Retailers Fear ‘W’ Coming to Town
By George Anderson
Its name starts with ‘W’ and competitors know that when it comes to town, everything changes. Bright expansive stores and a reputation that precedes it means that whenever the chain opens a new unit, consumers are going to drive miles beyond where they normally shop just so they can checkout what all the buzz is about.
No, it’s not Wal-Mart; it’s Wegmans.
The chain has continued its southward push from its Rochester, NY home territory with its newest store to open October in Hunt Valley, MD, reports the Baltimore Business Journal.
With Wegmans coming to town, existing businesses are remodeling and looking to improve product offering and service to compete.
Santoni’s Marketplace and Catering Co. is finishing up a $1.5 million expansion and remodel. Giant Foods has remodeled and expanded its fresh produce area. Super Fresh has expanded its fresh bakery and organic foods sections. Safeway has remodeled its local stores as part of its national lifestyle store initiative.
According to the publisher of Food World, Jeff Metzger, Wegmans’ new store should generate more than $1.5 million in sales on a weekly basis. As a point of comparison, Super Fresh and Giant do about $600,000 in sales.
“Wegmans”, said Mr. Metzger, “has made shopping exciting and that’s an intangible in their favor.”
To compete against Wegmans, David J. Goggin III, president of KPI Business Brokers & Consultants, said others will need to keep their service levels high.
Lou Santoni, co-owner of Santoni’s marketplace, began preparing for Wegmans’ entry into the market two years.
“We’re not putting our head in the sand,” he said.
Mr. Santoni’s company has focused on offering many of the same products sold at Wegmens in its bakery, deli, product and organic food areas. The company has also added four new chefs and a cake decorator and brought in a pro to build its catering business.
The difference between his store and Wegmans, Mr. Santoni hopes consumers will see, is simply size. He’s counting on customers realizing they can get what they need at his store without having to traverse the 140,000 square-foot Wegmans. Mr. Santoni’s store measures 24,000 square-feet.
Moderator’s Comment: What does it take to compete successfully against Wegmans when the consumer target market is the same? –
George Anderson – Moderator
Look at your establishment and then look at Wegmans. Ask yourself why one of your customers would shop at Wegmans and not with you. Make a list and address the issues on the list. Now make a list of why your customers should shop with you and not with Wegmans. Now take list number two and make a plan to communicate these points to your customers (print them on your grocery bags or hand out flyers). Action will save your business. Complaining will not, whining will not, government will not. The only people who can insure that your business will survive are you and your customers – especially your customers. If you have not cherished and honored them in the past, it’s going to be a little tougher to convince them that you really care.
Wegmans is a dominatingly effective retailer, so it’s important to understand what’s meant by competing successfully when the target market is the same.
The challenge here relates to defining “target market.” Does this definition relate to certain demographics, delivery of a specific experience, or the needs related to certain shopping occasions?
If I were a retailer who was about to begin to compete with Wegmans, I’d first try to understand what they do very well and what they do less well IN THE EYES OF THE TARGET SHOPPER, and we would define them in terms of demographics and lifestyle. This will highlight exceptional strengths, as well as areas where performance is not satisfying the needs of the target shopper.
The next step is to dig into where, why, and how the needs of target shoppers are not being satisfied and to decide if you as a retailer can serve them properly. If the answer is, “yes,” you have the basis for a strategy that has a good likelihood for success. If not, go back to the total consumer base in the market and repeat the process.
If W square footage is 6 times the size of its nearby competitor, the competitor has at least 3 choices: (1) sell the lease to someone with another, higher use; (2) transform the store to specialize in something W doesn’t provide; (3) merge with other local competitors to build huge stores than can beat W. None of these strategies is a subtle change because a new competitor SIX TIMES your square footage is not a subtle competitive challenge. It’s a major missile launch. A new bakery is not enough. When the Borders and Barnes & Noble superstores rolled out with locations 3 times to 10 times the size of legacy bookstores, most legacy bookstores died. The healthy survivors are the largest square footage locations, with the greatest assortments, such as Powell’s.
Today’s consumer marketplace for food and related products is slowly fashioning into specific entities. Dominant chains that can always offer LOW PRICE and HOUSEHOLD VARIETY such as Wal-Mart permit small opportunity for chain supermarkets to grow at this moment. (That might change in the future.)
Dynamic, broad variety stores with highly-intensive personal appeal, expected trustworthy quality, gracious ambiance and an exciting SENSE OF THEATER, such as Wegmans offers, make them master’s of that “high expectations” sector in the areas in which they operate stores.
For Whole Foods fans, there is a growing sector that appeals to the expanding health-minded audience. And Sav-A-Lot and Aldi’s are doing a good job at bottom fishing. Having said that, what’s can an existing quality-oriented retailer in Hunt Valley, MD, do with Wegmans operating on their turf?
