The disruptive strike that hit Stop & Shop, Rhode Island’s largest grocery chain, for more than a week in April is still being felt in the cozy aisles of Belmont Market in South Kingstown and at other independent grocers across the state.
At Belmont, a homey, intimate market where products are displayed on wooden fruit crates and small antique tables, a lot of new customers arrived during the labor dispute that shuttered many Stop & Shop supermarkets for several days in the spring, according to Belmont Marketplace Inc. owner Jack Siravo.
How does he know? “We recognize our [regular] customers,” he said.
In an industry that has become hypercompetitive, attracting and retaining a loyal customer is difficult. It takes more than having cheaper prices or well-lit aisles. Successful market owners say knowing what a community wants in its grocery store – including a wide selection of prepared meals for busy parents and a clean display of natural soaps and makeup – is essential to attract new customers and keep people coming back.
More than seven months after the strike, Belmont’s sales figures indicate that the store has retained a significant share of those new customers. Siravo estimated the overall sales increase at 5% to 10%.
Belmont made a great effort to keep the newcomers, showcasing the strengths of the local market, including the fresh, quality fruits and vegetables that were what the business was founded on. Siravo’s grandfather and father started the market in 1947, as a fruit stand, at a time when good fruits and vegetables were hard to find outside Providence.
He continues to work directly with a broker in Boston who scouts out the best-quality fruits and vegetables. It’s still the market’s calling card.
He said dismissively of the nearby big-box supermarket, “Their produce is edible.”
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MARKET LEADER: A customer exits the Stop & Shop store at 446 Putnam Pike in Smithfield. The supermarket chain leads the Northeast region with 415 stores and $17.8 billion in estimated sales volume through October 2019. / PBN PHOTO/MICHAEL SALERNO[/caption]
MARKET DISRUPTION
Stop & Shop Supermarket Co. is still the giant on Rhode Island’s supermarket landscape, with 27 locations across the state, almost double its closest competitor. But the strike offered an unexpected chance for other stores to carve away at least a sliver of Stop & Shop’s 15% market share in the Northeast.
The trouble for Stop & Shop started on April 11, when 31,000 unionized workers in Rhode Island, Connecticut and Massachusetts walked off their jobs over stalled contract negotiations. The work stoppage affected about 240 stores, many of which were forced to close and others were left with empty shelves. Many customers refused to cross the picket lines.
The strike ended 11 days later when Stop & Shop and the United Food & Commercial Workers Union International reached agreement on a three-year contract that, in part, offered raises and turned back the company’s effort to hike health insurance premiums and lower pension benefits for new hires.
But the damage was done.
The strike cost Stop & Shop millions of dollars and forced thousands of Ocean State shoppers to find grocery alternatives. For some people, it was the first time in years venturing into an unknown market. Many of them have kept coming back, according to independent store owners.
Tom’s Market Inc. has been one of the beneficiaries. The independent grocer, with locations in Coventry, Warren and Tiverton, reported a sales bump of 3% to 5% in the months after the work stoppage at Stop & Shop, a significant boost in an industry known for its paper-thin profit margins.
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PERIMETER SALES: Glenn Place, co-owner of Tom’s Market in Tiverton, talks with a customer. When it comes to competing with big-box supermarkets, Place says independent grocers can shine in perimeter sales, or perishable foods that show a human being is working there, such as the deli, meats, produce and the bakery. / PBN PHOTO/MIKE SKORSKI[/caption]
“It gave people a reason to go elsewhere,” said Glenn Place, who owns Tom’s Market with his wife, Danielle, and the market founder and namesake Tom DeAngelis. “Once you go elsewhere, you see what’s out there that you perhaps wouldn’t have seen before. There were people who came into my store in Coventry [for the first time]. We’ve been here 35 years.”
For its part, Stop & Shop hasn’t been sitting still since the picket lines dispersed.
Executives say the company is trying to reclaim lost sales and customers, in part by reducing prices on many products. In recent months, the chain also has rolled out a “click and collect” service that allows customers to pick up online grocery orders at stores without having to leave their cars.
