Aggressive pricing boosts retail sales

06/29/2010 10:36:26 AM
Tom Burfield

A burgeoning number of independent markets and continuing aggressive promotions are a couple of the major retail trends in evidence in Southern California as supermarket produce sales seem to be inching upward.

“Independents are getting stronger,” said Dick Spezzano, president of Spezzano Consulting Services, Monrovia, Calif.

He estimates that Hispanic and Asian independent chains operate more than 200 stores in the greater Los Angeles area, including the San Fernando Valley, the San Bernardino area and Orange County.

Produce departments in the independent stores typically make up to twice the amount sales of the average chain store, he said, and their produce prices are 30% to 60% cheaper.

“As they spread out of their core markets, they attract the crossover customer that wants good produce at cheap prices,” he said.

Since they can react to changing markets quicker than the major chains, they’re a preferred customer for many vendors, Spezzano said.

They’re also a destination for mature fruits and vegetables, odd sizes, oversupplies, and, in some cases, produce rejected by the chains, he said.

Many ethnic retailers have grown from relatively small operations to chains of up to 25 stores, said Paul Vogel, managing member of QSI LLC, Los Angeles.

“They are major retailers,” he said.

Some shoppers have left the traditional big-box retailers to shop at the more local, regional stores, he added.

“Independent markets tend to be more value-conscious and aggressive in the pricing,” said Chris Puentes, president of Interfresh Inc., Orange, Calif.

“They are looking for an optimal value range,” he said, perhaps offering medium-size peaches that they can promote at 69 cents to 79 cents per pound.

Meanwhile, large, mainstream chains also continue to play up and even expand their aggressive pricing programs, but some say prices on non-sale items slowly seem to be on the rise.

“Traditionally, the middle of the week used to be the softest part of the week,” Vogel said.

“Now, it’s one of the busier periods in the sales cycle due to the mid-week specials that retailers are running trying to drum up business.”

Together, thanks to midweek values, one-day specials and regular weekly ads, consumers have been given a tremendous opportunity to buy a lot of merchandise on sale, he said.

But that has resulted in a conundrum for supermarkets.

“The only items that really seem to be selling are the items that are on sale,” he said.

Puentes too, has noticed “some sporadic, more aggressive promotions,” but he said “on their everyday staples, they, to me, seem pretty pricey.”

Other trends Spezzano has noticed are the expansion of farmers markets from one a week on a seasonal basis to three or four each week year-round. He said locally grown programs continue to be popular, with Albertsons, Ralphs and Vons jumping on the buy-local bandwagon.

The retail trends now in evidence in Southern California eventually could show up in other regions, Vogel predicted.

“It appears that a lot of the people from across the United States are looking at the Southern California marketplace with tremendous interest,” he said. “It’s changing the way retailing is being done.”

Overall, retail business “seems like it’s getting a little bit better,” Puentes said.

But the economy remains fragile.

“There are reasons to be mildly optimistic,” he said, “but I think people are still very concerned.”



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