Monday, September 11, 2006

The Wal-Mart way

The Great Price Rollback is officially underway.

Exhibit 1: A press release issued last Thursday by T.G.I. Friday’s, touting new riffs on appetizer staples like Buffalo chicken wings, quesadillas and loaded potato skins, along with such new meal starters as Fried Mac & Cheese and a sizzling cheese dip. The price: just $4 if you pop for an entrée, too, at least through mid-October. That’s such a small fraction of Friday’s usual appetizer price that a buyer would have enough left over to afford gas for the trip home. Which is, of course, the point.

Exhibit 2: Shoney’s has lifted the silver dome off its new sandwiches, including such hot options as a Philly cheesesteak and a pot roast selection, as well as a turkey club. The price: $4.99, until the end of October. Five bucks for a hot sandwich served by a waiter or waitress at your table, though you have to settle for potato chips instead of fries. I recently had a cheesesteak at Denny’s that cost me at least 40 percent more, though it was accompanied by hash browns.My usual sandwich from a Subway is more than $6, and you’d be lucky to get out of McDonald’s or Wendy’s for a mere five spot.

And the clincher, the sure-fire indicator that should have margin-minded restaurateurs wondering how far the pricing retreat will go: The quote two weeks ago in USA Today from Outback president Paul Avery, about the price cuts set to be adopted by the steakhouse chain in November: "We've lowered prices from time to time, but never this magnitude."

More alarming than the depth of the discounting may be the duration. Are gas prices ever going to fall below $2.25? The automobile manufacturers aren’t betting on it; they’re radically shifting their showroom mixes in anticipation for a prolonged, perhaps permanent adjustment in the way consumers shop.

And is the credit situation going to ease overnight? The economists have been warning about a blow from that dynamic for years. To assume it’ll be gone in a blink is just wishful thinking.

Perhaps the better fodder for thought is how to present value to consumers, without too much of a sacrifice in margins.

No comments:

Post a Comment