Nob Hill cuts prices before ‘Super’ opening

Nob Hill, part of the supermarket chain owned by Raley’s,
recently cut prices on more than 5,000 products. The move comes
just three months before a Wal-Mart Supercenter offering discount
groceries opens across town in Pacheco Pass Shopping Center.
Raley’s spokesperson Nicole Townsend said the price cuts are not a
competitive answer to the new Wal-Mart.
Gilroy – Nob Hill, part of the supermarket chain owned by Raley’s, recently cut prices on more than 5,000 products. The move comes just three months before a Wal-Mart Supercenter offering discount groceries opens across town in Pacheco Pass Shopping Center. Raley’s spokesperson Nicole Townsend said the price cuts are not a competitive answer to the new Wal-Mart.

“That is in response to our customers and meeting their needs,” Townsend said. “We were hearing customers don’t have a lot of time to look at ads every week and shop around for the best price. Our pricing structure wouldn’t always meet our shoppers’ needs. We’ve changed our pricing philosophy so that now our customers can get everyday savings. We’ve been working closely with our vendors, evening out the price so instead of periodic sales, you’ll have a more consistent price throughout the year.”

Representatives at Safeway could not be reached for comment.

The city’s Wal-Mart Supercenter was intended to be the first of its kind in Northern California, but a court challenge by unions representing local grocery store workers allowed the Gilroy project to be overtaken by a supercenter in Stockton.

Steve Carrigan, Stockton’s economic development director, said there was “virtually no opposition” to the project.

“There’s a theory out there that Wal-Mart Supercenters close supermarkets,” Carrigan acknowledged. He said the theory has not held true in Stockton, which has lured a national grocery store with full knowledge that it will face competition from not one, but two supercenters (Wal-Mart is working on a second supercenter in the city).

Carrigan would not identify the grocery chain, but said he warned representatives that Wal-Mart is down the street.

“They said they know who their neighbor is and they said they know their customers and feel they can compete with Wal-Mart head on,” Carrigan said.

And among the city’s existing commercial base, he said he has not “heard from one business saying ‘Wal-Mart’s closing me down.’… I think Wal-Mart closes supermarkets that aren’t run efficiently. This is, I believe, a union – non-union issue, which is a whole separate game.”

Wal-Mart representatives could not be reached for comment.

Jane Howard, Gilroy’s interim economic development director, said she was not worried about the supercenter cutting into the business of established grocery chains.

“These are pretty sophisticated operations,” she said. “Nob Hill is already lowering prices and other loss leaders that will get people in the door. I also believe that Safeway and Nob Hill still have that smaller niche. Some people don’t want to go into 220,000 square feet to get their groceries.”

Local councilmen approved the project in early 2004 despite a groundswell of opposition from local businesses, environmentalists, and union workers. The latter group led a legal challenge on environmental grounds that was dismissed in court in November, allowing the project to move forward. Wal-Mart supporters point to job creation, low prices, and sales tax revenues as a boost for the local economy. The Gilroy supercenter is expected to add more than 200 jobs to the city and $600,000 in annual sales tax revenues. Critics claim, however, that Wal-Mart’s low wages and poor benefits create hidden costs by forcing workers to rely on welfare and other public assistance programs.

Carrigan said the competition between local grocery stores and Wal-Mart boils down to simple business smarts.

“Wal-Mart closes supermarkets that aren’t run efficiently,” he said. “I think what’s going to happen is you’ll see a shuffling in the grocery retail market, where people who are good at what they do are going to stay and thrive. The guys that aren’t good at it are toast.”

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