For some time now Fresh & Easy Buzz has been arguing that "value" is and should be the key consumer proposition for Tesco's Fresh & Easy Neighborhood Market, along with nearly all U.S. food and grocery retailers, in these poor economic times in the United States.
We aren't suggesting value should be the only retail proposition. Rather, it should permeate everything a retailer is currently doing regardless if its format is no frills discount or upscale specialty (with some exceptions in this case like Dean & Delucca and a few others)--or a combination/mixed format, in this current down U.S. economy.
Although the numbers--unemployment, inflation and the like--aren't showing a U.S. economy yet as bad as even the one for the year or so following the September 11 terrorist attacks, nor are the published economic indicators currently as bad as the 1990-1991 recession, many economists are arguing that the current U.S. economy is actually worse than in both those not too distant past economic downturns.
The thesis of these economists' argument, which we agree with in the main, is that the U.S. economy is currently experiencing a "perfect storm" of economic indicators that although the unemployment and inflation numbers don't show it for example, actually are making times more difficult for the consumer than in both of the past recessions mentioned above. Many respected economists are even starting to argue the U.S. economy is the worst it's been since the 1970's recession.
This perfect negative economic storm comes in the form of soaring gasoline and energy prices, a massive credit crunch and the housing foreclosure crisis, combined with fast-rising unemployment, stagnant wages and rapidly-rising food price inflation. This combination of factors, all happening at the same time, is hitting the average American consumer harder than past economic downturns because it's a combination of so many key factors occurring at the same time. What the economists call pocket book issues.
In other words, the collective consumer pocket book (except for the top 10% or so) is being rapidly depleted at the same time when most consumers' credit is overextended, banks have tightened consumer and commercial lending policies, and home values--the number one source of net worth for most Americans--are down by as much as 40% in some parts of the country.
As a result of this perfect consumer pocketbook storm, most consumers are for the first time in decades seriously cutting back on the quantity and quality of basics they purchase: food and groceries, gasoline and other everyday, essential items.
This isn't news to food and grocery retailers. Most food retailers are reporting average ring or market basket is down (with some exceptions), more coupons are being redeemed, and shoppers are cherry-picking weekly specials at much higher than previous rates.
Upscale and specialty retailers are particularly feeling the pinch. As we mentioned in a piece or two a couple weeks ago, even Whole Foods Market, Inc., the premiere natural and organic foods retailer in the U.S., has launched a value program, focusing on reducing prices and on offering other value propositions to retain, keep and not loose customers.
The driving force behind Whole Foods Value play is Walter Robb, Whole Foods Market, Inc's co-president. Mr. Robb has for years been unhappy with the "Whole Paycheck" nickname given to Whole Foods for its image as a pricey food retailer. Fresh & Easy Buzz has heard him say so on numerous occasions in various venues.
This image particularly upsets Mr. Robb because he has spent much of his retailing career in search of the deal. Suppliers who've dealt with Robb--whether it was during his days as an independent natural foods grocer decades ago, his years as the manager of the Mill Valley, California Whole Foods store, during the time he was president of the grocer's Northern California division, or in more recent years as the company's co-president--will tell you that he takes every opportunity available to him to mention to vendors and suppliers that they need to be giving Whole Foods "better," "stronger" and deeper deals, along with better everyday low prices regarding cost of goods.
Whole Foods "Whole Paycheck" moniker hasn't had an effect on the supernatural foods retailer materially in the past-except for raising the hair on the back of Walter Robb's and CEO John Mackey's respective necks. Despite this reputation by a segment of U.S. consumers, Whole Foods year after year turns in among the highest sales per square foot and gross margin numbers in the food and grocery retailing industry.
However, times are lean--and Whole Foods is responding with a multi-faceted value program designed not just to counter that "Whole Paycheck" image among some, but to prevent the retailer from losing business among its strong customer base, who even though they tend to be better educated and make more money than the average U.S. grocery shopper, are feeling their own pinched pocketbooks in the current poor U.S. economy.
Whole Foods' store team member Shawn Webb is on the front lines of the retailer's value program, reports the New York Times in a story today about Whole Foods' move into a more discount and value-oriented position.
Shawn Webb and every Whole Foods team member--from CEO John Mackey and co-president Walter Robb on down--is hoping among other things its new value proposition will restore some luster to the retailer, which has seen its stock drop 70% since 2006, despite acquiring the Wild Oats chain last year, Whole Foods main competitor.
What Whole Foods Market, Inc. is doing with its value program is indicative of what we've been suggesting all food and grocery retailers need to do to one degree or another in this current poor U.S. economy.
