Oh, what a difference a year makes! In 2021, consumers flush with stimulus cash were happy to splurge on premium products, and those still worried about COVID were ordering online or using self-checkouts to avoid contact with others. Fast forward 12 months, however, and rapidly rising inflation is squeezing consumers’ grocery budgets while shoppers anxious for a return to “normal” are heading back to brick-and-mortar supermarkets in droves.
‘Their fundamentals are sounder than anyone else in the business.’
That post-pandemic shift in consumer needs is one reason we chose Market Basket as our 2022 Retailer of the Year. Yes
, the Tewksbury, Mass.-based bargain supermarket chain was described as “old school” by almost every manufacturer we talked to. But not only is it right for the times, people absolutely love the place. When a family dispute in 2014 led to the dismissal of beloved CEO Arthur T. Demoulas, employees went on strike and consumers boycotted the store (several books and a movie tell the story, in case you missed it). He eventually regained control, and in the eight years since, that loyalty hasn’t diminished. In fact, Market Basket leap-frogged three larger retailers to finish third overall in dunnhumby’s 2022 Retailer Preference Index, thanks to its superior operations (it ranked first overall) and prices (second overall). Last year, Consumer Reports rated it the sixth best supermarket in the nation with an overall satisfaction score of 87. And just a few months ago, readers of USA Today voted it one of the 10 best supermarket brands in the country. Not bad for a chain that didn’t even have a website until 2017, that still doesn’t offer self-checkout or online shopping (except through Instacart), and whose older stores in particular are often described as “retro.”
‘I’m always impressed with how neatly and consistently shelves are stocked, especially given the huge volume of shoppers. From a manufacturer standpoint, that means your product is in good hands and has the best opportunity to sell well.’
BACK TO BASICS
Despite its old-fashioned approach, Market Basket does the basics better than any of its competitors. Stores aren’t fancy, but they are clean and fully staffed. Employees are well-trained and, as a result, genuinely helpful. Products are in stock. Assortments are solid. And prices are low everyday — no gimmicks, no games and no loyalty card required (more on that in a minute). “Their fundamentals are sounder than anyone else in the business,” says one supplier partner, citing the importance of “blocking and tackling” to long-term success.
“Market Basket wins with a simple formula: low prices + great service = outstanding customer loyalty,” explains Don Stuart, managing partner at Wilton, Conn.-based Cadent Consulting. How does an 87-store chain without the buying power of Aldi, Ahold or Albertsons, all of which compete in the same part of the country under various banners, manages to keep prices so low? For starters, Market Basket works on lower margins than competitors, though it makes up for it in volume. (The phrase “Stack ‘em high and watch ‘em fly,” was mentioned several times by industry observers.) Second, because the privately owned chain isn’t beholden to Wall Street, “It doesn’t have to squeeze every cent out of the business,” says Neil Saunders, managing director of retail at New York-based GlobalData.
In addition, says Stuart, Market Basket pays suppliers on delivery, which gives it more bargaining power than other retailers. Plus, manufacturers seem to genuinely like doing business with the chain. Yes, buyers will negotiate “aggressively” to get the best price for their customers, but they’re also going to move a ton of merchandise. “And I know that if I have an ad or a promotion planned, it will run and they will have plenty of product on hand,” says one manufacturer partner. In fact, retail audits show Market Basket has “exceedingly low” out of stocks compared to competitors.
‘You just have to look at the name tags: Joe, 23 years; Samantha, 10 years, etc. to realize that they treat their employees right.’
“I’m always impressed with how neatly and consistently shelves are stocked, especially given the huge volume of shoppers,” confirms another supplier, who also shops at Market Basket. “From a manufacturer standpoint, that means your product is in good hands and has the best opportunity to sell well,” making it easier to agree to Market Basket’s terms.
That level of in-store execution points to the other key to Market Basket’s success: its store-level employees. “Market Basket is lean on headquarters staff but heavy on in-store personnel, who are prioritized more than at larger chains,” says Stuart, pointing to better-than-average salaries, benefits and training. As a result, employees tend to stay in their jobs for years.
“You just have to look at the name tags: ‘Joe, 23 years,’ ‘Samantha, 10 years,’ etc., to realize that they treat their employees right,” says one supplier partner. And since there are so many of them, no one feels overworked or taken advantage of. Of course, employees who feel valued do a better job, creating a virtuous cycle.
But excellent employee retention doesn’t just lead to good service, it also contributes to Market Basket’s ability to keep
prices down, says Ken Morris, managing partner at Cambridge, Mass.-based Cambridge Retail Advisors. “Retailers — especially grocers — should never underestimate the efficiency gains from having experienced staff working in the same stores year after year.”