Hunt Valley, MD, a bastion of a lot of well-heeled consumers, will soon have another desirable shopping option in Wegmans asset-appealing store. Hunt Valley shoppers are rather affluent consumers who expect a lot and are willing to shell out for it. That will present a challenge to existing well-operated stores. To compete against the Wegmans powerful new entry will require more than convenience and “me too” to GROW … but these fine existing stores can compete with highly-personalized service that supports the assortments and the expectations that a large number of folks in the Hunt Valley marketplace demand.
Luckily for most retailers, Wegmans develops new stores at a very slow pace. This company has been around for about 90 years and only has about 70 stores. Still, their site analysis crew are geniuses. I know, because I helped train the man in charge. They go for quality in new locations and not quantity.
I will disagree with those above on how to compete with Wegmans. It’s like Mini Me competing with Hulk Hogan. You don’t. I would think Wal-Mart would be a lot easier to compete with than Wegmans. At least Wal-Mart always leaves a wake of enemies and disgruntled employees. But Wegmans, they are the standard that other companies wish they could follow.
People come from miles around to shop Wegmans – so implicitly, the target markets for Wegmans versus any competitor is different and in that difference lies the competitive edge others need to seek.
If Wegmans is about experiencing the world of culinary delights with the service equal to that of mom and pop specialty stores, other chains need to move in different directions – they can’t all compete for the same shopper.
In the early years, Topps competed against Wegmans by making each store a neighborhood store. In Ithaca, that meant reaching out to the vast international, yet transient community ( grad students/visiting faculty etc. with an array of staples that these folks sought.
Yet others need to seek ways to satisfy those folks who don’t want to make the shopping trip a 2 hour process. Focusing on service for time strapped, folks who shop to feed the family but who are not necessarily predisposed to the stimulation and bountifulness of a Wegmans is another angle.
It seems that Wal-Mart is lowering the bar while Wegmans is raising it and, guess what, there are enough customers around to keep business booming for both of them. So where does that leave everyone else? With opportunity, and lots of it. Figure out who is most likely to love you and help them to do it. One thing even I have to hand Wal-Mart is their determination, which could almost seem like passion, albeit for grinding customers, employees and suppliers into the ground. You don’t have to beat either W, you don’t have to be negative. What you have to do is beat the drum and get the cheerleaders rousing the rabble. Shoppers want choice, they want quality and they want value. They want to be tempted, teased and loved. Give them what they want and they will give you what you want – a healthy bottom line.
This might be an unconventional approach, but maybe it will generate some comments. I assume that all the shoppers will want to try the new Wegmans, if for no other reason all the advertising and buzz around town will make people curious. So let’s say you’re a Wegmans competitor. The question becomes “How do I get a chance to put forward my best image?”
First, let’s assume if we didn’t have it already we put into place a frequent shopper program as soon as we heard about the Wegmans plans. Even if we had one, now might be the time to confirm all your address and other customer info is accurate. This enables you to capture real data about the Wegmans effect. Then, you might begin some continuity programs several weeks before the Wegmans opening. These programs can encourage shoppers to continue visiting your store. Also, it might be worth it to run a campaign several weeks into the Wegmans opening to offer customers a discount based on the percentage of their Wegmans purchases. The customer brings their Wegmans receipt tape and gets X% of that amount off their purchase in your store. This captures data on who has been to Wegmans, when they were there, what departments they shopped, how much they spent and brings them into your store again to take another look. It might even be worth it to give these customers a brief questionnaire or the address of a website there they can answer some questions about the Wegmans experience and get another discount. Some of these customers are going to be “too good to loose.” Use the Wegmans receipt data to analyze what departments seem to be most popular. Go after customers you want to bring back with targeted discounts that encourage them to continue visiting your store. If one Wegmans feature seems to be a favorite, consider a “me too” approach. If all the defectors are visiting the widget section of the new Wegmans, consider selling widgets yourself. You don’t have to admit that it wasn’t until Wegmans moved in that you realized widgets were so popular.
You have the advantage. People have been shopping your store for whatever reason. People don’t generally want to change stores, but they are curious. Develop a response that lets them satisfy their curiosity and “return home” to your store when the dust settles.
Wegmans, like Publix has built a business and people culture second to none.
Combine this with impeccable service, shopper courtesy and an exceptional perishable arena; especially, in carry-out foods and meals, and you have an almost perfect supermarket, if you will.
Lifestyle and other supermarket shoppers, don’t shed information about Wegmans. But other research brings light to its success. But note — Wegmans isn’t invisible to like operations that mirror the W. Sutton Gourmet, and West Point, and Henein’s give Wegmans challenges. Hmmmmmmmmmmm