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Market Basket rival chains treading carefully

Customer surge raises tough PR, supply issues

Competitors have kept quiet about the Market Basket boycott, wary of alienating customers loyal to the company, some of whom held a rally Saturday.

Kayana Szymczak for the Globe

Competitors have kept quiet about the Market Basket boycott, wary of alienating customers loyal to the company, some of whom held a rally Saturday.

The paralysis that has gripped regional grocery powerhouse Market Basket should be a tremendous windfall for its supermarket rivals — if only they could take advantage of it.

The thousands of loyal Market Basket customers who are now flooding nearby Hannaford, Stop & Shop, Star Market, and Shaw’s supermarkets bring to those stores not just a huge surge in sales but also thorny business and public relations challenges.

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“It sounds easy: One of your competitors is imploding, their customers have to buy groceries, how do you attract them? But it’s harder than it sounds,” said Sean Willems, an associate professor at Boston University who studies operations management. “Beyond all the human drama, there is a fascinating business problem here.”

Three of the region’s main supermarkets each acknowledged that business at many of their stores has picked up substantially since July, when Market Basket employees and customers began boycotting the company’s stores to force the rehiring of popular president Arthur T. DeMoulas.

But representatives of Hannaford, Shaw’s/Star Market, and Stop & Shop declined to comment in detail on the Market Basket boycott. Indeed, the chains have either been cautious in their public statements or said little at all.

Analysts said the rival supermarkets have to be careful not to be seen as capitalizing on the controversy.

Moreover, they are limited in making quick changes, such as offering special discounts or new products, because supermarkets typically lock into their current inventory weeks ahead of time.

Their first and foremost problem is logistical: Many of their stores are now mobbed, and they need extra food and staff to keep both their new and existing customers satisfied.

A few supermarkets have barely kept up with the new business from former Market Basket customers. Customers have posted pictures on social media sites showing empty shelves at some stores after the crush of shoppers defecting from Market Basket.

Kevin Griffin, publisher of the Griffin Report on Food Marketing, said the rivals are in a difficult position.

“They’re not coming apart,” Griffin said. “But they can’t get the help, they can’t get the stores stocked fast enough, and it means they can’t service customers how they’d like to.”

The chains said they deployed contingency plans normally used during blizzards or hurricanes, when shoppers make a mad dash to stores to stock up on essentials, and brought in additional supplies and personnel. But that, too, entails some risk, since it is unclear when — or if — the crisis at Market Basket would abate and shopping life would return to normal.

Governor Deval Patrick took part in negotiations Sunday night to help end the DeMoulas standoff, which has crippled Market Basket stores and put thousands of people out of work, according to two people familiar with the matter.

One reason why Market Basket commands such loyalty among shoppers is that the prices are often much lower than at competitors.

Now, unhappy with the prices at rival chains, some Market Basket shoppers are taking to social media to trash the competition, while pining for their neighborhood Market Basket stores.

Online, customers call Hannaford “Can’tAfford,” or post pictures of barren refrigerators they say are empty because of high prices at Stop & Shop or Shaw’s.

Richard Nicolazzo, who runs the Boston public relations and communications firm Nicolazzo & Associates, said the rival supermarkets are wise to not respond to such criticism.

“There has been an amazing and emotional expression of brand loyalty to Market Basket that goes way beyond common sense and reason,” he said.

“I would let it lie. You cannot make sense out of nonsense, and a lot of this is nonsensical.”

Of the major chains, only Shaw’s would respond to the sniping from the Market Basket faithful.

“We’re all feeling the same balance of folks who are appreciative and folks who are upset they can’t shop where they want to shop,” said Shaw’s spokesman Jeffrey Gulko.

Otherwise, cautious is the prevailing tone among Market Basket competitors.

“We have seen many new shoppers in our stores in recent weeks,” Stop & Shop said in a statement. “We hope that these new shoppers continue to shop with us.”

Chief among their fears, analysts theorized, is that a single statement interpreted by Market Basket loyalists as insensitive could bring a stinging backlash.

“There’s been this kind of general theory that it would be improper for a competing supermarket to take out ads that say, ‘Welcome, Market Basket shoppers!’ ” said Edgar Dworsky, a consumer advocate who runs ConsumerWorld.org . “There’s a worry that people will ask, ‘Whose side on you are on?’ ”

Cutting prices is also a sensitive issue. While the chains said they endeavor to keep prices competitive, they noted that many products are typically priced and ordered long before they appear on shelves.

And without a drastic rewriting of strategy, it would be difficult for a higher-margin supermarket chain to suddenly emulate the discount Market Basket model, which relies on sales volume.

“Our ads and prices are set out weeks in advance,” said Gulko, the Shaw’s spokesman. “No one really knew what kind of impact [the disruption to Market Basket] would have when it started.”

Others, however, questioned whether the competition is in any rush to lower prices. After all, where else would Market Basket shoppers get their groceries?

“You don’t have to lower your prices when you’re the only game in town,” Dworsky said.

Several weeks into the crisis, analysts said, the competitors appear to be holding their own under the circumstances.

And while the nature of grocery shopping means the stores will have multiple chances to try to win over Market Basket shoppers, the companies will be able to bend only so far to please.

“You’re not going to be changing your business model. You’re trying to make temporary accommodations while converting as many people as you can into regular shoppers,” Griffin said.

“You’ve got to win customers one at a time. I’d say the opportunity outweighs the risk, and hopefully you can seize that and make the most of it.”

Dan Adams can be reached
at dadams@globe.com.
Find him on Twitter at @DanielAdams86.
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