The U.S. grocery industry is splitting into two segments: those that sell luxury goods and those that sell cheap ones. Both Whole Foods Market (luxury) and Wal-Mart (cheap) are among America’s fastest-growing stores (although they have slowed down a bit recently). As a result of this split between luxury and discount retails, there is a space opening in the middle section of the pricing spectrum that is not being served by many retailers. Current trends indicate that this middle pricing area will be further abandoned as both luxury and discount retailing grow as an overall portion of the food retail industry.
The resulting retail gap that is being created in the center of the pricing spectrum is likely going to leave many middle and lower income shoppers who are not looking to patronize the high-end, luxury food stores or the rock-bottom discounters with fewer options for shopping. As mainstream retailers such as Safeway’s lifestyle format stores and the new Fresh & Easy (a subsidiary of Tesco) pursue higher profits by entering the higher-end markets, and others such as Wal-mart and Food 4 Less dominate and expand in the discount segment, who will there be left to serve the many customers in the middle?
People’s Grocery Market will place itself in this middle market of the grocery retail industry between luxury and discount retailers. Our research shows that we can provide a basket of quality goods at prices that are comparable to existing retail locations in West Oakland. By positioning in the middle of the pricing spectrum and linking our pricing with our brand, People’s Grocery Market will expand its reach to attract customers from a broader geographic reach. Our intention is to locate our store in ’sweet spot” in West Oakland that straddles the community where low-income shoppers live and the downtown where middle class shoppers live.
Although People’s Grocery Market will not offer the cheapest prices in town, we are sensitive to being an inclusive store that can serve all income segments and will pursue special offers such as enhanced food stamp usage opportunities (see my previous blog post on food stamps). We will also work to establish direct distribution networks that can increase value and reduce cost by reducing the interaction of expensive intermediaries such as wholesalers. We believe that a blended approach of seeking a fair price in the marketplace while also building in specific offers that reflect our commitment to affordability and access will be a winning strategy.


