Wal-Mart is going after Matthews-based Harris Teeter with a tactic it's trying only in Charlotte: a series of grocery ads featuring head-to-head price comparisons on everything from chicken soup to ice cream.
The ads, running on television, online and in the Observer, signal a bid by the world's largest retailer to regain its footing after seeing its reputation as the lowest-cost store erode in recent years. Wal-Mart, the Charlotte region's largest grocer, hopes to make inroads against hometown chain Harris Teeter, the second largest.
If the Charlotte campaign pays off for Wal-Mart, the retail giant could replicate it elsewhere. "Right now, it's just in Charlotte," said Wal-Mart spokeswoman Tara Raddohl. "We do have some intent to utilize the same campaign in some local markets, but not at a national level."
Raddohl said Wal-Mart chose Charlotte because the company believes there is an opportunity to "surprise" customers with price differences here.
Wal-Mart is trying to regain its mojo, following more than two years of lackluster sales results. The discounter has said it will invest $2 billion to bring retail prices down.
According to Wal-Mart's ads, Charlotte-area shoppers could save anywhere from 10 to 19 percent on their groceries.
Harris Teeter says it saves shoppers money through its VIC loyalty card specials and promotions such as double and triple coupons. Spokeswoman Catherine Reuhl said the chain also brings shoppers value through its service, and the quality of its merchandise.
"We take pricing very seriously and always strive to offer our shoppers the highest quality products at a competitive price," Reuhl said in a statement.
Some consumers said they weren't swayed by Wal-Mart's new ads. Several told the Observer they believed they could save more than the ad shows at Harris Teeter by using coupons, and others said they preferred Harris Teeter's selection and convenience.
"I understand the ad, and I understand the premise behind it, but I think shoppers who shop for groceries regularly are more intelligent than that," said Wayne Battle, a Charlotte hairdresser. He shops mostly at Harris Teeter for produce, meat and "exotic" foods.
"I go to Wal-Mart when I want generic things, like Jell-O, or cornbread mix," he said.
But others said rising prices for necessities such as gasoline, electricity and food prompted them to switch to Wal-Mart. As one shopper put it, the savings in one of the ads, $19.60, amount to almost half a tank of gasoline.
Bentonville, Ark.-based Wal-Mart has had two consecutive quarters of increasing sales at stores open for a year or longer, which is considered a key measure of health for retailers. Prior to that, Wal-Mart had been in the midst of a prolonged sales slump, with sales at stores open at least a year dropping for nine straight quarters.
"You're going to see Wal-Mart, who obviously owned price and value, and lost it, really come back very, very hard and very strong against grocers," said Phil Lempert, an independent supermarket analyst.
"People are scraping at the bottom," he said. "They're already using coupons, they're already using frequent shopper cards."
Still, Lempert said many people will continue to shop at Harris Teeter due to perceived higher quality.
"Harris Teeter is a fabulous chain, really about customer service," Lempert said. "A lot of the loyalists for Harris Teeter are not going to switch to Wal-Mart, regardless of the price."
Wal-Mart's Raddohl said the campaign uses real shoppers from around Charlotte who applied online. They shopped at Harris Teeter as they normally would, and then Wal-Mart compared prices they paid to the items' cost at Wal-Mart. Each ad lists a sample receipt showing how much the shopper would have paid at each store, although the ads acknowledge the prices may include Wal-Mart specials and prices at both chains may vary.
Four years ago, Wal-Mart started an initiative to remove thousands of items from stores and focus on promotions and sales rather than across-the-board low prices. Smaller, lower-priced competitors such as Matthews-based Family Dollar grew, as customers increasingly turned to them for groceries. Since last year, Wal-Mart has reversed itself, adding back thousands of items and cutting prices to get back into consumers' good graces.
In fiscal 2011, Wal-Mart had $15.8 billion profit on nearly $444 billion in revenue. The retailer's single biggest category was grocery items, which accounted for about 55 percent of sales.
Wal-Mart isn't the only non-traditional grocer to push its food offerings recently. Target expanded all of its Charlotte-area stores last year to include fresh produce, meats and expanded grocery assortments, and Family Dollar has increased the amount of packaged and frozen grocery items at all of its stores.
In the Charlotte region, Wal-Mart has the largest share of the grocery market, according to sales data last year from Chain Store Guide. When included with Sam's Club, which is also owned and operated by Wal-Mart, the mega-retailer accounted for 26.2 percent of grocery sales in the Charlotte region. Harris Teeter came in second, with 22 percent, followed by Food Lion, with 19.2 percent.
In its most recent quarterly earnings statement, filed in February, Harris Teeter said it is seeing increased competition from stores including supercenters and discount clubs, in the forms of everyday low pricing and discounts. "Harris Teeter's markets continue to experience new store opening activity and increased feature pricing or everyday low prices by competitors," the company said.
Harris Teeter is upgrading some of its key local stores, including building new signature buildings in Plaza-Midwood and Myers Park. Harris Teeter's parent company, Ruddick Corp., also sold its thread and textile division, and shareholders voted to authorize the board to change the company's name to Harris Teeter Supermarkets Inc.
"Harris Teeter has responded to its customers' changing buying habits with increased promotional activity," the company said in its February earnings statement. Those promotions have driven increases in store trips and the average number of goods sold, Harris Teeter said.
Harris Teeter reported profits of $13.7 million in its first fiscal quarter, on $1.12 billion in sales.
The company also said its gross profit margin declined about half a percentage point in the first quarter, largely due to investments in promotions and lower pricing.
Neill Crowley, a marketing professor at St. Joseph's University, said Harris Teeter is focused on perishable goods and having nice, upscale stores, while Wal-Mart is focusing on price. Both strategies could appeal to different segments of the market.
J.P. Morgan analysts said in a report to clients last week that Wal-Mart should benefit this year from reemphasizing groceries. "The grocery category...continues to post the strongest sales gain," the analysts noted.
August May called herself a "lifelong devotee" of Harris Teeter, but with a new baby to provide for, she and her husband decided to try the Wal-Mart on U.S. 521 in Indian Land.
"We noticed a difference right away," said May, a paralegal.
The only downside, she said, is how much busier a Wal-Mart Supercenter is. "You have to be real intent to fight the crowds," said May.
They still go to Harris Teeter occasionally, but the defection is almost complete. "If we're going to have a steak or something, we go to Harris Teeter," said May. "But we just go for that."