At the Milken Institute Global Conference, Safeway’s CEO gave his reasons for reducing the company’s responsibility of health care coverage for employees. Interestingly enough, he referrenced the airline industry as a warning of where his company was headed without such a change.
“I would say we were six to seven years away from becoming an airline.” said Chief Executive Steve Burd.
In previous union negotiations, Burd mentioned that Wal-Mart’s low, non-union benefits were a reason for reducing Safeway’s benefits in order to compete.
“I’m a big fan of universal coverage, and Wal-Mart is somebody that doesn’t have the same kind of coverage that we have and it’s all about price,” he said. “We would love to have the playing field a little more level.”
It’s scary to hear the CEO of a major food chain say, “. . . it’s all about price.” Yes, he’s talking about health benefits, but it’s also about the bottom line. Basically, Burd is saying that Safeway cannot compete with Wal-Mart without lowering their overhead. Is it really all about price? I don’t think so. I think it is about value. Price is a stationery benefit. It is found in your product (if you’re a retailer). Value is transient. It is found in your service, your accessibility, your entertainment, or even in your eccentricities.
Maybe Steve Burd could learn something from Jim Bonaminio, an independent grocer in Cincinnati. Bonaminio’s “Jungle Jim” store is famous for its unique shopping/entertainment experience. Bonaminio is also concerned about Wal-Mart’s entrance into his market, but there’s no sign he’ll be cutting prices. Instead, he has opened a garden center near the front entrance and leased space to a bank, the post office, and Starbucks. He just broke ground on a shopping center adjacent to Jungle Jim’s. He understands that price is not the only reason people shop at Wal-Mart. They also want to buy most of their needs within arm’s reach of each other. The combination of Jungle Jim’s idiosyncracies and the convenience of finishing your shopping and eating nearby give him a great shot at success.
So, what’s the bottom line here? It is whether or not people are willing to pay for what you offer. If you’re in business, you’d better hope you offer more than just products. If you don’t, there’s a Wal-Martesque company out there just waiting to crush you.