DALLAS -- Supercenter giants Wal-Mart Stores and Meijer are squaring off against each other for the first time in Michigan, and the situation there is being watched closely and nervously by retailers across the country.
The battle between Bentonville, Ark.-based Wal-Mart and Grand Rapids, Mich.-based Meijer was a hot topic of discussion last week as independent retailers gathered here to track Wal-Mart's moves and discuss counterstrategies. The retailers were attending the National Grocers Association's Annual Convention, which dedicated itself this year to helping independents take a stand against Wal-Mart's advances in the retail grocery business.
"Wal-Mart stayed away from Meijer, but now it feels strong enough to go head-to-head," said David Rogers, president, DSR Marketing Systems, Deerfield, Ill. Rogers spoke at an NGA workshop entitled "The Michigan Battleground: Showdown with Supercenters."
Rogers contended that Wal-Mart and Meijer as the nation's two world-class supercenters. "So Michigan is a battle between the world's two best," he said.
"Wal-Mart is clearly going after Meijer," said Andy Woodrick, owner of four-unit Ric's Food Center, Mt. Pleasant, Mich.
Meanwhile, Meijer "is showing a passionate reaction to Wal-Mart's strategy by plotting superstore expansions in already saturated small towns," said Mark Felpausch, chairman and chief executive officer of Felpausch Food Centers, a 20-unit independent retailer in Hastings, Mich.
Part of Meijer's strategy is to pre-emptively seek out smaller markets in Michigan than Wal-Mart might typically favor and enter those regions with reduced-size formats, Woodrick said.
Meijer has operated in the state for more than 40 years and now has more than 60 supercenters. Wal-Mart's statewide supercenter count will grow to five in the next few months, but its deep pockets would enable the retail giant to quicken its rate of growth if it chose to.
All this activity in a state that lacks rapid population growth has local independents concerned about keeping pace. Felpausch conceded that the growing retail square footage represents a major challenge.
"You can't have grocers adding 100,000 square feet into a small community and not expect to lose something," he said. "Shoppers are still hanging with us, but they are splitting their shopping in some areas."
Michigan independents are taking varying approaches to the customer-retention issue, but they aren't panicking by falling into a price war.
"We decided our service levels make a big difference in customers' minds," Woodrick said. "We need to emphasize interaction with customers -- eye contact, a friendly tone by employees and nice greetings. Consumers tell us that works."
Local independents said they recognize that perishables represent a major strategic advantage for their business.
"Perishables are what make the difference," Felpausch said. "Meijer has a strong produce presentation, but once you go beyond produce we have a big opportunity. Wal-Mart Supercenters hasn't come up to Meijer in perishables, and now Wal-Mart is moving to prepackaged meat. Wal-Mart might look good on opening day, but a week later they don't have the same level of freshness."
Rogers urged independents to stay on top of their game when faced with the threat of supercenter competition. Among his recommendations:
React before a Wal-Mart Supercenter opens.
Ask customers about their perception of your operation rather than making assumptions.
Research supercenters extensively by making personal visits and talking with others, especially wholesalers.
Don't play by the supercenter's rules. Think and act differently.
Don't fight supercenters on price unless you know you can beat them by changing your format, for example, from a supermarket to a limited assortment store.
Improve your community involvement.
Focus on making your stores more convenient to shop in by, for example, improving signage in the aisles.
Don't be fussy about where your sales come from. You may lose volume to supercenters, but you can take sales from other sources, such as a florist or catering operation.
The NGA session was moderated by Frank Gambino, professor of food marketing, Western Michigan University, Kalamazoo.
Another panelist was Russ Hockin, vice president for industry relations/ECR, Kellogg USA, Battle Creek, Mich.