Wegmans Sets the Standard
By George Anderson
It’s hard, perhaps even impossible, to find anyone in the U.S. grocery business who doesn’t view Wegmans as one of the top supermarket chains in the industry today.
Robert Higgins, director of the Center of Food Marketing at St. Joseph’s University, told the Rochester Democrat and Chronicle that there is good reason for that universally held opinion.
“The way they design their stores, the caliber of people they recruit and retain, the innovation they bring to the food system is truly unique and differentiated,” he said.
The reason Wegmans has continued to earn that reputation, said company president Colleen Wegman, is it remains focused on what has made it successful and not simply opening new stores.
“We’re not afraid of growth,” she said. “The reason we have grown slowly is that we want to make sure our people are fully prepared and trained to deliver on our model of incredible service.”
Ms. Wegman expects the company to continue opening two or three new stores a year as it has done in the past.
Neil Stern, a partner at McMillan/Doolittle, said Wegmans has a “fantastic strategy” for growth that it is able to follow because it is a privately-held company. It might not be able to do so if it had to meet the expectations of shareholders and analysts.
“Their format is not only capital-intensive, it’s people-intensive,” said Mr. Stern. “Literally, they can’t train people fast enough. Even if they have access to capital, from a human resources standpoint, they can’t grow any faster.”
When Wegmans does open a store, consumers are sure to follow. Jeff Metzger, publisher of Food World, called reports that the new store in Sterling, Va. brought in $675,000 on its first day of business “accurate.”
“I was told opening week, there was about $2.8 million,” he said. “It’s like P.T. Barnum got reincarnated.”
Wegmans’ reputation goes well beyond its market area. According to the company, it received 4,655 letters and e-mails last year from consumers in 46 states who want the chain to open a store in their area.
“They make shopping a true experience rather than the way most consumers feel in feedback to us: that it’s a drudgery,” said Prof. Higgins. “If you look at marketing today, word-of-mouth is becoming almost the most powerful method of getting your message out to customers – and once you’ve been in a Wegmans store, I’ve never known anyone to walk out of one saying they didn’t like the experience.”
Moderator’s Comment: What makes Wegmans Wegmans? To borrow from the Rochester Democrat and Chronicle headline,
“What’s next for Wegmans?” –
George Anderson – Moderator
Yes, being privately held is a big advantage for Wegmans. Also, being in no hurry to build stores for the sake of building stores is another advantage. As previously said, excellent market research has been a staple at Wegmans for years. Their site selection people are taken seriously by upper management. In fact, Wegmans takes all their employees seriously, which results in excellent morale.
Great management and all are key underpinnings. But so also is the fact that they’re sincere consumer advocates. They truly want what is best for their shoppers. It’s uncompromising honesty, and it shows in everything they do. Then it feeds on itself, and snowballs.
Wegmans is a textbook example of true strategy: a system of exemplary practices that, taken together, create a unique and unassailable market position. One of those practices is maintaining private ownership, which permits the company to grow deliberately rather than pursuing expansion to meet the expectations of institutional investors. Another is its hiring and customer service standards. Another is its store environment and image.
So far, at least, Wegmans hasn’t lost the striving, small business mentality that made it a favorite institution in its home market in upstate New York. But at an estimated $4 billion in annual sales, with typical stores generating $50 million in year, this is no longer a small business. Its geographic expansion down the Eastern Seaboard generates new scale-related challenges that so far the company seems to be managing well.
As for what’s next: I would hope for a continuation of Wegmans’ deliberate approach to growth, coupled closely with its careful hiring and training practices. As the organization gets larger, it will need to distribute decision-making authority down to the local level, so that each store can optimize its own business within the larger Wegmans paradigm. Strong business intelligence systems will be essential for this.
Wegmans expansion success is aided by great market research. If you look at the stores that they have built outside of their primary market, they have all fit the demographic model that has been successful in their primary markets. They also take the time to hire and train the best people they can find in the markets and keep them with good working conditions and more than competitive compensation- a key component of their consistent strategy.
Would Wegmans be as successful if it were a public company? Why speculate, if you are lucky enough to live near one (as we were for 4 years), enjoy!
To attribute success at Wegmans to private ownership and not having to please the investment community misses the point and lets publicly owned supermarkets experiencing less success off the hook.
Wegmans clearly has a merchant’s approach to the marketplace, focusing on what consumers want (quality, variety, convenience, authenticity, excitement, service, and price.). In addition decisions are made based on the needs and desires of Wegmans’ profitable customers, not by simply imitating competitors. Lessons learned over the years are reflected in newly opened stores and where possible also implemented in existing stores.
Consumer communications build a long term relationship and are not based on simply claiming to have the best specials this week. While competitors’ ads scream “low price” Wegmans evokes continuing satisfaction.
