Alternatives Facing Superior. The First

¶ … alternatives facing Superior. The first is to adopt the everyday low pricing strategy by lowering prices on many items and doing some promotion. The second is to focus mainly on advertising an everyday low pricing strategy to combat the perception of high prices while focusing more on operating improvements than actual price lowering. The third option is to blend low pricing with operational improvements to try to be the best store all-round in Centralia. The fourth option is to maintain the status quo.

There are other options as well. Superior can restructure its operations by building a large store and closing one or more of the smaller stores. This would make the store the most attractive in terms of selection and pricing perception, would modernize Superior, but it would also be a very costly option for a market that is not growing. Superior could also consider increasing selection of high end goods, in particular at the meat counter and bakery, and become a differentiated high-end competitor. The current differentiated competitor is not especially differentiated so there is room in this market.

Another potential option for Hall to divest Superior, gaining value for the asset while it still holds the #2 market share and has potential. This may be the best solution for Hall's shareholders, but does not solve the problems at Superior. Nor does it seem especially palatable to Hall management at this point in time. Lastly, the Superior stores could simply focus on making minor improvements, abandoning the low cost strategy but attempting to capitalize on convenience by convincing customers to buy more of their groceries at Superior by enhancing the customer experience. This strategy plays to an existing strength at Superior, but is more tactical and less strategic, which may be insufficient to stem the customer exodus.

5. The first option will cost the company some margin in the short run, but will lower some of the staffing costs. Over the long-run this strategy will hopefully generate significantly greater volumes in order to make up for the lost margins. This option is risky because consumers seem only vaguely aware of pricing, and base their impressions of pricing more on perception than facts.

The second option will focus the company's efforts on perception. With a few improvements -- to the meat counter and bakery in particular -- the store can become more attractive to consumers. This will encourage consumers to give Superior the benefit of the doubt with regards to its claims of low pricing.

The third option will involve selective price cutting that is communicated as broad-based everyday low pricing, in combination with a string of operating improvements. This will shore up some of the company's weaknesses such as its lack of competitive advantage in anything other than convenience. If the company develops other competitive advantages, it can again receive the benefit of the doubt with respect to pricing if it simply brings its prices in line with the competition.

The fourth option assumes that consumers are not truly price sensitive and that the recent declines in sales are due to other reasons. While the easiest to implement, this option has opportunity costs, in particular if the perception of Superior continues to be as a player whose greatest asset is convenience.

6. The preferred alternative is the third option. This is essentially a re-envisioning of Superior stores from a mediocre store happy to be #2 to a store that wants to be the best on all levels. The stores are conveniently located, which is going to bring in customers inherently. However, most customers also shop at other stores which means that it is mainly the convenience that they shop at Superior at all. Superior needs to attract customers with other elements of its offering.

The consumer comments indicate that in general grocery store consumers want it all. They want attractive stores, low prices and good selection. They may pay more for a better meat counter but are uncomfortable paying more for basic groceries and dairy. Therefore, Superior should try to meet all of the needs of customers. They already receive high marks for the in-store experience, but they need to upgrade selection and prices. The small stores do not inherently mean a lack of selection. If the company focuses on efficient merchandising, it can give consumers the products they want while carrying a lower number of SKUs.