FD Buyer: WinCo Foods – Below the Radar

Discussion
Jul 29, 2011
Warren Thayer

Through a special arrangement, presented here for discussion is a summary of a current article from Frozen & Dairy Buyer magazine.

WinCo Foods doesn’t have a loyalty card or gas savings program. Clerks don’t bag your groceries. Outside of some direct mail to support openings, the stores don’t advertise. Heck, WinCo doesn’t even have an in-store flier.

But there’s one thing WinCo does, and does well. It sells a ginormous amount of groceries. Cheap. Its 78 stores in the northwest easily average well over $1 million a week, observers say. Most estimates put annual sales of the employee-owned company at around $5 billion.

Says one industry observer who shops regularly at WinCo, “Price is the driving factor here. When you can get things $1 or $2 cheaper at a WinCo, and save $30 to $50 a week, it gets your attention.”

The chain follows an everyday-low-price format, taking a standard mark-up to cover costs of its four distribution centers. Supply chain efficiencies give it a leg up to support its pricing structure where it competes. WinCo passes along deals it gets straight to consumers, and wants vendors to put everything into the cost of goods, with no extras or frills. And as with Walmart, you can’t so much as pay for a cup of coffee for a WinCo buyer. When a new WinCo store opens, I’m told, “a big chunk of the senior management helps with the pre-opening. You’ll see senior vps and directors in the stores, getting them stocked and making sure things are done right.”

Last month, I spent two days watching people fill Home Depot-sized shopping carts in WinCo stores in and around Boise, Idaho. At one point, I was dumb enough to ask a clerk if there were any smaller carts or express lanes. She was pleasantly amused.”No, there aren’t,” she said with a laugh. “We want you to buy a lot here!”

The company originally ran stores under the Waremart and Cub Foods banners, but changed its name to WinCo Foods in 1999. The Cub roots are clear as soon as you steer your cart down the Wall of Values by the main entrance. Everything is stacked high and sold cheap, including in the five-foot open multi-decks, one for refrigerated, one for frozen.

The counter-clockwise traffic flow along the perimeter of these big (generally about 90,000 square feet with noticeably wide aisles), boxy stores always starts with that Wall of Values, followed by produce, bulk items in bins and barrels, service deli, seafood, meat, dairy lineups, and frozen.

Here and there, signs point out the savings WinCo offers versus its competitors. For example, WinCo was offering 48-ounce packs of Kraft American Singles for $8.97, versus $12.99 at Fred Meyer and $12.38 at Walmart. “Extra Savings” and “Bag a Lot of Savings” signs are everywhere.

A few things surprised me a little. There’s a well-shopped olive bar, and some specialty gourmet items, neither of which I had expected to find in a discount supermarket. There are also many strong regional brands, giving the stores good variety and differentiation.

What can other supermarkets learn from WinCo? Can a regional grocer compete effectively with national chains – in the long run – with a focus on price and bulk buying?

Please practice The RetailWire Golden Rule when submitting your comments.

Join the Discussion!

12 Comments on "FD Buyer: WinCo Foods – Below the Radar"


Sort by:   newest | oldest | most voted
David Livingston
Guest
9 years 9 months ago

First, WinCo is not operating under the radar. They are one of the best known grocers in the industry. What the article fails to mention is that WinCo probably has a huge advantage over other chains with regards to debt, rent and labor. Chains that resort to loyalty cards, coupons, games and gimmicks are often paying above market rents, have heavy debt loads and stuck with overpriced unproductive union labor. My guess is WinCo has none of that.

The best way to get a strong price advantage while also having good operations levels is to pay no rent for your store, never borrow money and be employee owned paying the lowest possible wages and providing bonuses based on profit. Works every time.

Tony Orlando
Guest
9 years 9 months ago

Keeping prices low and making the customers feel welcomed is something I respect. I wish them well, as it doesn’t take a Walmart to get customers in your door. More power to ’em.

Bill Emerson
Guest
Bill Emerson
9 years 9 months ago

There are, at least, two take-aways for a regional grocer. First, you cannot make your company successful with marketing, regardless of how pervasive or sophisticated. Secondly, competing strictly on price is a losing proposition. Eventually someone better capitalized will come along and take your business away.

As always, winning comes from offering your target customer something that the other guy cannot. This can be superior service, superior assortment, superior quality, a superior overall experience.

Ed Rosenbaum
Guest
9 years 9 months ago

I am a proponent of employee ownership. Look what it has done for Publix, especially in the earlier years. I am going to follow WinCo and see what I can learn from their business model.

M. Jericho Banks PhD
Guest
M. Jericho Banks PhD
9 years 9 months ago

I wonder how Trader Joe’s, Whole Foods, and Costco are doing against WinCo. Surprise! … quite well here in the Sacramento metro area. And, I suspect, everywhere else they are in direct competition. Each is unique, approaching the food business from an individual perspective and making it work.

