Reed Case
Reed Supermarkets 1. How realistic is Morrissey’s goal of 16% market share by 2011?
Morrisey’s goal of 16% is not unachievable but it is highly unlikely that Reed will be able to achieve such expectations by 2011. Reed is an established company in Columbus with the strongest market share already, and its position is being attacked on multiple fronts. On one end, the company is losing some price sensitive customers to supercenters, warehouse clubs, and most recently dollar stores and Aldi. On the other end, Whole Foods has three stores in the metro area, two of which were opened in the last five years and any further expansion could steal market share from Reed directly (though expansion had slowed so this was not an immediate concern for Collins). Based on these challenges, the Company is more likely to lose market share than it is to gain it. It is unlikely a dramatic change in strategy will help management get to its desired position. If they change the sales model to that of a value or discount store, they could tarnish Reed’s image and lose high end customers. However, there are steps management can take to mitigate this risk and potentially even achieve its goal of increasing market share (see #2).
2. What strategy would be most effective for Reed moving forward? Why?
Management needs to focus on their existing customer base to continue what has made them successful over the last two decades. Rather than trying to establish a discount image (a move that could lead to significant negative consequences), they should continue to build on their high end reputation and focus on other desires of their existing customers. They can maintain their loyal customers and attain new customers in similar demographics by learning from shopping habits through its rewards card/loyalty program. Management already knows that their customer base is a generally older, more affluent, smaller household so they should focus on providing products that match this
Morrisey’s goal of 16% is not unachievable but it is highly unlikely that Reed will be able to achieve such expectations by 2011. Reed is an established company in Columbus with the strongest market share already, and its position is being attacked on multiple fronts. On one end, the company is losing some price sensitive customers to supercenters, warehouse clubs, and most recently dollar stores and Aldi. On the other end, Whole Foods has three stores in the metro area, two of which were opened in the last five years and any further expansion could steal market share from Reed directly (though expansion had slowed so this was not an immediate concern for Collins). Based on these challenges, the Company is more likely to lose market share than it is to gain it. It is unlikely a dramatic change in strategy will help management get to its desired position. If they change the sales model to that of a value or discount store, they could tarnish Reed’s image and lose high end customers. However, there are steps management can take to mitigate this risk and potentially even achieve its goal of increasing market share (see #2).
2. What strategy would be most effective for Reed moving forward? Why?
Management needs to focus on their existing customer base to continue what has made them successful over the last two decades. Rather than trying to establish a discount image (a move that could lead to significant negative consequences), they should continue to build on their high end reputation and focus on other desires of their existing customers. They can maintain their loyal customers and attain new customers in similar demographics by learning from shopping habits through its rewards card/loyalty program. Management already knows that their customer base is a generally older, more affluent, smaller household so they should focus on providing products that match this