Wal-Mart Hoping to Tackle Jewel, Dominick's Hold on Chicago Grocery Market

In an abysmal economy, Wal-Mart executives are hoping their lower-priced Supercenter groceries can gain some traction on Chicago staples Jewel and Dominick's.

Since the inception of several new Supercenters -- which operate full-scale grocers -- in the Chicago suburbs last year, research data suggests Wal-Mart gained a 2 percent share of the grocery market at the expense of its two main competitors. At present, Wal-Mart Supercenters command 6.5 percent of the grocery market in metro Chicago, compared with Jewel at 39 percent and Dominick's at just over 11 percent.

According to a recent Tribune report, Wal-Mart is pushing to open as many as five new city stores. A stock analyst at William Blair & Co. told the Tribune, "Large metro areas represent a tremendous growth opportunity for Wal-Mart. Chicago and New York, I would say, are the two priorities for the company."

Historically, the country's largest food retailer has experienced resistance to opening full-scale grocers in the city of Chicago, where workers employed by Jewel and Dominick's are part of a union. Wal-Mart execs are betting the continual slumping economy will change that. A January Credit Suisse survey suggests food prices at Jewel are 23 percent higher than at Chicago-area Wal-Mart Supercenters, and Dominick's prices 26 percent greater.

But some critics say the cheaper prices won't make up for service drawbacks. Wal-Mart consistently ranks low on customer service indices for supermarkets, and has been accused of undercutting salaries and benefits of its employees, when compared to those part of a union.

Six Supercenters are expected to open in the Chicago area by the end of 2009, bringing the total to 19. Six more are planned to open in 2010. Jewel-Osco operates 167 Chicagoland stores, while Dominick's has 80. [Trib]