Kroger v. Wal-Mart

Kroger gets a rocking when Wal-Mart comes a knocking.

Kroger says it is increasing its market share in most markets that Wal-Mart has entered, reports analysis in The Cincinnati Enquirer. The story about the home town retailers is headlined "Kroger beating Wal-Mart; Market share is growing."

Is this home cooking - favorable press coverage - tilted in favor of Kroger?

Actually, the story is supported by numbers and third party analysts. Importantly, the story notes that Kroger's prices have come down in response to W-M competition. So while market share may have increased, profitability has declined.


Here is an excerpt:

The results indicate that a recent building binge of supercenters by Wal-Mart not only failed to garner it more market share, but may have led a growing number of shoppers to seek out Kroger's neighborhood shopping approach.
In addition to emphasizing convenience, Kroger is closing the price gap.
A pricing analysis by Bank of America analyst Scott Mushkin last fall found that Kroger's prices were 7.5 percent higher than nearby Wal-Mart supercenters, compared to 20 percent to 25 percent five years ago.
Wall Street is rewarding Kroger's strategy by driving its share price to record levels last week, closing Friday at $29.73.
Kroger thrives when Wal-Mart comes calling, David B. Dillon, Kroger chairman and chief executive, told Wall Street analysts during a March conference call.
"There are 34 major markets in which supercenters have achieved at least a No. 3 market share," Dillon said.
"Our share increased in 27 of those 34 markets."
Kroger competes against 1,262 supercenters - a 10 percent increase in stores from 2005 - and of those centers, 1,000 are operated by Wal-Mart.
Yet in the 44 major markets in the United States where Kroger operated nine or more stores in 2006, the company increased its market share, Dillon told the analysts.
Kroger lost market share in six markets and remained unchanged in one region.


TK: Kroger has done some things right in competing with Wal-Mart, and it doesn't necessarily mean Wal-Mart is falling down. When I was writing about increased activity of Wal-Mart in the St. Louis region last year, I had asked Ron McCormick about the impact on market share of other retailers. Here is what he said then:

When Wal-Mart enters a city with established local chains, it is not uncommon to see one of those chains gain market share while other might lose sales, said Ron McCormick, vice president and divisional merchandise manager for produce and floral for Wal-Mart Stores Inc., Bentonville, Ark.
Those chains that are good merchandisers can see their business increase, he said.

TK: Not surprising, the approaching footsteps of Wal-Mart in any market make retailers perform better. Hats off to Kroger for a winning strategy so far.