September 4, 2013
Wegmans: Customers No Longer Need Price Freeze
I have to admit being a little surprised when I came across a post by Mary Ellen Burris, senior vice president, consumer affairs at Wegmans, announcing the grocery chain was ending its seasonal price freeze program. The chain initially rolled out the freeze in 2011 in response to financial challenges its shoppers were facing, coming out of the Great Recession in 2009.
Wegmans was taking the action as a result of some improvement in economy, although, Ms. Burris wrote, "not to the degree we’d all like." Instead, the grocer plans to continue focusing on its "consistent low price" strategy.
While Wegmans attracts shoppers who may be less driven by price considerations than some others in the grocery business, the fact that it instituted the seasonal price freeze in the first place shows many were negatively affected by the recession.
To that end, an article by Jeff Cox at CNBC, points to various research findings showing that gains made by the top five percent since the Great Recession have masked "a decline of income and wealth of the bottom 95 percent."
Those findings are supported by the struggles of chains such as Walmart. A Wall Street Journal report citing Nielsen as its source, points out grocery sales have been on the decline since April. For its part, Walmart has been getting more aggressive with its pricing in an attempt to capture greater share of available grocery dollars.
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Discussion Questions
Are consumers more or less price sensitive today than they were in 2011? Do you think Wegmans has mistimed the announcement that it is ending its seasonal price freeze program?
Poll
If we assume that they became price sensitive in 2009 and figured out life wasn’t getting any better in 2011, there’s little evidence to suggest that the situation has improved in 2013, so we would guess they are still as price sensitive. Ending the price freeze now, and announcing its ending, is pretty insensitive.
There are a lot of moving parts with this question. First, the so-called “Great Recession” was in reality already technically over by the time the media and politicians created that moniker and began using it as a leverage point for fiscal policy. However, over the past five years, the lingering sluggish economy coupled with surging national debt and slow full time job growth continues to effect consumer confidence. Certainly for those who are unemployed or stopped looking for work, “price” will continue to be paramount.
Now to Wegmans. Wegmans does a better than average job of gauging the sentiment of their shoppers. “Price Freeze” programs have become the “promotion du jour” and I would surmise because of their over-exposure, they have lost some of their impact. In my view, Wegmans has done a much better job of projecting a solid “price image” with the weekly specials and EDLP items, more so than other higher-end retailers like Harris Teeter, Lunds, and others.
It is my guess that Wegmans has decided that “price freezes” have run their course and perhaps a better place to invest their markdown is with more targeted programs with a higher ROI and more relevance to their customer base. I would be surprised if they experience negative sales trends from this move.
Wegmans is trying to recoup some of the cost increases on basic goods, and this memo doesn’t surprise me. They are not Dollar General with 3 employees running the store, and need some extra % on the bottom line to provide their workers with the benefits and wages they pay. I respect Wegmans tremendously, and it is a shopping experience like no other, so trying to have the lowest prices on staples must have cut into the bottom line to the point where they needed to do this move.
I am certain Wegmans is aware of the media response to this, but in the long run, it is vital to keep their stores beautiful, and have the services needed to keep their core customers happy. That takes money, and if they make some adjustments on pricing, without getting too ridiculous, they’ll be okay. It is a brutal business to be in right now, and all of us are preparing for very thin bottom lines in the coming years, so Wegmans got out in front of the impending healthcare requirements and mandates to stabilize their bottom line. Good luck to all out there.
This was a gimmick – gimmicks don’t usually end with press releases. See Ron Jonson’s legacy at JCP.
The only grocers that have price freezes are those that have larger gross margins to begin with. And the people who shop those stores are not so concerned about price. Recessions, recoveries, to me they are not real. The economy is good all the time for good people and good companies. Its that simple. I don’t see why Wegmans needed to make the announcement. They should have ended the price freeze program without mentioning it.
Most consumers are still price sensitive as the 5%-95% change in wealth indicates. Wegmans does not usually make mistakes in their approach to their customers, so for now I give them the benefit of the doubt on the ending of the price freeze. I am sure they will be competitive in their fall and winter pricing on seasonal items to insure that they can transition out of the freeze seamlessly to their customers.
I can’t speak to consumers, but I can speak to retailers—from our surveys, we’re seeing that retailers are less worried about consumer price sensitivity than they were in 2011—much less worried. Is that because they feel like they have a handle on on-going sensitivity (“the new normal”)? Or is it because consumers are, in fact, less price sensitive?
I think it’s too early to tell. In our latest benchmark on marketing, we found that retailers were much more optimistic about growth opportunities than they have been since 2007. So I’m starting to suspect that it may be real. But I think no matter what, consumers have learned some new behaviors over the last 5 years, a lot of them driven by price transparency, and even if price sensitivity is off the table, a lot of those behaviors aren’t going to go away. The new normal, indeed.
When is any time a good time to bluntly tell your customers you are raising your prices to them?
Does ending a publicized price freeze during a period of rising costs matter to iconic Wegmans’ customers?
My guess consumers are pretty callous by all of today’s Retailuminations … or are they all part of the game?
If I were a Wegmans customer, I’d probably yawn, bite the bullet and wait for what costs are coming next from “Affordable Health Care.”
I think the reality is, prices in some staple categories are rising so quickly they cannot promise price locks anymore. What is most important is how their prices on staple items stack up to the competing chains. Wegmans has the right formula: ultra competitive center store with a high quality high price and high service perimeter. Truly a gold standard of how to run a supermarket that others have tried hard to copy, but can’t even come close. I’ll give Marianos, some Whole Foods, and Frys Signature at Tatum and Shea in Phoenix props for coming very close though.
In my opinion, Wegmans’ primary value proposition to consumers is quality, a great shopping experience and strong Private Brand items, not lowest price. There is never a good time in the consumer’s eyes to pull back a price freeze program. That said, it might as well be now.
