R&FF Retailer – Meijer: Back on Track
Through a special arrangement, what follows is an excerpt of
a current article from Refrigerated & Frozen Foods Retailer magazine,
presented here for discussion.
What a difference a few years can make. In September
2003, Meijer, Inc. laid off 350 headquarters workers – 15 percent of its corporate
work force of about 2,300 – “to increase its competitive position in the supercenter
It was the second time in two years that the Grand Rapids, Mich.-based retailer – the pioneer of the supercenter – had eliminated hundreds of jobs. With Wal-Mart Supercenters invading its turf, Meijer seemed to lack a coherent strategy, and its plans for expanding beyond its 158 stores were reportedly on hold. Only a month earlier, observers had scratched their heads when Meijer inked a deal with the United Food and Commercial Workers Union, giving its 36,000 Michigan employees raises that the union said made them “the highest paid in the retail business throughout the Midwest.” Was this any way to compete with Wal-Mart?
Fast forward to 2007, and Meijer seems to have found its footing again, just as Wal-Mart is taking a needed breather. Now with 178 stores and about a dozen more (including its invasion of Chicago) on the drawing board, Meijer is flexing its muscles. The chain is heavily promoting its Meijer Gold brand, and has launched Meijer Organics, a new label that will eventually have more than 200 SKUs. All stores more than five years old are being remodeled.
If Meijer once briefly tried to emulate Wal-Mart on pricing, sources say it is now more inclined to emulate Kroger, which seems to have cracked the code in competing successfully against Wal-Mart. Others say Meijer is even taking some cues from paragons such as Wegmans, especially via upscale items and popular regional brands.
Observers say the chain is putting more emphasis on food versus general merchandise, as it continues to differentiate itself from Wal-Mart with variety, local brands, high-quality perishables and service.
Says one observer, “I see them re-balancing. Right now, a 200,000 square-foot store might be 40 percent to 45 percent grocery in terms of floor space. I think you’ll see the relative emphasis tip back toward grocery in the next few years. Remember, Wal-Mart came at this as a mass merchandiser that added food tactically, to drive traffic and ring. But at heart, Meijer is a grocer. They’re just better at food than Wal-Mart is.”
But the stores remain fairly price competitive.
“In markets where we have both Meijer and Wal-Mart data,” said one observer, “Wal-Mart is usually around 13 percent to 15 percent below traditional supermarkets, and Meijer is seven percent to eight percent below. So Meijer has noticeably lower prices than most supermarkets, but not as low as Wal-Mart.”
A year ago, looking to reinforce its history of being a low-cost leader, Meijer unveiled its “Price Drop” program of unadvertised specials. On average, about 5,000 items are part of this program on any given day, with items being added and dropped each week.
Observers note that while Meijer’s competitors are either EDLP or Hi-Lo, Meijer uses its Price Drop program to straddle the fence successfully – offering not only decent everyday prices and ads that are hot enough to get attention, but a sort of treasure hunt for specials.
Said consultant David Biernbaum, Chesterfield, Mo., “Meijer is large enough to offer competitive discounted pricing yet still small and regional enough to offer the local flavor. It executes well on supplier promotions as well as its own (private label).” He adds that the chain executes well on niche brands and products – not just the same major brands being footballed by other chains.
“The perimeter departments look great,” added one vendor. “They’re obviously spending a lot of money consistently improving their stores. And their weekly one-stop shopping fliers are very effective at getting the word out about hot prices. Wal-Mart doesn’t do that, they just rely on the shelf tags, so I think Meijer’s strategy is working to give them a decent-enough price image.”
Discussion Question: What lessons can be learned about the turnaround at Meijer? What in your mind sticks out as the biggest contributors to Meijer’s recent success?