What Does A Wegmans In Fenway Mean for Shaws?
A Boston University professor says Shaws will have to make some adjustments in order to retain customers.
Already battling to maintain relevance in a food market overflowing with a variety of shopping experiences, the news about a Wegmans eyeing a brand-new Fenway location is going to have an adverse effect on Shaws’ local business “without a doubt,” experts say.
“It is going to effect that particular store,” says Boston University School of Management emeritus Professor Ronald Curhan. “I am not talking about corporate, I am talking about that one store—they will have to share some business. When a competitor moves in close to your market, you are going to lose some business.”
On Monday, Mayor Tom Menino announced the anticipated arrival of the New York-based supermarket, Wegmans, during a speech delivered to the Boston Municipal Research Bureau. “It will open in the Landmark Center and continue the progress in that neighborhood,” Menino said in his prepared remarks. This will mark the first Wegmans in Boston and the second in Massachusetts. The supermarket chain already has a profitable location in Northborough.
Although the notion that Wegmans, which has a cult-like following due to it’s pricing and stock variety, is bound to scoop up loyal Shaws customers and attract a wide-range of new local shoppers is no surprise, Curhan said the announcement will mean that Shaws will have to come up with additional offerings in order to maintain a competitive edge in the Boston neighborhood.
“The classic response of a supermarket to a competitor coming into the area is not to wait until they are already there. The classic response it to have promotional features—not just price—but other things you do and offer and have them before they arrive,” says Curhan, adding that he expects to see that from Shaws in the coming months.
Shaws has recently been struggling on the corporate side as customers have lost interest in shopping at some locations based on higher prices compared to the competition. According to the Boston Globe, “once one of the region’s dominant grocery sellers,” customers continue to flock to different chains to get the basic necessities from grocery retailers. The report claims that Shaws “lost its way” and analysts place the blame on Supervalu Inc., a Minnesota-based supermarket agency that purchased both Shaws and its affiliate, Star Market, more than a decade ago. The Globe cites this eye-popping statistic:
Shaw’s sales have eroded by about $1.5 billion since 2006 and its New England market share has dropped from 19 to 11 percent.
Then in January came the news that Shaws and Star Market were part of a $3.3 billion buyout. Now, because of the new owners and the fact that the Shaws location in the Fenway area is fairly up-to-date and doesn’t require much capital investment, the Fenway spot can focus their efforts more on promotional ideas, rather than fixing the store, says Curhan.
“I think they can continue to stay afloat … Wegmans is known for their prepared foods, and to the extent that [Shaws] can offer promotional material in this area, they will probably do that. Some could be made in the store, or bought, but if they are going to make a run for it with Wegmans as the competition, then clearly they have to change some things,” says Curhan, adding that the high operating costs at Shaws will give them “a lot of room to go down in pricing.”
Luckily, Shaws still has time to do some advanced planning, since the Wegmans announcement is still in its first stages, and the company has yet to finalize a deal on a location. “We are very interested in a site in the Fenway neighborhood. Discussions with the developer are underway, and we anticipate that an acceptable agreement can be reached in the near future,” says Jo Natale, Wegmans’ director of media relations.
Source URL: http://www.bostonmagazine.com/2013/03/what-does-the-wegmans-in-fenway-mean-for-the-shaws-business-model/