Safeway Inc. is amongst the largest and most prominent food and drug retailers in Canada, and is also one of the most expensive. With 9 locations in Edmonton, and most of those locations situated in lower income areas, I started to wonder why Safeway still manages to be one of the most dominant grocery stores in the city despite their noticeably above average prices.
While considering the location of any retail store, one of the most important factors is convenience, or access to customers. Market area considerations such as frequency and transportation methods seem to be the most influential features in the consumer decision process for grocery shopping. After I took a closer look at the trading areas surrounding Edmonton Safeways, and researched the zones of primary shoppers as displayed through Prizm, it became clear to me why Safeway still has an astounding sales record in low income areas despite it's expensive prices.
For example, the Safeway located on 109th St and Whyte ave is surrounded mainly by the Prizm segment classified as “Grads and Pads”. This consists of educated singles, students, and recent grads living in apartments with short commute to work and easy access to public transportation. In other words, most of these shoppers do not have vehicles, either because they don’t have a need for one or can’t afford one. The reason why this Safeway is so successful (and so expensive, even amongst Safeways) is because of the psychology of distance factor: some people find anything more than a couple blocks too far to walk. This eliminates competition and establishes a large, loyal consumer base. The fact that many customers are on foot also ensures a high frequency of visits, because there is only so much you can carry in your hands. Buying small amounts of groceries at a time, consumers may not notice high prices as much as if they were buying enough groceries for a week or two. The "Grads and Pads" consumer base is also dominant in the Oliver Safeway area, which is located one block away from Grant MacEwan residence and downtown condos. I have lived in both areas, and often choose to go to Safeway merely for the convenience, and i try not to think about the price if it's only a few items.
Another reoccurring dominant Prizm market segments are "Single City Renters" located at the 8118-118 Ave NW and 2304-109 Street NW locations. This segment consists of low income, transient young singles, and common-law couple or single parents. With a low average household income of 44,000, these people are mostly renters and most likely cannot afford to drive vehicles either. The same factors of frequency and transportation apply here as did for the Grads and Pads. They are unable to drive to a much cheaper grocery store such as a Superstore, so they have no other choice then to shop at their convenient yet expensive, neighbourhood Safeway.
Of course there are Safeways located in wealthier neighborhoods such as Riverbend where the transportation issue doesn't apply, but it is interesting to consider why an expensive grocery store such as Safeway would want to constantly locate in lower income areas, and it makes me wonder wonder if a company like this is using poverty or low incomes to an advantage in their business.
Sonya King
http://www.edmontoninfocenter.com/merchant2.php/list2/91/Edmonton+Safeway
http://www.environicsanalytics.ca/
http://www.dbrs.com/research/229135/safeway-inc-canada-safeway-limited/dbrs-confirms-safeway-at-bbb-and-r-2-high.html
http://safeway.ca.inserts2online.com/I2O_MainFrame.jsp?pageNumber=1&drpStoreID=809
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