Wegmans can ease some of the pain by creating unique programs that help consumers save in new ways. For example Buy A, Get B programs or meal solutions that help them save money.
If there is one supermarket chain in the country where the customers don’t care so much about price, it has to be Wegmans. I was surprised when they “froze” prices. I think they were leaving a lot of money on the table. Now that they are “unfreezing” I doubt any of their customers will move on to other competitors. This is Wegmans!
There is never a good time to tell your world you are raising prices. Wegmans’ customer base is not as affected as others, but nonetheless affected. I agree with most of the previous responders when they say Wegmans knows what they are doing.
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If we assume that they became price sensitive in 2009 and figured out life wasn’t getting any better in 2011, there’s little evidence to suggest that the situation has improved in 2013, so we would guess they are still as price sensitive. Ending the price freeze now, and announcing its ending, is pretty insensitive.
There are a lot of moving parts with this question. First, the so-called “Great Recession” was in reality already technically over by the time the media and politicians created that moniker and began using it as a leverage point for fiscal policy. However, over the past five years, the lingering sluggish economy coupled with surging national debt and slow full time job growth continues to effect consumer confidence. Certainly for those who are unemployed or stopped looking for work, “price” will continue to be paramount.
Now to Wegmans. Wegmans does a better than average job of gauging the sentiment of their shoppers. “Price Freeze” programs have become the “promotion du jour” and I would surmise because of their over-exposure, they have lost some of their impact. In my view, Wegmans has done a much better job of projecting a solid “price image” with the weekly specials and EDLP items, more so than other higher-end retailers like Harris Teeter, Lunds, and others.
It is my guess that Wegmans has decided that “price freezes” have run their course and perhaps a better place to invest their markdown is with more targeted programs with a higher ROI and more relevance to their customer base. I would be surprised if they experience negative sales trends from this move.
Wegmans is trying to recoup some of the cost increases on basic goods, and this memo doesn’t surprise me. They are not Dollar General with 3 employees running the store, and need some extra % on the bottom line to provide their workers with the benefits and wages they pay. I respect Wegmans tremendously, and it is a shopping experience like no other, so trying to have the lowest prices on staples must have cut into the bottom line to the point where they needed to do this move.
I am certain Wegmans is aware of the media response to this, but in the long run, it is vital to keep their stores beautiful, and have the services needed to keep their core customers happy. That takes money, and if they make some adjustments on pricing, without getting too ridiculous, they’ll be okay. It is a brutal business to be in right now, and all of us are preparing for very thin bottom lines in the coming years, so Wegmans got out in front of the impending healthcare requirements and mandates to stabilize their bottom line. Good luck to all out there.
This was a gimmick – gimmicks don’t usually end with press releases. See Ron Jonson’s legacy at JCP.
The only grocers that have price freezes are those that have larger gross margins to begin with. And the people who shop those stores are not so concerned about price. Recessions, recoveries, to me they are not real. The economy is good all the time for good people and good companies. Its that simple. I don’t see why Wegmans needed to make the announcement. They should have ended the price freeze program without mentioning it.
Most consumers are still price sensitive as the 5%-95% change in wealth indicates. Wegmans does not usually make mistakes in their approach to their customers, so for now I give them the benefit of the doubt on the ending of the price freeze. I am sure they will be competitive in their fall and winter pricing on seasonal items to insure that they can transition out of the freeze seamlessly to their customers.
I can’t speak to consumers, but I can speak to retailers—from our surveys, we’re seeing that retailers are less worried about consumer price sensitivity than they were in 2011—much less worried. Is that because they feel like they have a handle on on-going sensitivity (“the new normal”)? Or is it because consumers are, in fact, less price sensitive?
I think it’s too early to tell. In our latest benchmark on marketing, we found that retailers were much more optimistic about growth opportunities than they have been since 2007. So I’m starting to suspect that it may be real. But I think no matter what, consumers have learned some new behaviors over the last 5 years, a lot of them driven by price transparency, and even if price sensitivity is off the table, a lot of those behaviors aren’t going to go away. The new normal, indeed.
When is any time a good time to bluntly tell your customers you are raising your prices to them?
Does ending a publicized price freeze during a period of rising costs matter to iconic Wegmans’ customers?
My guess consumers are pretty callous by all of today’s Retailuminations … or are they all part of the game?
If I were a Wegmans customer, I’d probably yawn, bite the bullet and wait for what costs are coming next from “Affordable Health Care.”
I think the reality is, prices in some staple categories are rising so quickly they cannot promise price locks anymore. What is most important is how their prices on staple items stack up to the competing chains. Wegmans has the right formula: ultra competitive center store with a high quality high price and high service perimeter. Truly a gold standard of how to run a supermarket that others have tried hard to copy, but can’t even come close. I’ll give Marianos, some Whole Foods, and Frys Signature at Tatum and Shea in Phoenix props for coming very close though.
In my opinion, Wegmans’ primary value proposition to consumers is quality, a great shopping experience and strong Private Brand items, not lowest price. There is never a good time in the consumer’s eyes to pull back a price freeze program. That said, it might as well be now.
Wegmans can ease some of the pain by creating unique programs that help consumers save in new ways. For example Buy A, Get B programs or meal solutions that help them save money.
If there is one supermarket chain in the country where the customers don’t care so much about price, it has to be Wegmans. I was surprised when they “froze” prices. I think they were leaving a lot of money on the table. Now that they are “unfreezing” I doubt any of their customers will move on to other competitors. This is Wegmans!
There is never a good time to tell your world you are raising prices. Wegmans’ customer base is not as affected as others, but nonetheless affected. I agree with most of the previous responders when they say Wegmans knows what they are doing.