Regionals Running to Stay Ahead of the Pack

Jun 11, 2003
Al McClain

Al McClain

In a “Coffee with…” session at the recently concluded GMA Executive Conference
(Grocery Manufacturers of America), three leading regional retailers provided
insights into “Staying Ahead of the Pack through Innovation.”

Paul Boyer, president of Meijer, Inc., a 158 store chain of super centers
headquartered in Grand Rapids, Michigan, remarked that his company is focusing
on increasing same-store sales, holding new store openings down to two new units
in 2003. Meijer sells a lot of groceries, but also moves plenty of hard goods
such as clothes and electronics, recently intensifying their concentration on
this latter category to bring in young shoppers. They also do well with large,
outdoor garden centers, with peak months being May and June. Meijer is converting
its in-store coffee business to Starbucks, expecting to have 100 such locations
by the end of next year.

From a management perspective, Boyer noted seemingly constant change in the
industry and the world, and said Meijer management has found it easier to operate
by viewing this turmoil as “the new normal”. They maintain cost “proximity”
with competitors, and one way of doing this is via The Merchants Consortium,
a buying group formed with HEB and Wegman’s. Meijer likes to be the “leading
supermarket” in town, and wants to be on-trend as much as possible, recently
adding emphasis to organics, healthy living, home, and Hispanic-oriented products.

Boyer asked suppliers to do three things: 1) continue to provide great new
products; 2) bring them great ideas and programs; and 3) execute great delivery.
Meijer favors “team-to-team”, rather than “top-to-top”, meetings with suppliers.

Paul Gannon, president and ceo of Shaw’s Supermarkets, Inc., of E. Bridgewater,
Mass., a division of J. Sainsbury, noted that their concentration is on staying
connected to and attracting customers. In fact, Shaw’s is moving from analyzing
demographic segments towards looking at “product purchase segments”. They look
at these areas in great detail, starting with categories of Ethnic, Special
Missions, Fresh, Families, and Value.

Gannon highlighted three stores that each illustrate a different customer-focus.
A flagship store in Boston’s Prudential Center caters to an affluent clientele,
with an average household size of “1.00”. A Providence, Rhode Island store communicates
to low income Spanish and Italian shoppers via “bi” and “tri” lingual signage.
Sale signs are often hand-written to reinforce a value image and “dollar deals”
are a regular offering. In an affluent Burlington, Vermont suburb, a Shaw’s
store offers a kids reading center, and a large “cook shop”.

Gannon’s appeal to manufacturers? Be customer focused, passionate, and flexible.
He also requested they provide product, category, and market knowledge, and
work to align their strategies with his organization. Not small requests, but
Shaw’s appear to be a retailer who “walks the talk” and offers suppliers much
in return.

Bob Mariano, the new chairman and ceo, Roundy’s, Inc., soon to be headquartered
in Milwaukee, Wisconsin, gave no doubt the most down-to-earth presentation,
eschewing all but one slide (a guy fishing), and speaking from the gut…and
the heart. His primary plea seemed to be, “Let’s get back to the basics.” Mariano
feels retailing is, at its core, a simple business and longed for the days when
a handshake sealed the deal, rather than a stack of legal documents.

While Roundy’s historically has been primarily a wholesaler, and secondarily
a retailer, they are now tilting the other way. On Mariano’s “to do list”: trying
to understand how consumers use print media, scorecarding ads to see which
work best, optimizing selling space for advertised items, flattening his organization,
and getting his employees aligned in terms of compensation and incentives. His
strongest plea by far was for the industry to simplify its processes and relationships,
and get back to paying more attention to customers — the shopping kind.

In the Q & A that followed, Mariano noted that, while some pundits
had said Roundy’s should be “dead soon”, he worried little about that and spent
more time getting to stores, talking to shoppers AND employees.

Paul Boyer noted that “team-to-team” meetings worked better with fairly large
groups and when each side had enough time to prepare. Roundy’s likes to have
these meetings in-store, so execs can go out and look at shelf conditions
during their discussions. (And, they usually do NOT tell the store manager they
are coming.) Gannon believes that suppliers often have a better category understanding
than retailers, and that they should provide research and consumer insights
whenever possible.

Boyer said that shoppers typically want to be able to get what they want from
a store, be treated well as they shop, and get out of the store reasonably quickly.
He also noted that, while shoppers come in for national brands, suppliers should
realize that margins are typically better on private label, and that good house
brands can become real “brands”. Mariano said that private label needs to stand
on its own, but can also be a “calling card” for the store.

Net, net… three well-respected regional operators, with diverse formats,
but who are each looking for ways to: reduce complexity and administrative costs;
be in a better position to work with suppliers; and sell more to consumers.
This strong session left most attending with the impression that these chains
will find ways to prosper, and that suppliers who make an extra effort to work
with them, will be well rewarded.

Moderator’s Comment: What advice do you have for regional
retailers looking to compete in a world of “mega” chains?

Just yesterday, in his commentary on Marsh Supermarkets,
Michael Banks, PhD (BrainTrust) said, “as long as he [Don Marsh] and the leaders
of other regional chains remain focused, nimble, and flexible, they’ll continue
to do just fine. My concern is for the regionals that have been restricted and
de-focused under the ownership of one of the mega-chains. But while there are
chains like Wegman’s, Raley’s, H.E.B., Publix, and many others setting the pace,
regional chains will survive and prosper”. (See RetailWire 6/10/03, “Last
Quarter Harsh for Marsh”

Doc…looks like you need to add Meijer, Shaw’s and
Roundy’s to your list. [Rick
Moss – Moderator

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