‘LIKE STEPPING BACK IN TIME’
So what are stores like? “It’s like stepping back in time, but in a good way,” answers Saunders. A few things jump out at first-time visitors. First of all, stores that average 40,000 to 45,000 square feet are fairly crowded — even on a weekday morning. But on weekends, well…be prepared to wait in line. The good news is there are plenty of red-, blue- and green-jacketed employees available to bag groceries, answer questions or help customers find a product. Many of them are stocking shelves, which, much to the chagrin of some shoppers, is done during the day while stores are open instead of at night, so consumers have even more access to staff.
Instead of trendy concrete or faux wood floors, Market Basket stores feature ‘50s-style orange and white tiles, which have become something of a signature for the chain. The signage is basic and old-fashioned. There are open chest-style freezers in older stores. And the chain’s “more for your dollar” tagline is everywhere. But the differences don’t end there.
When customers enter the store, they walk right into the refrigerated aisle, not the produce section, which is on the opposite side of the supermarket. The frozen section is several aisles over and, like the refrigerated area, features two aisles separated by a row of open coffin cases or bunkers. “The frozen food category remains an essential piece of the overall Market Basket offering,” says director of frozen and dairy Costas Papanicolaou. As a result, “As we build and remodel existing locations, we have increased our frozen space allocation, which we have learned from our customers is an important store component.”
He adds that weekly features are prominently displayed on frozen aisle endcaps (not meal solutions or seasonal favorites), highlighting the chain’s laser focus on low prices.
In that same spirit, notes Stuart, Market Basket tends to place lowest-price items at the front of its stores and more premium products at the back — exactly the opposite of how most supermarkets merchandise their departments.
ONE SIZE FITS ALL
Not surprisingly, private label represents a big part of the chain’s offering, and many departments feature large store brand blocks. Although the program encompasses close to 3,000 products, there’s only one tier. “That approach is deliberate,” says Saunders. “The company wants to demonstrate to customers that all of its products offer good quality at low prices. Tiering would just confuse the proposition and make shopping more complex.” Although the line does include some higher-priced organic and specialty products, much of that need is filled by national brands.
“Product offerings in frozen have expanded,” reports Papanicolaou. “Our goal remains to offer customers essential items while keeping the frozen category both expansive and relevant. We pride ourselves on listening to our customers’ desires and attempting to accommodate as many requests as possible.”
Still, manufacturers say high volumes (and the need for extra packout) mean Market Basket’s assortments are a bit less extensive than other supermarkets’, though they’re certainly much broader than at low-cost competitor Aldi (one reason industry observers say the chain hasn’t been hurt by Aldi’s expansion into New England). For example, “Market Basket does not have the most comprehensive range of organic products,” says Saunders. “However, it does have them, including under its private label. And it does have things like gluten-free,” which tend to be merchandised alongside conventional counterparts, not in a separate section. Indeed, sales flyers from two recent weeks included everything from Alpha Foods plant-based breakfast sandwiches and So Delicious Coconutmilk Yogurt to Three Bakers Gluten-Free Frozen Bread and Truwhip Vegan and Keto Toppings. Clearly, says Saunders, “There is enough of an offer to meet the needs of shoppers.”
Still, some manufacturers think the chain is selling shoppers short. For one thing, Market Basket is rarely first to market with new products, only taking on items with a proven track record. As a result, “Opportunities for innovation are somewhat limited,” claims one supplier, citing a frozen set “crowded with big players who pay to play.” Some manufacturers think that’s a result of the chain not truly understanding the breadth of its customer base.
“I have heard multiple comments from Market Basket over the years about how their customer doesn’t care that much about natural food,” says one sales and marketing exec. “Well, I personally know three people in the natural foods industry who do their majority of their grocery shopping at Market Basket and then go elsewhere to buy the natural products not carried there. They appreciate the value combined with the excellent in-store execution, but the store isn’t meeting all of their needs.” She adds, “I believe that disconnect comes from not having access to loyalty card information or other research.”
NO CARD, NO E-COMMERCE, NO PROBLEM
Not having a loyalty card is pretty on-brand for a chain that prides itself on offering everyone the same low prices every
day. And Saunders says Market Basket’s executive team makes up for the lack of consumer data by not only spending time in stores talking to customers but also giving store-level managers and employees the autonomy to tailor their assortments to their unique shopper base. “Being a smaller regional chain allows them to be more hands-on, and it really pays dividends.” He adds, “Rewards programs are sometimes touted as critical for creating loyalty. But even without one, Market Basket has some of the most loyal shoppers around.”
