Personalization, omnichannel and wellness: Establishing a strong consumer proposition at Safeway
Safeway on Thursday reported a 1.3% annual sales lift to $44.2 billion for its fiscal 2012. The year-end sales lift was driven by increased fuel sales and a same-store sales increase of 0.5% (excluding fuel), the grocer reported.
However, from listening to this last conference call, coming out of a year that has been framed more by Safeway’s challenges than Safeway’s opportunity on Wall Street, you get the sense that 2012 was 2012 and that this 2013 party has only just begun.
Because coming out of that call, there are three key initiatives to watch out for at Safeway this year — a loyalty card program striving toward greater personalization; the fact that upper management is already savvy to the value of the omnichannel consumer; and an as-yet-to-be-revealed wellness program will be originating from one of the more progressive healthcare thinkers in big business today.
Personalization. Safeway’s Just 4 U loyalty program numbers 5.4 million members today. And those 5.4 million members account for 45% of total sales. Safeway is looking to grow that mix to as high as 65% of revenue from loyal cardholders, who both spend more and spend more often. "There’s going to come a point where our shelf pricing is pretty irrelevant because we can be so personalized in what we offer people," Safeway chairman and CEO Steve Burd said. "It’s pretty hard to compete with somebody whose price [is no longer visible]. You don’t even know what [the competition’s] prices are to individual consumers." And Burd believes Safeway has got a 24 month to 36 month headstart on optimizing personalization before the competition is able to get up to speed.
Omnichannel retailing. Ever since soccer moms started pulverizing pigs from an Angry Bird slingshot on those first iPads, consumers have become more cognizant of who they’re shopping, not where they’re shopping. It’s become a brand experience as opposed to a store experience or online experience. And, according to Safeway’s brass, those iPad-packing shoppers are rolling marketbaskets to the front register that are 40% larger in terms of dollar sales. And they’re doing it more often. "So basically we are on all smartphones, plus an iPad application, which is quite different from the pure mobile application. And it’s attracting a lot of users," Burd noted.
Wellness. All along, Safeway’s still-under-wraps wellness program was expected to be chain wide by year-end 2013, Burd noted. And that hasn’t changed even though the initial launch has been delayed by two quarters. "The delay is largely the result of making sure that the infrastructure that’s created to support the initiative allows us to go with great speed across the company," Burd said. Later in the call, Burd clarified that it was the infrastructure of its technology partner that needed to be scaled before implementation. So it’s the technological infrastructure that needs to be more robust. Remember personalization and omnichannel-savviness? Don’t be surprised if this all comes together as a seamless wellness proposition.
And let’s not forget Burd’s history with implementing health initiatives. Safeway was one of the first employers to create a health program that rewarded healthy behaviors. "At Safeway we believe that well-designed health-care reform, utilizing market-based solutions, can ultimately reduce our nation’s health-care bill by 40%," Burd opined in a Wall Street Journal editorial back in 2009. "The key to achieving these savings is health-care plans that reward healthy behavior."
According to that opinion piece, Burd reported that Safeway’s healthcare costs remained stable between 2005 and 2009 (they didn’t go up), while most companies were realizing increased healthcare costs of up to 38% in that same time period. "74% of all costs are confined to four chronic conditions (cardiovascular disease, cancer, diabetes and obesity)," Burd wrote. "Furthermore, 80% of cardiovascular disease and diabetes is preventable, 60% of cancers are preventable and more than 90% of obesity is preventable."
Now DSN isn’t saying Safeway will introduce some revolutionary retail wellness program that will help reduce America’s healthcare bill by 40%. We’re not even saying this 2009 editorial has anything to do with what Safeway has planned for next quarter. But what we are saying is, Burd has long been a pretty progressive healthcare thinker, and now that thinker is implementing a retail wellness program.
And that should be something worth watching out for.
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Primary care physicians ‘go-to’ source on supplements
While pharmacists are reported as the primary source of information on OTCs, doctors are the ‘go-to’ on vitamins and dietary supplements, according to an online survey of more than 900 AccentHealth viewers conducted in late 2012. Two-in-5 survey participants reported that they were primarily given information about their supplements from their doctor, followed by 28% who received that information from a friend or relative, and 18% who researched their supplements online.
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Source: AccentHealth. To view the demographic breakdown of participants, click here.
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Rite Aid finishes debt-refinancing transactions
CAMP HILL, Pa. — Rite Aid has completed a series of debt financing transactions it announced recently, the retail pharmacy chain said.
The transactions were meant to extend the maturity of a portion of the retailer’s debt and lower its interest expenses.
The transactions included the amendment and restatement of Rite Aid’s existing revolving credit facility to $1.795 billion and an extension of the maturity to February 2018; the refinancing of a $1.038 billion Tranche 2 Term Loan due 2014 and $331.7 million Tranche 5 Term Loan due 2018, each including accrued but unpaid interest, with the proceeds from a new $1.161 billion Tranche 6 Term Loan due 2020 under the chain’s first lien credit facility, together with borrowings under the amended revolving credit facility; the refinancing of, via a cash tender offer, Rite Aid’s $410 million aggregate principal amount of 9.750% Senior Secured Notes due 2016 with proceeds from the Tranche 6 Term Loan, together with borrowings under the amended revolving credit facility; the refinancing, through a tender offer, of the company’s $470 million aggregate principal amount of 10.375% Senior Secured Notes due 2016 with the proceeds from a new $470 million Tranche 1 Term Loan due 2020 under a new second lien credit facility, together with borings under the amended revolving credit facility; and a cash tender offer for Rite Aid’s $180.3 million aggregate principal amount of 6.875% Senior Debentures due 2013.
Rite Aid said it expected to record a loss on debt modifications of $117 million related to the transactions and expected to have annual cash interest savings of about $45 million.
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