The Importance of Differentiation

A recent big announcement is shaking up the grocery industry here in Chicago: Dominick’s announced it will close its 70 stories in the Chicago area by the end of the year. The chain has so far only found buyers for 15 of the soon-to-close stores, and if other deals aren’t inked in the next week, some 6,000 employees will be out of a job.
The story hits close to home. Becker’s Healthcare “adopted” a family holiday season, as we do each year as part of our holiday give-back event. Yesterday, we visited the family (picture below), bringing gifts and food to their home. We learned while we were there the single mom, Jean, was one of these soon-to-be unemployed Dominick’s workers. A baker of 15 years, she had always provided presents to her children in years’ past. This year, however, she wasn’t even able to afford a tree, choosing instead to save her precious last paycheck for rent and food, in case she isn’t able to find work quickly. 

The demise of Dominick’s has a lot to do with the chain’s failure to really differentiate itself in a competitive market. According to Chicago Business Journal:
“Dominick’s — a mass-market, middle-of-the-road grocer — found itself fatally squeezed at both the high end by expanding grocery chains such as Mariano’s and Whole Foods (NASDAQ: WFM), and at the low end by aggressive chains with low-ball pricing such as Walmart (NYSE: WMT), Target (NYSE: TGT), Meijer, Aldi and Trader Joe’s, which have begun to greatly increase their presence and their competitively-priced grocery offerings in the Chicago market.”
Mariano’s (known for its difficult to find, high-end products) entered the Chicago market just two years ago, and Walmart (known for always low prices) received approval for its first store nine years ago. In less than 10 years, the grocery market was turned on its head, and the chain that didn’t differentiate, lost.
You may be wondering why I’m writing about grocery stores on a healthcare blog. But, the lesson learned by the shake-up of the Chicago grocery industry is relevant for all industries: Differentiation is often the key to remaining competitive in a crowded market.