THE POWER OF A BRAND to shift demand applies whether a company pursues a low-price or a premium-price strategy. At the low end, for instance, discount retailer and grocer Wal-Mart excels by constantly wringing out costs and passing on the savings to consumers, earning operating margins of 5.3% in its express stores and 3.1% in neighborhood stores in the process. At the other end of the strategy spectrum, US grocer Whole Foods earns most of its profits in prepared foods, where it commands a substantial price premium. Whole Foods recently generated operating margins of some 6.9%, five times the US grocery average. For both companies, the brand plays an essential role in moving the business toward the point of maximum revenues. Wal-Mart’s brand reinforces the company’s “great value” strategy to increase volume while Whole Foods’ brand—rooted in its sophisticated in-store presentation, knowledgeable staff and an emphasis on organic food—convinces customers to pay a higher price on prepared food.
Posted on: Thu, 18 Jul 2013 03:01:22 +0000
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