Hotter Pace In Race To Sell Groceries

Press, Volume CIII, Issue 30366, 15 February 1964, Page 21

Hotter Pace In Race To Sell Groceries

The latest blow in the grocery price battle was struck this week when a supermarket in Richmond announced it was selling butter at Is 9d a pound, lid below cost. This staple—and subsidised—commodity is proving one of the big attractions to the growing number of supermarkets in the city and the latest price cut has provoked an outcry from the small grocers, who see it as a damaging blow to their busineses.

It is, however, only one of the hundreds of items being offered at cut prices in the intensely competitive grocery trade. There was a time when a grocer could assume that for every pound of butter he sold he would do £ 1 worth of business. This old rule of thumb has been quite upset by the supermarket business which has developed in New Zealand in spite of many prophesies to the contrary. It promises to grow at a remarkable rate in the next two years. Each new supermarket that opens—and several opened in the last few months—has a turnover equivalent to that of five or six small grocery shops. So far, their effect has been spread over a wide field and small traders have not suffered drastically. In fact, where small grocers near supermarkets have fought back with brighter, cleaner shops, better service, and cut prices on special lines, they have actually improved their business. What the general competition has achieved so far has been the elimination of poorly-managed businesses. Even then, the number that has succumbed to superior forces is remarkably small. The butchers have suffered more directly. Some have responded by late dosing on Friday nights and, by renovating shops, or by selling packaged meat to match the supermarkets’ methods. : In Auckland, butchers have banded together to buy cooperatively and to offer price specials, thus borrowing a leaf from the grocers’ success manual. Neighbours of the supermarkets claim they have increased business because of the extra trade brought to their areas by the car parks and the bargains. One garage proprietor says his petrol sales have gone up substantially since the supermarket came to his district The hairdresser is better off, too. The improvement can even apply to grocers who play their cards right. . Some supermarket managers say they are employing psychology in their selling. Some call it low cunning. At any rate,, it is shrewd busi-

ness. There seem* no end to the devices learned on tours the supermarketeers have made in the United States and Australia. Bulky goods are placed where customers pick them up first. They find a shopping trolly is necessary; then they are committed to more, extensive shopping. The basic foodstuffs and the best-advertised bargains are reached last in the well-planned shop. Children are welcomed. They slow down the shopping pace and want to examine the stock, too. When some customers reach the cash registers they find they have bought more than their purses will bear. Goods have to be returned to balance up. But on the whole, customers seem to be getting a good service. They welcome the opportunity to compare prices and to inspect goods and labels closely before they take them and enjoy the leisure of this kind of shopping. Many arrive with shopping lists composed from advertisements and know exactly how much they will spend and how much they will save on reduced lines. What is more, the cut-price lines are those they most often want. Reductions are no longer made on a few slow-sellers. The basis of price cuts is the scale on which goods can be turned over. Sometimes the manu-

facturer bears the brunt of the cut; more often it is the retailer himself who expects to increase turnover in other lines as a result. Smaller Profits Where the small trader once reckoned on a profit margin of about 18 per cent, ihe is often now satisfied with less. The supermarkets, with perhaps 100 price reductions, are satisfied with 10 per cent profit on turnover. Where the small grocer expects a turnover of £6OO a week with a staff of three or four, the supermarket can sell more than £3OOO worth of stock in a week with a staff of 20 and make a good profit. Wholesalers who have lost business to the grocers’ cooperatives have banded together in collective buying schemes for the remaining independent grocers. Manufacturers have accepted price-cutting as part of ■their business to promote bigger sales and are prepared to finance part of the advertising of their goods as specials by the grocers’ groups. This is in addition to the advertising they do on their own account. Wholly independent grocers are now few and far between. Such developments have meant good times for customers who are prepared to use their feet or their cars to get the bargains. They have meant tougher times for grocers who have lost some of the cream of their business to the cut-price stores but are still expected to deliver heavy goods to their old customers. Changing Trade In some cases instant, coffee is an example—the cut prices have become so general that they are now standard. In the sale of chocolate, the grocers, who are prepared to regard it as a fringe line worth foregoing profit on, have robbed dairies .and confectionery shops of much of the trade. Grocers have also had to make up ground by stocking fruit and more hardware and softgoods.

“The sm all man has been trampled on by experts,” says one man in the trade. “Those who are not prepared to enter the price war will survive only if they stay open seven days a week, like the dairies,” says another.

