Albertson’s: A Shot at the Crown

Wal-mart only began selling groceries in 1988. Now it sells $56 billion of foodstuffs and household goods in its supermarkets every year. That makes larry johnston an underdog. The alumnus of the fabled jack welch era of general electric management aims to make albertson’s, with “Just” $36 billion in revenue, the nation’s greatest grocer. He’s assembled an all-star team in idaho that combines top talent from dell, safeway and, yes, wal-mart to fulfill his quest. The moral of this story: if the boys in boise, armed with technology and smart marketing, can’t beat back the behemoth from bentonville, it’s quite possible that no one can.

Cathy Bishop is a power shopper. Cruising the aisles of the Jewel supermarket in Barrington, Ill., she knows exactly what she wants and how much she’s willing to pay for it. She also has no problem using technology, if she thinks it’s going to make her trip faster, or save her money.

As Bishop rounds the corner to the laundry-detergent aisle, she pulls a wireless handheld computer from a holster on her shopping cart and points it like a gun at a bottle of Tide with bleach. The Symbol 6553 device scans the bar code, displays the $12.49 price, then shows her total bill at this point, $28.13.

The computer beeps to alert her to a special on a nearby shelf for Bounty paper towels, but she ignores the promotion and moves on to her next destination, a newly installed section of toys co-branded with the Toys ‘R’ Us chain. Bishop is thinking about presents for her grandchildren. The toy area could save her a trip to the mall. For now, she just uses the section for gift ideas.

After the final item is placed into a shopping bag already in her cart, Bishop proceeds to a self-service checkout register. She slides the Symbol handheld into a dock. Her total—$43.18 now—flashes on a touch-sensitive screen. The system asks her if she has any coupons. She scans a coupon for Dole frozen fruit-juice bars past a bar-code reader, deposits the coupon in a slot and, when done, sees the savings applied to her bill. Bishop completes her purchase by swiping a credit card through a magnetic reader; barely 30 seconds after arriving at the register, she is heading out the door.

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A cashier nearby could perform a random check to make sure Bishop isn’t sneaking out with any unscanned products, but doesn’t. Bishop’s entire trip is conducted without any interaction with an Albertson’s employee.

“I love the system,” says Bishop, who has shopped at this remodeled outlet in a northwest Chicago bedroom community for close to 30 years. “My fruits and vegetables have only been handled once, I know exactly how much I’ve spent, and I can skip right by any lineups. I’d be disappointed if they took it away.”

Ring one up for Larry Johnston, chief executive of Albertson’s, which owns Jewel. Bishop’s response is exactly what Johnston wants: he hopes information technology will save the company’s bacon. The third-largest grocer in the U.S. is locked in a fierce battle with traditional competitors, particularly Kroger and Safeway.

But Johnston’s biggest worry is Wal-Mart Stores, which only began selling groceries in 1988. Already, the Bentonville, Ark., behemoth is the biggest food merchant in the U.S., selling more than $56 billion of groceries a year. Annual sales at Albertson’s, by contrast, are $35.6 billion and its earnings of $485 million represent a profit of 1.4 cents on each dollar of sales. Wal-Mart, renowned for low prices, makes 3.3 cents on each dollar.

Now playing catch-up, Albertson’s is betting big—$500 million this year alone—that technology can help keep its pricing competitive with the low-cost leader and make shopping at its stores more interesting and “vital” to both current and prospective customers.