Research Summary

Recent Strategies in the U.S. Grocery Industry

by Rajiv Lal

Description

Rajiv Lal's work comparing the benefits of EDLP and Hi-Lo strategies in the grocery industry indicates that while EDLP grocery retailers may not be able to benefit from traditional costs savings associated with this strategy, these retailers still benefit from the use of promotions, lower basket prices, and sometimes lower in-store service levels by effectively differentiating themselves from Hi-Lo stores. In this way these stores avoid competing head-to-head with Hi-Lo stores, leading to higher profitability.

Another recent trend has been the increasing reliance on store brands by retailers such as Shaw's supermarkets and Safeway. While for many years store brands were viewed as 'cheap and nasty,' catering to the needs of price sensitive consumers, Lal's research shows how they can be used to enhance store loyalty and profitability.