“Only the few independents and the dairies maintain the

recommended retail prices now,” says a corner store owner. “My turnover has stayed up only because I stock more fruit —and much better quality than I used to,” says a grocer in Sydenham who has three supermarket competitors. “They shouldn’t be allowed to sell meat after 5 o'clock on ,a Friday,” says a butcher there. “Manufacturers are fighting to get their goods in the front of my shop,” says a supermarket manager. “It’s not easy to find a man capable of running a supermarket,” says the director of a grocery chain. “I propose to spend even more on advertising—it really brings the. girls in,” says a market manager. “Women spend up to threequarters of an hour doing a week’s shopping .... I think most of my customers are shrewd household managers and get a good deal,” says another supermarket manager. “This shop has been here 60 years but I am moving to a supermarket in another suburb,” says a young storekeeper who has been faced with supermarket competition. No Going Back One thing is certain: there will be no reversal of the trend over recent years. The customers like it; the Government has rejected appeals

for the fixing of minimum prices for such goods as butter; the supermarket promoters are investing in land for more and bigger establishments. Foodstuffs (Christchurch), Ltd. (Four Square), a branch of the Dominion’s biggest chain of grocers with 220 stores in the city, has 11 supermarket sites under consideration or already being planned. The group hopes to ring the city with supermarkets. Consideration is being given to markets at Riccarton, Bishopdale, Opawa, Hoon Hay, Belfast, Rangiora, Papanui, and a site beyond Hornby. The I.G.A. group, which operates on a similar principle with grocer shareholders, and has about 120 members in Christchurch, has supermarket plans for Opawa, Papanui, Riccarton, Ilam road, and New Brighton. It has firm plans for, or is already working on, supermarkets at Blenheim, Greymouth and Timaru. I.G.A. has bought land at Rangiora and near Hornby with supermarkets in mind. The New Zealand Farmers’ Co-operative Association of Canterbury, Ltd., which is converting its Cashel street grocery into a supermarket, also has development plans for Blenheim. It has already proved the acceptability of the supermarket principle in provincial towns. The association has successful supermarkets at Leeston and Ashburton. A supermarket is expected to be part of the shopping centre proposed by the firm at Northcote. It has a three-acre site on the Main North road which includes the former Waimairi County Council buildings and yard, and has room for an extensive car park. Self-Help Co-op., Ltd., which runs about 30 shops in Christchurch, expects to open its New Brighton supermarket in about two months, and has a site in the Bishopdale development which could be used next year. New Force Woolworths (N.Z.), Ltd., regarded as a growing force in the food trade with supermarkets at Riccarton and Sydenham, will open another at New Brighton and is expected to break further into the field at Bishopdale. Wool worths regards only the Sydenham store and Bishopdale schemes as true supermarkets in that there is pro-

vision for car parking next to the shop. Hay’s, Ltd., with shops at Riccarton and Sydenham, has firm plans to open a supermarket at Papanui. Hay’s and the Farmers’ Co-opera-tive work inside the I.G.A. buying system. The Good Housekeeping Bureau, Ltd., a group of about 1500 grocers allied with independent mechants (about 260 members in Canterbury), is watching the position with interest. Although it has no plans at present for entering the supermarket field, grocer merhbers or the merchants themselves might be tempted to put up the capital for supermarkets. Definition The general agreement In the trade about the definition of a supermarket is that it is a self-service shop occupying at least 5000 square feet. Some firms insist that it should have car parking space on the American pattern and some that it should be a general store at which all kinds of household requirements in addition to provisions can be bought. What remains in doubt is the capacity of Christchurch to support as many supermarkets as are planned. A solid block of the public remains, and is likely to remain, wedded to the small grocery shop giving personal attention to shoppers and operating a delivery service. But the promoters’ calculations are based on the assumption that a supermarket’s customers are drawn from within a radius of five to seven miles if the attraction is great enough. This is why they have plans for markets standing on cheaper land in virtual isolation on the edge of the city; and it is why supermarkets in Sydenham and Richmond, hardly to be regarded as growing residential areas, have proved successful. Nevertheless, not everyone in the trade is confident that all the plans mentioned so far will be realised. But until the future is clearer the big groups are prepared to invest in land wherever they think they are likely to succeed. They are watching their competitors as closely as the small trader is watching them. For, paradoxically, the small trader, as a shareholder in the wholesale group, could be financing his strongest opposition.