http://www.modbee.com/2010/11/15/143108 ... o-fit.html
I dont have much hope for this idea...
Save Mart Re-Opening in Modesto
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storewanderer
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Re: Save Mart Re-Opening in Modesto
This idea of taking a poorly performing store in a declining area and switching it to a reduced service, lower price, reduced variety format rarely works. Countless companies have tried this and the results have not been good. Albertsons tried it multiple times with Super Saver, Max Foods, Grocery Warehouse, etc. and we see where those formats are: largely gone aside from a few scattered remnants. American Stores tried it with Super Saver too. Vons tried it in SoCal. Bashas has done it in AZ with Food City and has mixed results. You could argue the recent SmartCo fiasco in Denver was a similar idea. Other grocers have also tried this.
I'm not all that sure it will work for Save Mart given that Save Mart's core formats are already having a lot of problems attracting shoppers, at least, Save Mart and Food Maxx. Customers are simply shopping elsewhere and getting far better prices, better quality, and a wider selection of products. Safeway and Raley's are killing Save Mart. WinCo is killing Food Maxx. It is not a good situation. Competitive opening after competitive opening continues to chip away at Save Mart. Target adding food to many stores will not help. A low volume store losing as little as 10% of its business can easily put the store out of business when it is on the edge, and a lot of Save Mart's stores look to be on the edge.
What exactly is Maxx Value Foods? What is the target customer? It sounds like it is a Hispanic area. Why did they close the service counters? Hispanics seem to like service meat, service bakery, and more interaction with staff than white customers. I have observed Hispanics to like shopping in smaller shops/stores even if the prices are higher if they like the people and quality. Why isn't there a tortilla machine? Why isn't there a service meat counter? Why isn't there a refrescos kiosk? What customer are they targeting? Are they hoping the Hispanics will come here for low margin dry goods after buying all of the high margin fresh items at the Mi Pueblo across the street? Are they trying to target non Hispanic shoppers? What is the focus? Do they even know what the focus is? They should have pretty good data on what happens to a limited service format (Food Maxx for example) when a full service oriented hispanic grocer (Vallarta, Pro's, Mi Pueblo, etc.) opens near a Food Maxx.
But Save Mart is known to settle for doing lower volumes than most chains do. If the store makes a cent of profit, it stays open. So if this conversion can turn some stores profitable that were previously losing money, thus keeping the stores open, it can be a winner.
I have seen this work for Holiday in rural NorCal who was dying a slow death with too high of prices and not good enough perimeters going up against Safeway in rural towns. A good chunk of stores were converted to Sav Mor and picked up enough business to at least remain viable. Their labor and operational costs are lower though since they are non union.
I'm not all that sure it will work for Save Mart given that Save Mart's core formats are already having a lot of problems attracting shoppers, at least, Save Mart and Food Maxx. Customers are simply shopping elsewhere and getting far better prices, better quality, and a wider selection of products. Safeway and Raley's are killing Save Mart. WinCo is killing Food Maxx. It is not a good situation. Competitive opening after competitive opening continues to chip away at Save Mart. Target adding food to many stores will not help. A low volume store losing as little as 10% of its business can easily put the store out of business when it is on the edge, and a lot of Save Mart's stores look to be on the edge.
What exactly is Maxx Value Foods? What is the target customer? It sounds like it is a Hispanic area. Why did they close the service counters? Hispanics seem to like service meat, service bakery, and more interaction with staff than white customers. I have observed Hispanics to like shopping in smaller shops/stores even if the prices are higher if they like the people and quality. Why isn't there a tortilla machine? Why isn't there a service meat counter? Why isn't there a refrescos kiosk? What customer are they targeting? Are they hoping the Hispanics will come here for low margin dry goods after buying all of the high margin fresh items at the Mi Pueblo across the street? Are they trying to target non Hispanic shoppers? What is the focus? Do they even know what the focus is? They should have pretty good data on what happens to a limited service format (Food Maxx for example) when a full service oriented hispanic grocer (Vallarta, Pro's, Mi Pueblo, etc.) opens near a Food Maxx.
But Save Mart is known to settle for doing lower volumes than most chains do. If the store makes a cent of profit, it stays open. So if this conversion can turn some stores profitable that were previously losing money, thus keeping the stores open, it can be a winner.
I have seen this work for Holiday in rural NorCal who was dying a slow death with too high of prices and not good enough perimeters going up against Safeway in rural towns. A good chunk of stores were converted to Sav Mor and picked up enough business to at least remain viable. Their labor and operational costs are lower though since they are non union.
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krogerclerk
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Re: Save Mart Re-Opening in Modesto
SaveMart has fallen into the trap that has led to the downfall of many regional chains. Putting together two weak operations results in a still weaker operation along with overextending itself in the process. Adding Albertson's poor performing NorCal division to SaveMart's base more than double the size of the chain without bringing anything beneficial to either operation to the table. SaveMart hasn't gained any synergies from the acquisition of NorCal ABS but instead expanded its presence into markets that are more competitive than its core Central Valley.
In the long run, Save Mart could have better spent the money to upgrade its core store operations and improve pricing as Walmart and WinCo are providing competition that SaveMart was unprepared to go head to head with. Meanwhile, SaveMart picked up a store base that was found in more affluent and more populous markets of the Bay Area and Sacramento, requiring a service level and merchandising approach a bit more sophisticated than SaveMart is accustomed to delivering.
I suppose it's better to operate a store unprofitably than to pay a lease on an empty store, at least a cash flow is generated by having a store open, and it's possible to bring in enough revenue to loose less money by being open than by paying out leases, maintenance and utilities on a vacant building. Winn-Dixie tried this route in Atlanta with SaveRite and failed miserably, and they had a better store base to work with than that of SaveMart's Central Valley core market stores. it's not unusual for grocers to pay leases on vacant stores to keep a competitor from taking a location, and I'm sure SaveMart has done that on more than one occasion. Generally once an operator has closed a location, the same operator has a tough go of it reopening the same location. Kroger encountered the same problems in Northeast Ohio in the mid-80's before closing its Cleveland and Pittsburgh divisions. Barney's Food Warehouse, BiLo and LoBi never had the customer counts that Kroger had prior to closing, nor did they get the higher margin sales from fresh and prepared foods that the store had as a conventional Kroger.
In the long run, Save Mart could have better spent the money to upgrade its core store operations and improve pricing as Walmart and WinCo are providing competition that SaveMart was unprepared to go head to head with. Meanwhile, SaveMart picked up a store base that was found in more affluent and more populous markets of the Bay Area and Sacramento, requiring a service level and merchandising approach a bit more sophisticated than SaveMart is accustomed to delivering.
I suppose it's better to operate a store unprofitably than to pay a lease on an empty store, at least a cash flow is generated by having a store open, and it's possible to bring in enough revenue to loose less money by being open than by paying out leases, maintenance and utilities on a vacant building. Winn-Dixie tried this route in Atlanta with SaveRite and failed miserably, and they had a better store base to work with than that of SaveMart's Central Valley core market stores. it's not unusual for grocers to pay leases on vacant stores to keep a competitor from taking a location, and I'm sure SaveMart has done that on more than one occasion. Generally once an operator has closed a location, the same operator has a tough go of it reopening the same location. Kroger encountered the same problems in Northeast Ohio in the mid-80's before closing its Cleveland and Pittsburgh divisions. Barney's Food Warehouse, BiLo and LoBi never had the customer counts that Kroger had prior to closing, nor did they get the higher margin sales from fresh and prepared foods that the store had as a conventional Kroger.