Roger Saunders
Guest
9 years 9 months ago

I’ve never had occasion to visit a WinCo store, but I do know that the consumer in Boise, Idaho and other parts of the Northwest, have multiple reasons as to: “Why they shop a Grocery Store MOST often”. Each month, the Consumer Intentions & Actions (CIA) Survey points to 26 different “reasons”. Some of the reasons vary in importance for different retailers, but when all 8,500+ respondents’ figures are accumulated, reasons mentioned most are:

– Price 74.5%
– Location 71.1%
– Selection 57.3%
– Quality 47.9%
– Fresh Produce 32.0%
– One Stop Shopping 30.3%
– Service 28.6%
– Meat / Seafood 24.6%
– Store Layout 22.2%
– Trustworthy Retailer 21.0%
– Store Appearance 20.9%

Fifteen other areas of the store are covered in the survey. Based on Warren’s review, WinCo is certainly hitting the most relevant ones in the consumers’ hearts and minds. I especially like and admire the “roll up the sleeves” and getting to the store mentality of the executive team. Value and innovation are always created when an organization stays close to the customer.

Louis Mellet
Guest
Louis Mellet
9 years 9 months ago

During our recent fieldwork, we had the opportunity to spend considerable time studying the WinCo format with the objective of determining key margin strategies that makes the format so appealing to regional shoppers. A few of the more salient points, in brief:

1. Buy direct and transport directly to stores as much as possible.
2. Own real estate and use your own construction crews
3. Sell key national brands at or just above cost to create value perception and drive consumer traffic (approximately 30% selling space)
4. Use procurement power to drive down purchasing costs on local and private label (where WinCo makes a higher margin).
5. Buy discontinued labels in bulk and forward buy on “deal” items.
6. Emphasize brands NOT carried by mass merchandisers
7. Create an immediate value perception at store entrance
8. DESTROY Walmart on produce pricing – circumvent brokers by buying direct from LOCAL farms
9. Use private label to “set up” regional brand value perception
10. Price beneath Walmart on comparable (not identical) items.

Kai Clarke
Guest
9 years 9 months ago

Price, Price, Price! Shoppers care about price! A clean, well-organized store with the best prices in town will keep shoppers coming back over and over again. How many more examples does ANY retailer need to see who is thriving in our economy…Dollar General, Dollar Tree, $.99 Only, WinCo, etc. They all offer great prices on their products, and their customers are loyal and shop there until their needs are fulfilled. Big carts, minimal advertising, low overhead, and great values make WinCo a super place to buy, buy, buy!

John Crossman
Guest
John Crossman
9 years 9 months ago

Publix does an outstanding job competing with national chains by focusing on customer service and quality of product. In addition, they do an excellent job connecting to the local consumer.

Herb Sorensen
Guest
9 years 9 months ago

The thing that grabs my attention here is that these WinCo stores, about the same size as a Stew Leonard’s, sell about 2/3 ($65 million) what Stew typically sells ($100 million.) Given that most supermarkets sell ($10-30 million,) well less than half as much as a WinCo, this means WinCo has tapped principles that blow away typical supermarkets, and are at least approaching the stellar performance of Stew Leonard’s, without the severely restricted SKU count of Stew’s.

Always on the lookout for superior store performance, I intend to begin a study of WinCo and will present conclusions in due time. Meanwhile, I am impressed with the analysis others have offered here, and will consider the cited factors in my own study. One feature that I will be giving special attention to is the very long “center-of-store” aisles that transit the store from right to left, with three major front-to-back aisles – on the right, enter of store, and on the left. Stay tuned!

Herb Sorensen
Guest
9 years 9 months ago

After reviewing the voting on factors, I would have to say that I am SHOCKED at the opinions expressed here:

What do you think is most responsible for WinCo’s success?
Employee ownership (15%):
Low prices (30%):
Superior senior management (10%):
A good business model (40%):
Not sure/No opinion (5%):

Apparently many think superior results are mostly due to low prices and a business model, ignoring that the source of the model IS “superior senior management,” who had the good sense to leverage “employee ownership,” which in itself will come close to guaranteeing superior operation of the model. Well, at least 25% of us agree about what makes business tick. πŸ˜‰

vic gallese
Guest
9 years 9 months ago

Absolutely — they can compete!
You have to have a buying function that is focused on EVERY SINGLE SKU, know the competition and YOUR customer and have each area of the company rigorous about cost. That’s all it takes!

wpDiscuz

Take Our Instant Poll

What do you think is most responsible for WinCo’s success?

View Results

Loading ... Loading ...