How low are the prices, really?

By DON SHILLING
VINDICATOR BUSINESS EDITOR
Lured by the promise of lower prices on thousands of items, Mary Beth Partika changed her normal shopping routine and made a rare visit to Giant Eagle.
The 45-year-old Poland woman liked the meat and bought a few reduced-priced items from the store on Doral Drive in Boardman, but they weren't enough for her. Next time, she will be headed back to Sparkle.
"I like the small, hometown stores best," she said. "I like the service there, and I know my way around the aisles."
Another shopper, Nina Kalitich, 47, of Youngstown, said she found the new Giant Eagle prices a bit lower than they had been but still figures she could save money by shopping around. She said she'll stick with Giant Eagle, however, because she likes the quality of the food.
"You do find that they have the best. There comes a point in life where you want that," she said.
Like these two women, most shoppers surveyed recently at Giant Eagle's store on Doral Drive in Boardman had heard about the recent price cuts made by the Pittsburgh chain. Not only did they need groceries, but they also came to see how low the prices really are.
Giant Eagle says the cuts are not temporary but are part of a new pricing strategy for its stores in the Youngstown, Cleveland, Akron and Canton areas.
Another regional chain, Tops Friendly Markets, also announced it has cut prices on 12,000 items in its Ohio stores.
Comparisons
To see how these stores' prices compare with those at other area stores, The Vindicator checked the prices of nine items at six stores.
Here's how they added up:
Wal-Mart Supercenter in New Castle, Pa., $25.66; Rulli Bros. in Austintown, $26.05; Cochran Sparkle in Boardman, $27.47; Nemenz IGA in Canfield, $27.58; Tops Friendly Market in Niles, $29.86; Giant Eagle on Doral Drive in Boardman, $30.33.
"That's really good news for us," said Michael Rulli, vice president of Rulli Bros. in Austintown, about his store's second-place finish.
Low overhead, mostly because of family members' working long hours, keeps prices down, he said.
Brian Frey, a Giant Eagle spokesman, said the newspaper's survey was too small. Some Giant Eagle stores have 60,000 items, and he's confident Giant Eagle's prices would be competitive on a full cart of groceries.
Howard Cohen, manager of Cochran Sparkle, said he wasn't surprised the locally owned stores had lower prices than Giant Eagle and Tops. The rankings of the smaller stores, however, could change based on what items are in the sample and what sales are being run at the time, he said.
Local grocer Henry Nemenz said the survey showed his stores are competitive with Wal-Mart's, which has grown to be the largest retailer in the world because of its low-cost products.
Wal-Mart's push into groceries is forcing supermarkets across the country to cut prices, said Steven Baumgarten, research analyst with Parker/Hunter in Pittsburgh.
Size matters
Wal-Mart is recognized for its ability to hold down prices through efficient operations and using its size to negotiate good deals from suppliers. Wal-Mart has supercenters with expanded grocery sections in New Castle, Salem and Greenville, Pa., and is building larger Sam's Club warehouse stores in Boardman and Niles.
"They are hurting every one of us that are conventional grocery stores," Nemenz said.
Baumgarten said supermarket operators across the country are citing Wal-Mart as a main reason for declining profit margins.
Supermarkets can compete, however, by improving their store presentation or by developing a niche, such as selling natural or freshly prepared foods, he said. Some shoppers simply don't like to shop at Wal-Mart because they say it's too noisy or too crowded, he said.
Supermarkets can't let the price difference between them and Wal-Mart grow too large, however, or they will lose even these customers.
"They don't have to match Wal-Mart, but they have to be close," he said.
Rob Borella, a Giant Eagle spokesman, said the price cuts weren't made specifically because of Wal-Mart but because of the increasing variety of competition -- mass merchandise stores, warehouse clubs, convenience stores and even restaurants.
Giant Eagle officials looked at its northern Ohio markets and saw an opportunity to increase its market share, he said.
"It was an offensive move," he said.
It is continually evaluating its other markets, such as those in Pennsylvania and Columbus, to determine if price cuts would make sense there, he said.
Borella said the price cuts were made on staple items across a variety of product categories. Shoppers need to use the company's shopping card to receive the savings.
Tops, which is based in Carlisle, Pa., also is cutting prices just in Ohio, although it has stores in New York and Pennsylvania, said Denny Hopkins, vice president of advertising and public relations. The company has stores in Niles and Warren.
"We were recognized as low-price leaders at one time, and we realized we've lost that edge," Hopkins said.
Local grocers have various ways of reacting to the price cutting by the big guys.
"We don't go to other stores to check prices," Rulli said. "We know what good prices are, and we try to keep ours as low as we can."
Nemenz and Cohen, the Sparkle manager, said they keep an eye on other store's prices.
"We're going to make sure we are cheaper than they are," said Nemenz, who owns three IGA stores and 14 Save-a-Lot stores.
Nemenz and Cohen said this area is getting caught up in a price war that began in Cleveland between Tops and Giant Eagle.
Cohen said some of the new prices at the Giant Eagle down the street from him are lower than his wholesale prices. He figures Giant Eagle is willing to take a loss on some items to get shoppers into its stores.
He's confident, however, that his prices are lower on most items.
Besides, some people just prefer the store run by his father, Art, and uncle, Jerry, for 40 years, he said.
"We've got a good niche. Not everyone likes big stores," he said.
Cohen said his sales figures last week were holding steady despite the publicity of the Giant Eagle price cuts.
Soon, however, he'll have even more competition as a new Sam's Club opens on South Avenue with more groceries than the current store has.
"It won't help," Cohen said.
shilling@vindy.com