Grocery Stores Increase Ad Spending

            During this bad economy, supermarkets (who are now not the only places to buy the groceries) have been spending their money on advertising to repel competition from drug stores and dollar stores. For example, chains including Pacific tea and Safeway Inc. are lowering their prices on numerous items in hopes to attract more customers. Although these chains haven’t increased their profits by much, they are building up their reputation in terms of being known for their low-priced goods. In today’s society, it is also extremely hard to succeed with these type of companies, for they are also competing with places such as Wal-mart, Walgreen Co., and Target-places that all have grocery offerings at cheap prices. In the beginning of this year, data shows that advertising spending rose 19% to $393.3 million. That portrays a  huge increase in spending within this industry.

            What shocks me is that despite their low prices and increase on advertising, these companies aren’t benefiting much from it. For example, Safeway reports to decline 1.1% in third-quarter sales due to their new strategy. Just as Jefferies & Co. analyst Scott Mushkin states,” Advertising alone is not going to be the magic bullet…they have to marry it with real actions.”

            I believe that his statement is 100% true. This new strategy is effective in a way that it will attract a lot more customers. However, advertising alone won't do the job of bringing success to the company. Companies can’t just have the mind-set that they will prosper because of this strategy. They must continue working hard to find ways to bring more and more people to buy from their stores. I am not surprised that many of these chains haven’t done so well, especially this year, for there exists so much competition. After reading this, do you guys think that it is foolish of these companies to spend so much on advertising even if  there shows no increase in sales, or do you think that over time, they will benefit from it?

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Posted by Tania Dabdoub