They say the efforts have been working, but it doesn’t erase that Stop & Shop was badly stung by the labor dispute.
The company identified the losses at $345 million through the 11-day strike and a recovery period that followed, according to news reports. By the end of the second quarter, parent Ahold Delhaize reported flat U.S.-based sales, which would have been an increase but for the walkout.
By the third quarter, U.S. sales rose for the supermarket giant, based in the Netherlands, but this was buoyed by increased online sales and sales at other regional brands, including Food Lion. Sales at Stop & Shop declined, the third-quarter report said, without identifying a percentage.
New company President Gordon Reid says Stop & Shop has seen a sales rebound in the past month. With its aggressive moves to win back customers across New England, Stop & Shop has also seen its market share climbing, according to Reid.
Rhode Island, with slightly more than 1 million people, is particularly competitive. And Stop & Shop is not willing to cede ground, he added. Independent grocery stores, regional and national chains that operate in the Ocean State are all fighting for customers.
“We consider everyone who sells food competition,” Reid said in a recent interview. “We’re in an incredibly competitive market and it’s growing more competitive.”
FOOD HABITS
Stop & Shop’s nearest competitor in the Ocean State, IGA-affiliated stores, has 14 locations, followed by Dave’s Marketplace with 10 stores, according to industry publication The Griffin Report Northeast Market Review.
Stop & Shop also dominates in estimated sales volume, at $17.8 billion through October 2019 in the Northeast. It captures about 15% of the Northeast market, according to The Griffin Report. The next-closest competitor, retail giant Walmart Inc., has 12% of the Northeast market.
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Source: The Griffin Report Northeast Market Review, October 2019.[/caption]
Warehouse stores and retailer competitors such as Walmart and Target Corp., as well as online services, have made the supermarket industry more competitive in recent years.
On top of that, consumers are price conscious and bound by habit, according to retail consultants.
That is true of Roberta Dias, a Cranston resident who continues to frequent her favorite Stop & Shop, at the Wampanoag Plaza in East Providence, despite having moved from the immediate area.
Days before Thanksgiving, she loaded a large turkey and bags of groceries for the holiday dinner into the trunk of her car. Dias shops for a family of four, and she’s loyal to Stop & Shop because of its sales and the gas discount when she shops using the loyalty card.
She shops enough to routinely earn discounts of 60 cents a gallon on gas.
On a recent weekday, she used online coupons and other sales to shave $62 off the $224 initial bill, a 28% savings.
During the strike, she shopped at Walmart.
“I like Stop & Shop meats better,” she said. “I love their sales. I stock up when I can. You have to try to save money when you can.”
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Source: The Griffin Report Northeast Market Review. Market share is derived from all commodity volume, which is an annual range of the estimated retail sales for all items sold at a retail store.[/caption]
Mary Ann DeSousa, who lives in the Riverside section of East Providence, stopped at the same Stop & Shop a short time later, searching for a small spiral ham for Thanksgiving.
She’s not a regular customer, instead dividing her food budget between Price Rite Marketplace, where the cost savings are significant, and Shaw’s Supermarket, which she says has greater selection.
She’s motivated by savings, she added, and shops regularly for her family of four. “I come here for certain things,” she said of Stop & Shop. “Or if they’re having a sale.”
While price-conscious customers will drive an extra mile for sales, analysts say proximity can be a powerful draw.
In supermarkets, the biggest predictor of where someone will shop is how close the store is to their home, said Scott Sanders, a consultant at Growcery Partners in Boston, which works with food producers on pricing.
He said it would be hard to win over competitors’ customers long term, given those habits.
“I suspect people probably went back to their usual habits [after the strike],” he said. “Where disruption is happening, totally independent of the strike happening, is when chains offer something that is hard to get somewhere else.”
In competing with the big-box supermarkets, independent markets can shine in what Place, at Tom’s Market, calls the perimeter sales – the perishable foods that show a human being is working there.
