February 24, 2004

Mega Grocery

Retail Innovator Meijer Now Adapting to Compete with Wal-Mart, Other Stores

By Greta Guest, Detroit Free Press

Feb. 24--GRAND RAPIDS, Mich. -- Meijer celebrates its 70th anniversary this summer by reinventing the supercenter concept it created in 1962 and then watched as Wal-Mart cloned the concept to become the largest company on the planet.

Meijer Inc., the nation's 9th largest private company, with an estimated $11.1 billion in annual revenues, has aggressive remodeling projects planned for the chain's 158 stores along with several new stores in the next few years.

It is testing new grocery and general merchandise strategies by New York designer and architect David Rockwell at two stores near Meijer's Grand Rapids headquarters. Rockwell is best known for designing the Kodak Theater in Los Angeles and the Planet Hollywood restaurants.

Meijer plans to compete with Wal-Mart on price, in some cases, and with offerings not typically found at a discount supercenter. Besides Wal-Mart, the company sees competitors in Kroger, Target, Kohl's, Whole Foods Market, Costco, Walgreen and others.

The test stores are offering items like sushi, $120 bottles of wine, organic food, gourmet food to go and hand-painted chocolates. They also are testing a drive-through pharmacy and have placed the pharmacy, along with health and beauty products, at the entrance.

Hank Meijer, CEO and cochairman, says the competition has made the company his grandfather founded in 1934 more frugal. Inside costs are being pared, from selling one of two corporate jets to laying off 1,900 salaried workers last month. And he's trimming the cost to build a new store by a third.

"It's a new climate in which there is an imperative for us to be low-cost in our operation so we can be low cost for our guests," Meijer said during a recent tour of the retailer's test stores.

"In a sense, part of what makes what we do exciting is that we are in competition with as formidable a competitor as anyone has ever conceived of. That has a sense of adventure about it that I guess also implies a lot of risk," Meijer said.

Meijer now leads its competitors in market share in eight metropolitan areas including Detroit, Ann Arbor and Columbus, Ohio, according to Mass Market Retailers, a New York-based industry publication.

In comparison, Wal-Mart, with about $245 billion in annual sales, is the dominant general merchandise retailer in 73 of the top 100 markets, the publication said. And Wal-Mart plans a major expansion in the next two years, including seven new Michigan stores this year.

Meijer plans to open five stores this year and then start opening supercenters at a rate of eight per year.

One Meijer pilot store is testing the grocery operation and the other is testing out the new general merchandise design. Company spokesman John Zimmerman said the supercenter plans to remodel up to 45 stores this year with the new concept, including stores in Commerce and Chesterfield townships.

The new grocery and general merchandise concepts will be combined in the new Southfield store in the Tel-Twelve shopping center in 2005. Meijer plans to demolish the former Kmart at that location and build a 194,000-square-foot supercenter.

Zimmerman said that Meijer competes head-on with 50 supercenters, most of them Wal-Marts. By 2007, he projects the company will be competing with 350.

Fred Marx, a Farmington Hills retail analyst and public relations consultant, said Meijer has survived because it keeps evolving.

"I think Mejier has kind of met the barbarians at the gate," Marx said. "Meijer is to be commended for getting out in front of this. I think they are far better prepared to withstand the assault than other players in the country who have had Wal-Mart coming in."

Key changes for shoppers in the grocery area include:

An expanded deli with gourmet food to go, including prime rib and grilled salmon.

An expanded bakery with specialty cakes and hand-painted chocolates.

An expanded cheese section with 200 varieties.

An expanded wine area with bottles priced at $6.99 to $120. The area has hardwood floors, and wine is displayed in long polished wooden bins.

In the second test store, highlights of changes in general merchandise are:

New signs and lower shelving for a more open floor plan.

More private-label brands including At Home with Meijer by Rockwell, which includes bedding, doormats and other items.

Kitchen supplies and baby clothes displayed directly across from the grocery section.

Wood and carpeted floors in the clothing section. New brand names include Sag Harbor and Gloria Vanderbilt.

A new electronics section called E4. The area has televisions, computers, digital cameras, video games and small electronics.

Bob Phibbs, a Long Beach, Calif.-based retail consultant and author, said that while Meijer has a history of innovation, it might overreach its core customer with the new concept.

"People shop at a wine merchant because they know everything about wine and they can help you out with it. I doubt a $7-a-hour-clerk can do that," Phibbs said. "It's good to have the upscale merchandise, but you have to have the upscale help to go with it."

Tony Camilletti, senior vice president of JGA, a design firm in Southfield, said the firm consulted with Meijer two years ago on its fashion presentation.

With recent layoffs, he wonders if Meijer is moving toward a more self-service approach while offering more upscale goods.

"A very large superstore concept to approach a luxury market I think is kind of like an oxymoron," Camilletti said.

Still, what has differentiated Meijer from the beginning, Camilletti said, is that you could buy a T-shirt and a gallon of milk on the same trip.

That appeals to Karen Hembrough of Ada. Steering around a cart loaded down with food, she said she spends at least $200 a trip, "and that's when I don't wander into the other section.

"I got the cutest suede coat here that I love to brag about where I got it for $50. You can get your lettuce and suede coat on the same trip," she said.

Hank Meijer said the company has a better sense of itself now than it did two years ago. It plans to expand by 6 percent a year.

"We all want to be part of a team that's not merely going to cling to survival," Meijer said.


--Founded: 1934 in Greenville by Hendrik Meijer

--CEO: Hank Meijer

--Headquarters: Grand Rapids

--Annual revenue: $11.1 billion (estimated)

--Employees: 75,000

--Stores: 158 in Michigan, Illinois, Ohio, Indiana and Kentucky


1938: First offers shopping carts.

1954: Starts using automated conveyor belts at checkout lanes.

1962: Opens first Thrifty Acres, a food and general merchandise store, in Grand Rapids.

1977: Lane scanners are introduced in a pilot program and expand throughout the chain.

1988: Starts 24-hour service at all stores.

1995: First in the market to open self-checkout terminals.

2004: Introduces new six-bag carousel bagging system to make checkout faster.


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Posted by Craig at February 24, 2004 03:14 PM