Yearlong discount a gamble for Market Basket
The buttons are yellow with blue letters, pinned to uniform jackets, shiny and bright under the fluorescent lights inside the Market Basket on Fort Eddy Road.
“Why pay more? 4% off. Save an additional 4%.”
The buttons herald a promotion announced by the chain’s management last month – a 4 percent discount on almost everything in its stores until the end of December.
The company’s explanation for the new deal is a thank-you to loyal customers, a promotion to draw customers to the Market Basket registers and a boon for shoppers on a tight budget. But in a competitive industry characterized by a net profit of less than 1 percent, some employees and industry experts are skeptical of how the company will cover the cost of a yearlong discount.
In the Fort Eddy Road store Friday, cashier Trevor Warren circled a customer’s savings on his receipt. “You saved 58 cents,” Warren told him.
A young woman, who has worked part time for Market Basket for almost two years, bagged groceries at the end of Warren’s checkout lane. Her gray scarf partially covered the yellow button pinned to her own uniform. Even as the customers who pass through her lane save money, she said she has been scheduled for fewer hours since the discount began.
“I think people are starting to get shorter shifts,” she said.
She started to talk about the longer shifts she used to work, especially on Sundays – now she’s down to just four or five hours, instead of six or more. But an older employee in a blue Market Basket jacket swooped in, shuffling the bagger away with a cart of items that needed to be restocked. He watched her go, then reached for a plastic bag to take over her work.
“I have to work,” he said, turning away to reach for incoming produce.
Jim Netto, assistant store manager, said some hours have been reduced for part-time employees in his location, but he denied the cuts have been substantial or widespread. His store employs 210 people, he said, and about 70 percent of them are part time.
“If people noticed a cut now, that’s sometimes the nature of the time of the year. . . . As the business picks up, so do the hours,” Netto said.
The discount, he said, is expected to “drum up business.”
“It’s just to give back to the customers and a way of saying thank you for their loyalty and their patronage to our stores,” Netto said.
Announced in mid-January, the discount is an extra edge over big-box stores like Target or Walmart. It’s a flashy plug for a company already known for low prices.
And it’s working, said Director of Operations Bill Marsden.
“It is fueling the growth,” Marsden said. “We’re gaining new customers. We’re rewarding the customers who have shopped with us over the years.”
The Tewksbury, Mass.-based company operates more than 70 stores in New England. Marsden started at one of those stores 56 years ago as a bagger, he said, and everyone who works in his office joined the company that way.
“We include our employees, and we think of them first,” Marsden said.
The company is not cutting employees’ hours or raising prices to make up for the discount, Marsden said. His tone was genuine, and his voice was firm.
“No, no, no, no,” Marsden said. “Quite frankly, that’s an untrue statement. We’re not going to debate that. A completely untrue statement.”
Stores will likely have to add hours and employees as more customers seek out Market Basket prices, he said.
“Quite frankly, we’re doing more business,” he said. “We certainly can’t do it with less people. We’re going to have to do it with additional people.”
A growing chain, Market Basket is still owned and operated by a family. President and CEO Arthur T. Demoulas is the son of one of the company’s founders; his cousin Arthur S. Demoulas descends from another and sits on the board of directors.
Family infighting spilled out into the media last year, when Arthur S. reportedly tried to push his cousin out of the company. Thousands of Market Basket employees rallied behind “Artie T.” in online petitions and “Save Market Basket” protests. The board backed off its search for a new president at the end of last year.
Store Manager Brian Boucher, who runs the Market Basket on Storrs Street, said he sees this discount as a gesture of gratitude from the company president, a reminder that he’s still looking out for his stores.
From a balcony overlooking the Storrs Street aisles, Boucher pointed to a yellow banner advertising the discount.
“This is kind of the follow-up right here,” Boucher said.
He called the company’s internal disputes “a bump in the road.” A Market Basket circular stuck out of his coat pocket.
“We were surprised,” Boucher said of the discount. “We know we’ve already had the reputation out there that we are lower priced. We’re working on a smaller profit margin to begin with.”
Boucher said his store hasn’t changed its scheduling or its prices to eke out a profit. And Artie T. has said the company’s finances can handle this discount, so it must be true.
“This 4 percent is a true 4 percent off,” he said.
Marsden acknowledged the conflict between the Market Basket board and the president. The discount came from Arthur T. Demoulas, he said, and the board is “inquisitive as to whether it’s going to work or not.”
But knocking 4 percent from shoppers’ bills was a business decision, Marsden said, and it was not related to the family’s disputes.
“We’re having some difficulties with the present board, but that too shall be overcome,” Marsden said. “We both want good things for the company. It’s been difficult, but we’re working through our inner turmoil.”
Meeting the challenge
Grocery stores are not a lucrative business, said John Dumais, president and CEO of the New Hampshire Association of Grocers.
Far from it, actually.
“We make a net profit of one-half to 1 percent,” Dumais said. “One penny on the dollar for every dollar we sell.”
So deducting 4 percent from the cost of almost everything on the Market Basket shelves is what Dumais called “a very aggressive move.”
The Demoulas chain has grown its footprint in recent years, even in the aftermath of a recession, by making low prices its trademark, Dumais said. But other chains such as Hannaford and Shaw’s could try to fight back soon by expanding their selection or pushing the quality of their products.
“Possibly, this will draw some more business (to Market Basket) for a while until others try to meet the challenge,” Dumais said.
Jon Springer, associate editor of Supermarket News, said he believes the discount will appeal to Market Basket customers.
“Generally, they’re counting on an increase in sales volume, but I wouldn’t be surprised if there were other efficiency programs to make this possible,” Springer said.
Those efficiency programs could include cutting hours for store employees or negotiating lower prices from suppliers, Springer said. While company officials like Marsden and store managers like Boucher deny those changes are being made, Springer said he was skeptical of “the cost of the bottom line.”
“It’s just my suspicions, my knowledge of the industry,” Springer said. “Generally, when a price reduction program is announced, there’s some sort of justification for it.”
Every little bit
When Chuck and Pat Poirier moved to Havenwood-Heritage Heights more than 11 years ago, Chuck Poirier took a survey of essential products – milk, butter, eggs – at local stores to find the best prices. The winner was Market Basket.
An extra 4 percent off their groceries is nice, said Pat Poirier, 87, but they have been loyal Market Basket shoppers since her husband returned his survey results more than a decade ago.
“It wasn’t anything to change our minds,” she said.
“Every little bit helps,” added Chuck Poirier, 86.
The Department of Agriculture reports that a family of four living on a low-cost budget will spend an average of $829 on food each month. That adds up to almost $10,000 in a year – which means a 4 percent discount on groceries could add up to almost $400 in savings.
The 4 percent off was good news to Joe Lessard, who has worked at Market Basket for more than 20 years.
“I have six kids myself,” he said with a laugh.
Lessard, a full-time employee, stood next to rows of paper plates and boxes of plastic utensils.
“At first, there was some trimming,” he said, but he didn’t know whether shorter hours for part-time employees was a reflection of the discount. Now, business has picked up, he said, and he hasn’t noticed any changes in scheduling.
Ashley Jones, a part-time employee in the produce department, has noticed a change. “I got more hours,” she said.
Like her bosses, she predicted more shoppers would come into the store for the 4 percent discount.
At least, that’s what they’re all hoping.
“We just want more people to come in and see us,” Jones said.
(Megan Doyle can be reached at 369-3321 or email@example.com or on Twitter @megan_e_doyle.)