip, is not available at least half the time.
This all does not make me happy–there needs to be healthy competition and differentiation in the grocery business. I hope Safeway/Dominick’s can pull it off. But the article about Safeway I just read does not track with my actual experiences and observations inside their stores.
Safeway is clearly the most innovative traditional grocer in the industry. They were very quick to move on the improved experience and then even quicker to roll it out. Their private label moves have been exceptional and, as mentioned, their in-house foodservice exemplary.
They opened a restaurant (Citrine)! And, they’ve also been very quick to open a small market grocery model (Von’s Market, Long Beach).
It’s one thing to have new ideas and test them, but Safeway’s ideas WORK, and they roll them out. They have mastered the art of being a “fast, profitable second.” Cheers.
One area where I’d like to see even greater improvement is for a more aggressive approach in health & beauty; in particular, to have a better understanding of niche, specialty, and premium brands and products that do not “rank” as high as high volume commodities. These types of items need to be included in the mix because the consumers that buy these items are high spending niche consumers that want to have a complete shopping experience at one store.
You can sum it up in two simple labels.
Safeway stopped being a distributor.
Safeway became a marketer.
Safeway really focuses on the consumer. All their programs, from PL to the online nutrition tools, really add value to the customer’s shopping experience. Newer stores have great layouts and they deliver on the whole Lifestyle experience. In the few Safeways that I have been to on the West Coast, I have had really great customer interactions withe the floor associates. Product knowledge is a real priority for staff. This enhances the already excellent shopping experience.
The article says it all. Safeway, after several years of acquiring great regional chains and “Safewayizing” them, realized that all retail is a local phenomenon. In addition, the renewed focus on the customer has allowed for positive differentiation of the various chains in its portfolio. Safeway realized that the “big middle” was not the place to be. Instead, its various new offerings give customers particular reasons to shop (besides simply price).
They are not finished innovating and focusing on the customer. Their newly minted banner, The Market, a 15,000 square foot offering, looks to be a well-executed response to Tesco’s Fresh & Easy. Stay tuned.
Safeway, like many other conventional grocers, has benefited greatly by the slowdown in new location expansion by Wal-Mart, Costco, and Sam’s Club. Fewer new competitive stores helps everyone’s profits. If the retailing industry went on a new store opening strike for 5 years, would retail profits double?