A quarterly review by Hall Consolidated is scheduled to discuss performance in District III. District III includes fifteen Superior Supermarkets located in Centralia, Missouri. The district manager for these stores, Randall Johnson, has requested that these three locations implement an everyday low pricing strategy since these stores are the highest priced supermarkets in the Centralia market. His is concerned that because of increasing consumer price consciousness, they may lose market share. Centralia store’s sales have been below budget for the last quarter of 2002 and this first quarter of 2003. Still, operating margins are near plan due to sales of slightly higher gross margin items and a reduction in operating expenses. They have also had a higher customer count for this first quarter (Kerin & Peterson, 1998/2010, pp. 484-495). Market Conditions
Centralia, Missouri had food and beverage sales of $62.3 million in 2002, which was a 4.6 percent increase over the previous year. Superior and three other major competitors, Harrisons, Grand American, and Missouri Mart account for eighty-five percent of food sales in Centralia. 41.6 percent of Centralia’s population is between the ages of twenty-five and fifty-four. 30.6 percent of household income is between $15,000 and $34,999 and 39.6 percent is between $35,000, and $74,999. In 2002, Superior held an estimated twenty-three percent of the food sales market, Missouri Mart had twenty-seven percent, Harrison’s had twenty-two percent, and Grand American had thirteen percent. However, these competitors draw customers from larger geographic areas than Superior (Kerin & Peterson, 1998/2010, pp. 484-495). Competition
Superior executives consider Missouri Mart to be their primary competition since thirty-two percent of Superior’s customers shop there regularly. Missouri Mart’s customers are middle aged to older families with incomes above $30,000. Sixty percent of their space is allocated to general merchandise (Kerin & Peterson, 1998/2010, pp. 484-495). General Merchandise is considered to be all nonfood items, except health and beauty aids. This includes: housewares, toys, greeting cards, hardware, etc (McGraw-Hill Companies, 2004). Missouri Mart’s primary strength is in grocery and special purchase displays. Forty percent of their floor space is dedicated to food items (Kerin & Peterson, 1998/2010, pp. 484-495). The store is cluttered, and their products lack quality and freshness. However, their advertised sales items are priced extremely low and are well stocked at the end of their isles. They are located at the north edge of town near Superior’s N. Fairview location. Missouri Mart is situated within a complex which houses a drug store, furniture store, and a bakery. This location is managed as a single-owner franchise. Customers consider Missouri Mart to have the greatest variety of items; however they are unhappy with their meat department and overall customer service (Kerin & Peterson, 1998/2010, pp. 484-495). Grand American is considered Superiors secondary competition. This store opened in 2001 and is the most modern of all Centralia’s supermarkets. It has wide aisles, fancy décor and is easy to shop. However, Superior considers the store to be lacking in merchandise appeal. It has a modest variety of meats, produce and groceries, but has very little general merchandise. This store also has its own small pharmacy. Customers particularly like their dairy department. Their advertising emphasizes high-volume items and emphasizes competitive pricing on advertised items. They also offer double coupons and manager specials. They are located near Superior’s Main Street store and Harrisons’ Supermarket. This store attracts residential customers with incomes between $20,000 and $35,000, and received mostly neutral or low comments on a...