“The deli, the meats, the produce, the bakery,” he said. “Let’s face it. We all sell Ivory soap. I sell three types of Tide, not 75. … I’m looking at my cashier now. She knows everyone’s name who’s coming through. You can’t get that at a larger store.”
At Dino’s Park-N-Shop, a family market established in 1957 in the Glocester village of Chepachet, Stop & Shop is a clear competitor. “They’re all around me,” said owner Stephen Kopeski. “There’s one in Woonsocket. There’s one in [Smithfield]. And there’s one in Putnam [Connecticut].”
The labor problems at Stop & Shop sent scores of people into Dino’s for the first time. “We just did business as normal,” he said. “But when you have new customers, if they have any questions, you bend over backward to answer.”
Since the strike ended, the market has held on to quite a bit of the newfound business, Kopeski said.
“We have a very good meat program,” he said. “We are a full-service supermarket. We are fresher than most stores.”
With pricing, specials often drive sales in any supermarket.
Independent market owners say they can’t sell the center-store manufactured products at the same price as a large competitor, but they’ll have competitive prices on the staples that people need. That creates an opportunity to hold on to new customers.
“If the Stop & Shop had hamburger for $1.99 one week, mine [is] $2.99. However, another week, I may have $1.99 pork chops and theirs are $3.99,” Place said. “So, it really gives an opportunity. If you shop here on a weekly basis, you can save money.”
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APPEALING DRAW: Customers head into Dave’s Fresh Marketplace at 371 Putnam Pike in Smithfield. Sue Budlong, Dave’s marketing and communications director, says the location is one of two of the company’s 10 Rhode Island stores that is large enough to be considered a destination market, attracting customers who drive a distance to get there. / PBN PHOTO/MICHAEL SALERNO[/caption]
SETTING THE TONE
For Dave’s Fresh Marketplace Inc., the largest of Rhode Island’s independent supermarket businesses, the difference comes in fine details.
The business adapts each market to the community, said Sue Budlong, Dave’s marketing and communications director. The stores come in varying sizes and without cookie-cutter layouts. Two markets, in East Greenwich and Smithfield, are large enough to be considered destination markets, attracting customers who drive a distance to get there.
In each Dave’s, customers enter into a large produce section. “It sets the tone,” Budlong said. “That was [founder Dave Cesario’s] standard. He was a produce guy. He started in a produce store up on Federal Hill.”
As long ago as the early 1990s, recognizing the growing desire for ready-made dinners among its customers, Dave’s started increasing production of prepared meals. These were healthy options that were made with fresh ingredients. Today, its selection of prepared dishes is one of the market’s signature characteristics.
In each store, Dave’s has butchers who grind hamburger meat on-premises daily and can answer detailed questions about cuts of meat.
It’s a commitment to quality, Budlong said. Until the 1980s, when the supermarket competition started to heat up in Rhode Island, Dave’s didn’t advertise. Now it sends customers an emailed flier each week. But unlike larger supermarket chains, such as Shaw’s and Stop & Shop, it doesn’t track consumer purchases and preferences through a loyalty card.
Budlong would not say specifically how the Stop & Shop strike affected Dave’s sales but said that over the past nine months, the 50-year-old business has held its own in terms of customer retention.
“What we do is try to be consistent,” Budlong said. “We offer good value, great customer service and terrific, fresh products. That’s it. We don’t try to get away from that mainstay. … We are built on word of mouth.”
In competition with large regional and national chains, Dave’s may not be able to offer bulk-purchase products such as boxed cereals at a lower or same price. But Dave’s tries to be competitive on pricing.
“We may not be able to sell the Cheerios at the same price, but we will be able to offer something comparable at a very good price,” Budlong said.
At Belmont Market, Siravo knows his market can’t survive if it’s competing on price alone. People who want lower prices will go to the Shaw’s Supermarket in South Kingstown, or the Stop & Shop in Narragansett.
“People who come to Belmont’s want good quality, nice service, a friendly face that they see every time they’re in there,” he said. “And our prices are not that much different.”
Mary MacDonald is a PBN staff writer. Contact her at Macdonald@PBN.com.