WHITE SULPHUR SPRINGS, W. Va. -- Regional supermarket chains are learning that they can't connect with consumers if they aren't also linking with employees, manufacturers and communities.
That was the consensus of a panel of three top regional operators last week at the Grocery Manufacturers of America's Executive Conference here. The panelists were: Jim Donald, chairman, president and chief executive officer of Pathmark Stores, Carteret, N.J.; Ron Pearson, chairman, president and CEO of Hy-Vee Food Stores, Des Moines, Iowa; and Steve Smith, president and CEO of K-VA-T Food Stores, Abingdon, Va. The panel was moderated by Mark Baum, executive vice president, GMA.
The chain executives said their efforts to understand and service their constituencies are more intense than ever as they face heightened competition from supercenters and other alternative store formats.
CONNECTING WITH SUPPLIERS
"To connect with consumers, we need to create our own opportunities and be different as we compete with Wal-Mart," Donald said.
Donald described a successful six-month campaign in which he met individually with major suppliers to discuss unique opportunities with Pathmark. One of these is ethnic marketing. A total of 87% of consumers moving to the New York metro area are Hispanic, he said. "What an opportunity for manufacturers and us to grow the customer base," he said. "We've had about 40 to 50 stores waiting for that opportunity."
Donald said many manufacturers embraced ethnic programs with Pathmark as a result of these discussions.
Pearson said Hy-Vee is a believer in close relationships with suppliers. "We have top-to-top meetings to create special promotions, seasonal items and truckload sales," he said. "We also explore with suppliers what more we can do to take costs out of the system."
GMA's Baum underscored the viability of the supplier-regional chain relationship. "Many believe manufacturers don't need supermarket operators as much as they used to," he said. "And to the extent they need supermarkets, the top five or 10 chains are the majority of the supplier volume. But which manufacturers would want to give up 20% to 40% of their business? The message is that even in an era of consolidation, regional chains are vital to the success of food, beverage and CPG manufacturers."
RELATING TO STORE ASSOCIATES
K-VA-T's Smith stressed that the chain's reputation rests of the shoulders of its store associates. "We've convinced our associates that we will run the best store in town," he said. "They understand that our goal is to be the food experts. We don't sell tires or parakeets. So we expect our folks to be the food experts."
Hy-Vee has a unique connection to its associates because it is an employee-owned company. In fact, Pearson said, the chain is one of the largest in the country in that category. That strategy has been a big help to the chain's ability to execute, he said, noting that employee ownership and the personal wealth opportunities that affords has helped support low turnover and high morale.
Donald described visits to stores to talk with Pathmark associates, including one at 1:30 in the morning. Why that early? "I had to connect with associates before consumers," he said.
He also involves associates in programs aimed at increasing sales. In one of these, dubbed "Fruit of the Month," produce managers are asked to push a chosen item across the store base. One month clementines were chosen.
"We normally sell about six trailerloads of clementines per week in December," Donald said. "That month we sold 80 in one week. The Fruit of the Month program continues to grow."
LINKING WITH COMMUNITIES
Pathmark partnered with some vendors in embracing a program that involves "adopting a school," Donald said. Pathmark became involved with one school that was 49% Hispanic and 49% African-American.
In addition to performing a service, Pathmark's partnership with the community actually had bottom-line benefits. "Kids pushed their parents to shop in our stores, and in over six to seven months volume turned for us in that area," he said.
Pearson said that at Hy-Vee "almost every store adopts one, two or three schools. We have a strong feeling that if the community isn't successful, we won't be."
Hy-Vee also connects with communities through local marketing efforts in which stores have a lot of autonomy. "Each store decides what products they'll carry, where to place them, and how to price and promote," Pearson said. "So each store adapts to the community. That's been our strength and the reason we are growing at a faster rate than the rest of the industry."
Smith said community-based marketing is a major aspect of K-VA-T's program. "About one-third of 1% of our sales are given back to the community in programs such as Apples for Students and NASCAR," he said.
CONNECTING WITH CONSUMERS
Donald said Pathmark believes that connecting with consumers involves four things: "Go where you've never been before; encourage risk-taking amongst the troops; leverage the associate selling force to push one more item better; and execute, execute, execute."
Pearson said addressing consumer needs through in-store programs is very important. "We have a strong perishables focus," he said. "We have lots of services, such as banks and Internet shopping. We focus on health with 170 in-store pharmacies. We try to learn the names of our consumers."
Smith said K-VA-T is leveraging technology through a major card marketing program in an effort to link with consumers. "We have an extensive data warehouse system," he said. "We know our customers. That's a huge advantage over the competition. We are able to do direct mail and can refer to customers in the store by name."
