A Lesson for CEOs:
The pioneer of the supermarket concept founded in 1859 is joining the junk pile of brands that were. After functioning as a mail-order tea business known as the Great Atlantic & Pacific Tea Company for over fifty years, management opened their first supermarket in Jersey City in 1912.
Then the company became known as the familiar A&P brand, and grew rapidly opening nearly a store a day during the era of the first World War. By the mid-1930s A&P had opened 16,000 stores. The early focus on having their stores in major cities gave their competitors the opportunity to concentrate on the suburbs surrounding the cities.
When A&P finally decided to expand into the suburbs it was with too little and too late, a familiar faux pas made by professional managers of mature companies. In addition, A&P stuck to their old familiar model while their traditional customers were seeking bigger stores with better prices. By the time A&P management woke up and tried to emulate a variety of nontraditional new competitors like Target and Walmart, and others like Stop & Shop and ShopRite; again it was with too little too late.
More recently, these competitors have stepped up their game and with aggressive pricing and better advertising and promotions, and have gradually attracted more and more A&P customers. It has been estimated that between 2008 and 2014 A&Ps share of market was reduced by nearly 50%.
This prompted their first bankruptcy filing in 2010 allowing for an even greater loss of customers while management struggled to reorganize. During this period there was also a host of new "specialty" supermarket brands that entered the market concentrating on a variety of changing consumer tastes that each nibbled away their own share of A&P customers. Like Whole Foods, Trader Joe’s, Fairway, and others.
When the company emerged from the bankruptcy reorganization in 2012 it was already too late, even with a new cash infusion of $93 million. Their competitors were opening more and more new locations with advances in technology incorporated into their new customer friendly store layouts.
During the first six months of 2012 A&P was losing nearly $28 million a month, and from February 2014 through February of this year the company has lost more than $300 million.
What are the lessons here?
First and foremost: If the customer gets to the future before you do – they will leave you behind. You are in the customer business, no matter what you are selling.
- Competitive analysis – who was watching who? Like with many other industries you are not alone. Most changes are easy to see, but only if you are looking.
- What was the plan? Without a religious devotion to strategic planning it is easy to be left behind.
- What were the key performance indicators and who was policing them?
- Bureaucracy is an inevitable byproduct of early growth and success. Once management takes on a feeling of entitlement the end isn’t too far away.
Question is: What are you doing to watch the three most important factors in your business – Customers, Competitors, and Trends?