Safeway Cuts Prices to Lure Frugal Shoppers

Safeway, the second largest grocer in the region, has plans to expand the price-cutting program.
Safeway, the second largest grocer in the region, has plans to expand the price-cutting program. (By Rafael Crisostomo For The Washington Post)
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By Ylan Q. Mui
Washington Post Staff Writer
Wednesday, August 12, 2009

Safeway has lowered prices on thousands of items at its stores in the Washington region as the supermarket chain adjusts to shoppers' increasingly frugal mind-sets.

The grocer, the second largest in the region, is slated to announce the initiative Wednesday with banners and signs throughout its stores. The price cuts primarily are targeted at staples sold in the center of each store, such as paper products, laundry supplies and coffee, and the reductions run as high as 25 percent.

"In this economy, what the customers are telling us is that we need more value," said Steve Neibergall, Eastern division president.

Safeway is not the only grocer lowering prices. Giant Food undertook a similar initiative in 2006. Even Whole Foods has cut prices on key items. Use of its coupons has grown to nearly 4 percent, the company said.

Safeway's decision to reduce prices comes after it spent several years upgrading the perimeter of its stores, where meats and produce are sold. The strategy was designed to help the chain compete with upscale grocers, such as Whole Foods, that were increasing their market share.

But as the recession weighs on pocketbooks, people are shopping more for value, said Phil Lempert, a food retail consultant known as "The Supermarket Guru."

According to a survey by Lempert's firm, 82 percent of consumers reported making shopping lists in June, up from 70 percent in January. The percentage of shoppers who said they compare store ads rose to 64 percent from 52 percent. And 46 percent in June said they shop at several stores based on price, compared with 37 percent in January.

The online survey polled 3,340 people and had a margin of error of less than 2 percent

"I do think there's a new, smarter consumer out there than ever before," he said.

Neibergall said Safeway began phasing in the price cuts about three weeks ago and plans to expand the program. He said the company was able to renegotiate with suppliers as commodity prices dropped.

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