Still, Morris thinks the chain could benefit from a bare-bones program. “With inflation running rampant, Market Basket has a huge opportunity to draw in new customers… At the very least, it should be collecting shopper names and contact info. That’s the best way for the retailer to engage with and keep these new customers. It can’t hurt the relationship with long-term customers, either, especially if they offer the occasional extra-special deal,” he adds.
While industry observers are divided on the question of loyalty cards, there’s consensus around the need for omni-channel capabilities. While shoppers can order online via Instacart, Market Basket doesn’t have its own e-commerce platform, so there’s no click-and-collect option, which is much more popular than home delivery. “[In-store] customer experience is important, but consumers are looking to save time more now than ever,” so it might be a good idea to start thinking about an e-commerce solution, says Stuart.
He adds that although lack of curbside pickup and long wait times to enter stores early in the pandemic may have caused Market Basket to miss a beat in 2020, it’s more than making up for it now as consumers return to stores en masse. As a result, says Stuart, “It’s not likely to be a problem this year or next. But long-term, maybe….” In the meantime, he continues, Market Basket may want to at least upgrade its website. “It’s really lacking. Customers can’t even see all available products, only the weekly flyer,” which limits the ability of budget shoppers in particular to plan out their purchases, says Stuart. Even the chain’s social media presence is fairly new, though it’s a good start — and a great way to connect with younger shoppers in particular.
Despite its digital deficiencies, observers believe Market Basket has likely gained share during the past two years in markets where it operates (Eastern, Northeastern and Central Massachusetts; New Hampshire; Rhode Island; and Maine). In fact, several manufacturers we talked to said the chain is outperforming the rest of the market in their particular categories.
“But it’s probably helped by having such poor competition,” says Saunders. “National chains like Walmart and Target are solid, as is Aldi. However, traditional chains like Hannaford and Shaw’s are pretty poor retailers whose execution is way worse than Market Basket. Dollar stores that have been expanding all over New England, especially Dollar General, are more of a threat, but for top-up trips, not larger weekly shops,” he says.
Still, most observers expect Market Basket to continue to approach expansion very conservatively. It recently opened a new store in Hanover, Mass., and construction continues on two more, in Concord, N.H., and Shrewsbury, Mass. Meanwhile, an existing store in Danvers, Mass. — next to the company’s second MB Spirits — is undergoing an expansion, which will include a Market Basket Café with a seating area.
“It may look beyond states where it currently operates — perhaps to Vermont —but I don’t think we’ll see Market Basket trying to become a national or even an East Coast force,” says Saunders.
‘Rewards programs are sometimes touted as critical for creating loyalty. But even without one, Market Basket has some of the most loyal shoppers around.’
“Expanding to other regions would pose too many challenges and create quality control issues,” which would erode Market Basket’s brand equity, agrees Stuart. “It’s better off staying close to home because it understands the Northeast consumer very well and has good relationships with suppliers there, which is a critical part of keeping costs under control.” But what do those suppliers really think about Market Basket?
A ‘REFRESHING’ PARTNERSHIP
After “old school,” the word used most often by manufacturers to describe the chain was “refreshing.” While several mentioned that it can be very difficult to get your foot in the door, once you’re in, “It’s very straight-forward,” says one, citing Walmart-esque net-net pricing. “Their attitude is: just sell us your product at the best possible price and we’ll mark it up as we see fit,” no ad dollars, no lump-sum funds. If the chain wants to run a promotion, it will take the margin hit or at least match the manufacturer’s contribution.
“Sometimes this business can be a lot more complicated than it should be,” adds another supplier. “But Market Basket has a very simple go-to-market strategy. Honestly, I wish everyone would operate that way.”
Yes, the company drives a hard bargain in an effort to give shoppers the very best prices, says another manufacturer. But it’s fair, and it’s honest. “It’s not ‘margin hungry’ like some other retailers.”
“Even when we’ve had to pass along price increases, we’ve rarely gotten pushback as long as we could back it up,” recalls another long-time partner.
“It’s really a pleasure doing business with Market Basket because it’s done face to face,” adds another long-standing supplier, who appreciates the opportunity to sit across a desk from a buyer (even though a jacket and tie is a must) and come up with solutions. “It’s not just ‘Send me some samples, and I’ll get back to you if we’re interested.’ It’s people selling people.”
As a result, suppliers say the company is able to operate on fairly short lead times, which benefits everyone. While some retailers work more than six months out, “You can execute a promotion at Market Basket really fast if you need to,” says one manufacturer.
“At the end of the day, their goal is the same as mine: sell, sell, sell.”