Wegmans – great merchants with a long term view.
Great executives hire great management people. The fact that Wegmans is privately owned is irrelevant. Anyone can name other privately owned grocers whose results are lousy. Great leadership is rare, but when it shows itself, the results are not easily missed.
Neil Stern’s observation about privately held companies having an advantage in the marketplace cannot be understated. It’s not that publicly held companies have no regard for customer service or investment in stores, fixtures, etc. Rather, it is the priority in which these initiatives are placed that tell the story. Wegmans undoubtedly has a very astute CFO and financial team in place, but I would guess they understand that the return on capital and labor isn’t always directly measurable, but in many cases an intangible that builds customer loyalty and sales.
When share holder equity becomes a retailer’s focus, it often overpowers all else. Labor expense, being the largest single controllable number retailers can affect in the short run, often is controlled by cutting training, hiring less experienced part-timers and largely fielding a group of employees that are looking over their shoulder, instead of at the customer.
Wegmans obviously understands that labor is a tool for marketplace differentiation, not a means to control EBITDA performance. While publicly traded companies may understand this and talk about customer service, the proof of their conviction can be quickly be assessed by the environment within their stores. Short cue lines, a systemic customer service orientation and knowledgeable and experienced employees demonstrate this commitment. Not slogans or programs.
I have worked for a retailer that was heavily controlled by share holder equity and other financial performance metrics, and another who built their business, like Wegmans, on the customer needs. One priority is not mutually exclusive of the other…it’s about which one leads and which one follows.
Wegmans understands the key fundamentals to retail success; people and service. They keep this as their mantra for each store they open, and for every day that one of their existing stores is open. Their staff are genuine and treat their customers in the same way any customer would expect to be treated by a top-rate retailer; with patience, understanding and genuine desire to help. Add to this a true focus on customer service (i.e. meeting the customer’s needs) and you have focused on the 2 keys to success in retail. Add to this an offering of high-quality merchandise, which covers a diverse market, in an exciting atmosphere, and you have a formula which Wegmans can duplicate in any metropolitan area. Success is theirs without having to sacrifice corporate margins or consumer choice!
Great companies put their money and efforts where their mouths are. Wegmans believes in a great customer experience. Wegmans also believes in training their employees. Wegmans executes on their promises. Wegmans delivers a great customer experience. Wegmans does a great job of training their employees. Is it any wonder why when they open a new store their customers follow?
I’m with Mark and Neil on the issue of private versus publicly held companies. Of course nothing is absolute, but in general, private companies have the potential to take more risks, and therefore have the potential for greater reward.
There is something very fundamental and wholesome about the Wegmans approach that makes it appealing. On the surface, you have to wonder how they do it. How do they make money while providing the atmosphere and services that everyone else has said can no longer be afforded? The articles mention it, but they don’t give enough emphasis to the investment in people and supply chain processes that Wegmans makes. Wegmans is probably the best “executer” out there. They have always been at the forefront of technologies and business process standards to improve supply chain efficiencies. By reducing the costs at the backend, they can afford the additional marketing expenses at the front end that bring in the shoppers. I don’t know where they want to go, but their attention to detail and their focus on “blocking and tackling” provide unlimited possibilities.
I don’t want to get into privately vs. publicly owned operations; though there may be some advantage. But it is still a very competitive business and each company needs to distinguish itself from others…just like department stores, and other retailers.
So what are we saying? Wegmans, and others like Publix and Ukrop’s, have found a distinguishing difference in the marketplace, not to forget executing to strategic and annual plans that separate such supermarkets.
How to balance: shopper experience (decor; find products not in the marketplace; added thankyous to consumers) vs. pricing tactics; hiring quality personnel and committing to continuous education programs vs. minimizing labor cost; bringing service to shoppers vs. lowering prices more; willing to test new methods, formats, and ways vs. can’t try… costs too much; researching and marketing where appropriate, vs. being the lowest price leader; and finally, very distinguishable perishable departments vs. have to meet prices of my competitor down the street… all speak to Wegmans and more.
From the top, president down to the bagger, they have the same commitment and practice.
Stay ahead of the consumer’s needs; and serve the consumer with only the best. Makes sense. Hmmmmmm
Now that the insightful remarks by Messrs. Stern, Metzer and Professor Higgins re: Wegmans have been recorded, I shall draw support from Lord Tennyson, no less, to characterize Wegmans: “Faultily faultless, icily regular, splendidly null, dead perfection, no more.”
You’re right on, Alfie, that’s what makes Wegmans exciting and worth visiting. Wegmans creates a sense of theater; makes a visit to their stores enjoyable and satisfying; they stay at the leading edge of food retailing and serve people well.