Traditional Grocery Chains Wage a Two-Front Battle

Oct 15, 2013

All you have to do is turn on your TV lately to see evidence of the grocery wars. 

One recent Walmart ad states: "With Fred Meyer fuel points, you could save $1.30 at the pump. At Walmart, you could have saved a total of $17.92." 

"Wow, that's awesome!" the woman shopper in the commercial exclaims. 

The issue of competition has become a big issue as employees at Fred Meyer, QFC, Safeway, and Albertsons try to reach a new contract. They voted overwhelmingly last month to authorize a strike. The companies have used a growing competitive threat as justification for cuts to health insurance and little to no wage increases. 

Picket Signs

On Wednesday, the two sides head back to the bargaining table. But United Food and Commercial Workers Local 21 spokesman Tom Geiger says workers have already ordered picket signs, and are moving ahead with strike preparation.

Geiger says they've asked the employers for documentation of rising competition, but haven't gotten the information. 

But David Wright, an analyst with the Bellevue-based consumer research firm Hartman Group, says it's true the grocery chains face multiple threats. 

Walmart has been expanding in Western Washington. Just in the past year, the company opened stores in Marysville, Bellevue, Lynnwood, and Tacoma. Wright says the supermarkets are also competing with Whole Foods, Trader Joe’s, and Costco, and as a result, get stuck in a "discount spiral."

'Discount Spiral'

"It means they get trapped in a kind of discount spiral where they’re not necessarily able to offer an upscale experience to their customers, and they’re instead sort of trapped in the middle trying to provide pricing that is progressive, but not fully able to operate as a discounter," Wright said.

Wright says grocery stores have also been hurt by the growing number of consumers who choose to dine out more. And he says supermarket chains have been slow to respond to a desire for more fresh, prepared food. He says people think about eating instead of cooking when they head to the supermarket, and that’s a shift the stores haven’t adjusted to.