The Wonder Of Wegmans

ByPYMNTS

Posted on January 9, 2017

 

 

 

Supermarkets aren’t generally the sorts of things that generate massive, dedicated fan bases. Certainly most shopper have a preferred grocery store (or at least one they tend to frequent more often than others) — but in general, it is not something most people talk all that often about since on the whole shopping for groceries doesn’t register all that highly on the excitement meter.

Humans have to eat, which means they have to buy food at least sometimes, but generally speaking, wandering the market to fulfill that need is more felt as a chore than as a good time had by all. Much of the appeal of services like Prime Fresh and Instacart is in fact built into that basic dislike of going to the grocery store.

Wegmans — a 92-store chain based out of Rochester, N.Y., however — is a very different sort of grocery animal. Wegmans doesn’t just have fans — Wegmans has devotees. When its first Massachusetts store opened last year, 2,000 people lined up to get inside. Consumers have been known to write open love letters to Wegmans imploring them to open up operations in their state or town. The Wegmans Twitter group — #Wegmania — is quite possibly the most upbeat place on the internet.

So how did a little chain, with less than 100 stores spread across six Eastern states, become something of a grocery wunderkind in a suddenly very competitive environment? What makes Wegmans so special?

That answer, as it turns out, can be broken into two bites: Wegmans is good at doing all the stuff the world can see just a little bit better and great about doing all the stuff no one sees a lot better.

The Customer Experience 

There is something a little bit off about call Wegmans’ “small” since each individual store is massive. That is terms of both raw square footage — a small store is 74,000 square feet — and in terms of selection, as each store carries 50,000 to 70,000 items.

“Inside each Wegmans is the equivalent of 8 to 10 other supermarkets,” noted Burt Flickinger, who is the managing director of consumer industry consulting firm Strategic Resource Group Flickinger. “The produce department by itself in Wegmans stores is twice as big as the total supermarket store volume of its average competitors in the U.S.”

As for what it does with all that extra space, the typical Wegmans is designed to be a bit like a supermarket and (according to its company spokesman) a bit like a European food hall where customers can watch their food being freshly prepared in the market. On offer in your average Wegmans: a cheese shop, a pasta station, a sushi bar, a pizza shop, a sub shop, organic salad bar, and, in some cases, a sit-down restaurant.

“Wegmans was prescient,” on grocery analyst noted. “They were aware of what millennials wanted before the millennials even got there and that ‘shopping’ didn’t mean filling your cart with canned peas; it meant hanging out, learning about food and eating it.”

And of course what Wegmans stocks and how it prices are a big factor. Wegmans stocks organic and local products heavily, some produced from its own organic farming complex, as well as stored-owned brands (à la Trader Joe’s), and is actually the nation’s largest seller of gluten-free goods. But unlike other grocers known for their high-end pricing — Whole Foods, for example — Wegmans is known for having lower-than-average pricing than their competitors — 10 to 17 percent lower, depending on whose figures one uses.

So how is Wegmans going big — and spending less? That leads to the other thing Wegmans is good at.

The Invisible Effort 

Unlike many of its competitors, Wegmans has a mostly vertically-integrated supply chain that allows it to control the distribution process, which is a lot of how it keeps it costs so very low.

The integration includes warehouses — which it owns as opposed to leasing — and full control of its distribution. It even grows its own food on the aforementioned organic farm. Moreover, Wegmans is more a turtle than a hare when it comes to its expansion plans — slow and steady wins the race — which means it restricts its footprint to six states and rolls out new locations extremely slowly (by normal retail standards).

That is because Wegmans’ staff is more extensively trained that anyone else in grocery, which the chain says is key to its consumer relationships since its lower turnover creates a staff that is on the whole more expert, attentive and popular with its customer base.

Wegmans has also invested a good deal in digital improvements in its back end. A 2006 upgrade put data synchronization with local and national suppliers in place — which, according to an internal report, improved supply chain efficiency to the tune of $1 million in labor and inventory costs.

That big savings reportedly pushed a 7 percent increase in productivity from store delivery process improvements. Suppliers also saw direct improvements, including a 75 percent reduction in speed to shelf for new items and a decrease in inspection time by five minutes per order. Suppliers like it — they move more goods more efficiently — and Wegmans loves it because their short-cycle delivery times mean they have less food waste than almost anyone else in the industry. Wegmans overturns fresh inventory 100 times a year, compared to 20 for competitors.

Wegmans, of course, is a small fish in a pond that is becoming increasingly crowded with players of all stripes. Even Amazon is building its own grocery stores. But Wegmans has something that almost no one else has — which is an actual, honest-to-God fanbase who would rather shop there than anywhere else.

Maybe slow and steady can actually win this race.