Eric Steckling, Pitney Bowes Business Insight
In August 2009 Sarah Gilbert of WalletPop.com blogged about how “Panera made news by not discounting its bread” (see link) and goes on to lambast the chain for not lowering prices despite an industry trend of discounts, promotions, and new low price offerings. Even though the economy is in a severe depression, not all retailers and restaurants are feeling the pinch evenly. Panera’s strategy can be summed up by a quote from CEO Ron Shaich when he said that he’s “focused on the 90% [of Americans] that are still employed”.
The trend of price breaks may be a hasty kneejerk reaction to slipping sales. Many restaurant operators argue that discounts hurt the bottom line and largely fail to bring more customers in the door. It’s reasonable to understand why discount sellers are posting modest gains, as previously higher-end consumers downgrade and loyal bargain hunters continue to patronize the low priced purveyors. Companies such as Walmart, Costco, TJX and McDonalds have all reported increased sales. Panera’s strength through the recession begs the bigger question; how are some non-discount retailers and restaurants relatively unaffected by this massive economic downturn while others struggle to keep their doors open?
My guess is that there is a reason behind every success. A particular store may have a customer base that is relatively unaffected by job losses, or in an area(s) with a relatively stable economy (Texas), or are benefiting from folding competition. In turbulent times such as these consumers often change their behavior so quickly that retailers/restaurants do not have time to respond to the trend before the fickle consumer changes their mind. It is evident that in troubled times with economic factors to numerous to list, that there are winners and losers, with the losers far outnumbering the winners…
Ms. Gilbert predicted that the press around the company’s growth (and lobster offering) “will only affect it negatively.” Panera’s third quarter earnings report prove Sarah’s predictions wrong; a sales increase of 35% over Q3 2008 can hardly be described as “a fluke”.
