Florida-based grocery chain Publix thinks it has found the key to fending off Walmart (NYSE:WMT): Make sure associates will profit from winning that fight, according to a story slated for the Aug. 12 issue of Forbes.
Part of Publix's advantage is that 80 percent of the company is employee-owned, so store workers have natural skin in the game. Store employees are also eligible for store-specific bonuses every 13 weeks, which is often enough to keep them hungry for the next round.
A potentially bigger part: Publix has the highest profit margins in the U.S. grocery business at 5.6 percent. By comparison, Walmart's margins are 3.8 percent, Whole Foods (NASDAQ:WFM) is at 3.9 percent and traditional grocery champ Kroger (NYSE:KR), which also competes effectively going head-to-head against Walmart, is at 1.6 percent.
Having decided it wasn't going to bleed itself by price-slashing, Publix has gone for customer service—and customer loyalty—instead. "We believe that there are three ways to differentiate: service, quality and price," Publix president Todd Jones told Forbes. "You've got to be good at two of them, and the best at one. We make service our number one, then quality and then price."
The strategy worked very well against Winn-Dixie (NASDAQ:WINN) and Albertsons, so that now Publix has more than twice as many stores in Florida as any competitor. But Walmart has now targeted the state, and Kroger (which pulled out of Florida in 1988) is in the process of acquiring Harris Teeter, which has stores there.
Publix says it won't pretend it always has the lowest price, just point out that Walmart's isn't always lowest either, and it will offer bargains through two-for-one deals that cut what shoppers pay without reducing the base prices of the merchandise.
- See this Forbes story
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