Wal-Mart vs. Kroger: the Rise of the Regional Food Chains
And the End of Wal-Mart Dominance
(Clinton, KY. Jan. 23, 2013) - A quiet food war is now laying siege to the American Midwest and Southern states. It is a gigantic struggle between one of the largest corporations on the face of the planet against a regional powerhouse. This is a fight between Wal-Mart and Kroger.
For over forty years, Wal-Mart has been the all stop shopping center for most of small town and rural West Kentucky. Driving out small locally owned shops in the 1960s and 70s, Wal-Mart’s extension into West Kentucky became the perfect storm of retail dominance.
This retail invasion of rural Kentucky was based upon (1) of cheap prices for food and consumer goods, (2) bright new shopping centers, with large numbers of parking spaces where the customer had a direct line of sight to the store, (3) air conditioning and heating during seasons, and (4) large selection of consumer goods and foods.
During this time, small independent and locally owned hardware stores, food stores, clothing stores, card shops, music stores, shoe stores were forced out of business. Wal-mart was very successful while Main Street commerce started to go out of business.
Geography of Market Core
Wal-Mart was born in small town Arkansas. Kroger was born in the urban center of Cincinnati, Ohio. The 20th Century saw both brands grow into major market dominance.
Wal-Mart targeted small towns in the Mid South as its primary core market area during their formative years of 1960 through 1980.
Wal-Mart used logistics strategy and cheap prices from suppliers in Asia to crush most competition. This system of high speed logistics linked Asian containers coming into Southern California ports into regional distribution centers for Wal-Mart. Once containers and imports were on the West Coast, they then were trucked or put on rail to stores in Midwest. Wal-Mart planned to have a retail store within 20 to 30 miles of each other. This strategy hammered all local and regional competition. Few retail operations could fight against the sheer volume and depth of goods and products offered at low or sometimes below market price.
Kroger, due to its scale of size and number of stores in Kentucky in 1990s, was able to hold on to its market, at a time that similar stores like E.W. James, Winn Dixie, and IGA were beaten down and suffered massive loss of regional market shares.
Business Model
Kroger was able to stand up to Wal-Mart, in part due to Kroger’s business model. For years Kroger stuck with its base store of about 35,000 to 45,000 square feet. Good food prices, fresh produce, and its own network for fresh meats was Kroger’s staple. The stores were primarily located in communities of 10,000 to 30,000. Most locations were in zip codes defined as upper middle class.
Kroger made major effort during the early 1990s to reconnect with its customer base. One strategy was a new customer card. Kroger gave its value shoppers discounts for using their Kroger Card. Store brand loyalty was pushed each time the card was used.
Kroger management also decided to stay in one place, unlike the Wal-Mart strategy of moving and upgrading every few years.
Wal-Marts changed buildings on average every eight to ten years during the latter part of the 20th century. When smaller units of Wal-Marts moved, they became Super Wal-Marts. These Super Wal-Marts would be around 60,000 to 80,000 sq. ft.
The next major moving and redefining of Wal-Mart came during the turn of the 21st century’s early years. From 2000 through 2012, a new model of Super Wal-Mart was born. These new stores were 95,000 sq. ft. up to 115,000 square feet. Most of these stores were built on new land, just outside the targeted urban core city or at its edge.
Kroger managed to avoid direct competition with Wal-Mart during most of the 20th century. With Wal-Mart’s move to suburban areas, the two giants would begin competing for the same customer base.
The battle for the soul of the Southern and Midwestern shopper is on. |