We suggest you read the story in today's New York Times here, as it is not only informative as to what Whole Foods is doing specifically, but also offers a broader object lesson in terms of our argument that value is in across all formats, and its not merely a short-term fad, in our analysis.
We aren't suggesting value should be the only retail proposition. Rather, it should permeate everything a retailer is currently doing regardless if its format is no frills discount or upscale specialty (with some exceptions in this case like Dean & Delucca and a few others)--or a combination/mixed format, in this current down U.S. economy.
Although the numbers--unemployment, inflation and the like--aren't showing a U.S. economy yet as bad as even the one for the year or so following the September 11 terrorist attacks, nor are the published economic indicators currently as bad as the 1990-1991 recession, many economists are arguing that the current U.S. economy is actually worse than in both those not too distant past economic downturns.
The thesis of these economists' argument, which we agree with in the main, is that the U.S. economy is currently experiencing a "perfect storm" of economic indicators that although the unemployment and inflation numbers don't show it for example, actually are making times more difficult for the consumer than in both of the past recessions mentioned above. Many respected economists are even starting to argue the U.S. economy is the worst it's been since the 1970's recession.
This perfect negative economic storm comes in the form of soaring gasoline and energy prices, a massive credit crunch and the housing foreclosure crisis, combined with fast-rising unemployment, stagnant wages and rapidly-rising food price inflation. This combination of factors, all happening at the same time, is hitting the average American consumer harder than past economic downturns because it's a combination of so many key factors occurring at the same time. What the economists call pocket book issues.
In other words, the collective consumer pocket book (except for the top 10% or so) is being rapidly depleted at the same time when most consumers' credit is overextended, banks have tightened consumer and commercial lending policies, and home values--the number one source of net worth for most Americans--are down by as much as 40% in some parts of the country.
As a result of this perfect consumer pocketbook storm, most consumers are for the first time in decades seriously cutting back on the quantity and quality of basics they purchase: food and groceries, gasoline and other everyday, essential items.
This isn't news to food and grocery retailers. Most food retailers are reporting average ring or market basket is down (with some exceptions), more coupons are being redeemed, and shoppers are cherry-picking weekly specials at much higher than previous rates.
Upscale and specialty retailers are particularly feeling the pinch. As we mentioned in a piece or two a couple weeks ago, even Whole Foods Market, Inc., the premiere natural and organic foods retailer in the U.S., has launched a value program, focusing on reducing prices and on offering other value propositions to retain, keep and not loose customers.
The driving force behind Whole Foods Value play is Walter Robb, Whole Foods Market, Inc's co-president. Mr. Robb has for years been unhappy with the "Whole Paycheck" nickname given to Whole Foods for its image as a pricey food retailer. Fresh & Easy Buzz has heard him say so on numerous occasions in various venues.
This image particularly upsets Mr. Robb because he has spent much of his retailing career in search of the deal. Suppliers who've dealt with Robb--whether it was during his days as an independent natural foods grocer decades ago, his years as the manager of the Mill Valley, California Whole Foods store, during the time he was president of the grocer's Northern California division, or in more recent years as the company's co-president--will tell you that he takes every opportunity available to him to mention to vendors and suppliers that they need to be giving Whole Foods "better," "stronger" and deeper deals, along with better everyday low prices regarding cost of goods.
Whole Foods "Whole Paycheck" moniker hasn't had an effect on the supernatural foods retailer materially in the past-except for raising the hair on the back of Walter Robb's and CEO John Mackey's respective necks. Despite this reputation by a segment of U.S. consumers, Whole Foods year after year turns in among the highest sales per square foot and gross margin numbers in the food and grocery retailing industry.
However, times are lean--and Whole Foods is responding with a multi-faceted value program designed not just to counter that "Whole Paycheck" image among some, but to prevent the retailer from losing business among its strong customer base, who even though they tend to be better educated and make more money than the average U.S. grocery shopper, are feeling their own pinched pocketbooks in the current poor U.S. economy.
Whole Foods' store team member Shawn Webb is on the front lines of the retailer's value program, reports the New York Times in a story today about Whole Foods' move into a more discount and value-oriented position.
Shawn Webb and every Whole Foods team member--from CEO John Mackey and co-president Walter Robb on down--is hoping among other things its new value proposition will restore some luster to the retailer, which has seen its stock drop 70% since 2006, despite acquiring the Wild Oats chain last year, Whole Foods main competitor.
What Whole Foods Market, Inc. is doing with its value program is indicative of what we've been suggesting all food and grocery retailers need to do to one degree or another in this current poor U.S. economy.
We suggest you read the story in today's New York Times here, as it is not only informative as to what Whole Foods is doing specifically, but also offers a broader object lesson in terms of our argument that value is in across all formats, and its not merely a short-term fad, in our analysis.
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