The Old-School Spy Tactics Helping to Set Your Grocery Prices
The price of bananas, a dozen eggs or a loaf of bread at neighborhood supermarkets is set in part by a not-so-subtle process of spying.
Grocery-store operators scrutinize the websites and promotions of rivals and send managers to walk through competitors’ stores to help establish what shoppers will pay for items. Companies commonly use rivals’ prices as a benchmark in setting their own, but these tactics have gained attention from government antitrust lawyers seeking to block a $20 billion merger between Kroger KR 0.91%increase; green up pointing triangle and Albertsons ACI -0.76%decrease; red down pointing triangle, the respective largest and second-largest U.S. supermarket chains by sales.
Federal Trade Commission attorneys argued that Kroger won’t have the same incentive to lower prices in its stores without Albertsons. Price checks can provide a ceiling for what grocers charge shoppers, an argument made by lawyers at the FTC and state attorneys general to emphasize the importance of competition.
Lawyers for Kroger said the purchase of Albertsons gives the company enough scale to match or beat prices from Walmart, the world’s largest retailer, and other low-price grocers. Kroger and Albertsons also said they price check against a number of different competitors in a given area, including Walmart, Target and Amazon.com’s Whole Foods Market, not just each other.
A federal judge is expected to decide whether to block the deal in the coming weeks.
Todd Broderick, an Albertsons executive who oversees Safeway stores in Denver, routinely monitors one of his company’s top rivals in the area. In visits to Kroger-owned King Soopers locations, he checks how busy and clean the stores are and how prices compare to those at Safeway. Broderick and his colleagues also pore over print advertisements that Kroger mails to local shoppers.
If our price is lower, we’d say we won,” he said in a federal courtroom in Portland, Ore., in September.
Grocers use Walmart as the most common reference point for prices, he said, but if a nearby store has lower prices, then that is the one they would care most about. Walmart works to offer the lowest everyday prices across its stores. The retailer also has regional managers visit competitors and its buyers pressure suppliers to offer lower wholesale prices if managers find items sold cheaper elsewhere, people familiar with the process said.
Originally Posted by Neveragain
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