Supermarkets began replacing small grocery stores after World War I because of their ability to offer discounted prices and reduced labor costs. After World War II, the growth of supermarkets increased exponentially as car ownership increased. According to the Food Marketing Institute, supermarket sales today exceed $584 billion.
However, not everyone loves supermarkets. Early critics challenged the freshness and quality of supermarket goods. Bi-Rite, a supermarket based in San Francisco, has broken the mold of traditional supermarkets and developed a unique supermarket model. Bi-Rite, believes that supermarkets can provide fresh, healthy, high-quality food, and its business model is working with sales per square foot close to $4,000.
Sam Mogannam took over the store in 1997. According to Mogannam, Bi-Rite has been successful because it gives customers what they want and breaks the traditional supermarket model of huge spaces with nothing but major brands or private labels that customers have no relationship with. Bi-Rite believes in the importance of personal relationships. Bi-Rite also supports the “good food movement” which is based on the sustainable production of fresh, local food. Bi-Rite believes that this movement resonates with customers. Mogannam believes that Bi-Rite is successful because it has a mission that is honest. Mogannam also suggests to other businesses that in order to be successful, make sure that your values are aligned with your mission.
Mogannam states that the net profits are single digit, which is typical for grocery stores. Mogannam says that Bi-Rite is a very profitable business because it allocates expenses differently. Mogannam is committed to changing the model of the super market industry. He invites other grocers to the Bi-Rite facilities to view the company’s business practices. Bi-Rite believes in order to be sustainable, you can’t squeeze your suppliers, customers, or staff.
Discussion Question:
Describe Bi-Rite Market’s retail strategy. Specifically, what is the retail format, its target market, and its bases for sustainable competitive advantage?
SOURCE: Peter Johnston, Stores Magazine, April, 2013