At 85, Dominick's Seeks to Remain a Chicago Tradition

ELLIOT ZWIEBACH

CHICAGO — As Dominick's celebrates its 85-year anniversary, the words of its founder continue to ring true, Don Keprta, president of the 78-store chain here, told SN.

Don Keprta

“Dominick DiMatteo said it 85 years ago — ‘The stores belong to the customers’ — and we still believe that today as we continue to listen to our customers because they tell us with their dollars if what we provide is what they want,” Keprta said.

Though Dominick's has been a division of Pleasanton, Calif.-based Safeway since 1998, it still keeps close tabs on the local pulse of its customers to make sure it delivers stores suited to their specific needs, he explained.

“We are constantly trying to understand our customers by seeking out information to get the mix right so we can offer what they want to buy,” Keprta said. “Right now, they're telling us they want more organics, more healthy foods and more ethnic products, so we're expanding those sections.”

Keprta — who joined Safeway in 2005 after an extensive industry career that included Lucky Stores, Albertsons and Andronico's — moved from Safeway's corporate operations to oversee Dominick's later that same year. At the time the chain was struggling with two primary challenges: the loss of its distinctive identity after Safeway sought to replace local brands with more of its own corporate brands, and long-standing issues related to its relationship with the United Food and Commercial Workers Union.

“Safeway sent me here to stabilize and grow the Dominick's division, and that's what we've done,” Keprta said.

Dominick's operates 78 stores, including one that opened at the end of September, with another store scheduled to open at the end of this month. Of the total, 54 have been remodeled with Safeway's fresh-focused lifestyle format.

All Dominick's stores are in northeast Illinois within a 60-mile radius of Chicago. Stores range from 30,000 to 75,000 square feet, though the majority are in the 60,000-square-foot range.

Though Safeway does not break out volumes at its divisions, industry sources told SN Dominick's annual sales run about $2 billion, with a market share estimated at 12% — significantly below Jewel's market-leading 35%.

CHANGES IN OWNERSHIP

Dominick's has not been owned by the founding DiMatteo family for the past 16 years. It was acquired initially by Yucaipa Cos., a Los Angeles-based investment firm, in 1995 and sold to Safeway three years later.

Once Safeway acquired the chain, it dropped the former corporate name — Dominick's Finer Foods — in favor of, simply, Dominick's. However, one industry observer told SN that, as the chain has sold off some of the stores it's closed to a local independent, it also sold rights to the “Finer Foods” name, clearing the way for a locally based seven-store retailer to operate as Tony's Finer Foods.

Despite the ownership changes and the distance from the stores' years as an independent operator, Keprta said Dominick's is still held in high regard by local consumers.

“One of the first things I learned when I came here was that people shop with us because we are part of a Chicago tradition,” Keprta said. “We have served the city for generations, and we have daughters, mothers and grandmothers from the same family all shopping with us over the years — plus many employees who have been with us for up to 30 years, including some relatives of the DiMatteo family, so customers know our people.

“Dominick DiMatteo said the stores belong to the people, and we've kept that tradition going by making sure our stores are about tradition and family. As a result, when customers want quality, they come back to their roots by shopping at Dominick's.”

One longtime local observer also told SN Chicagoans tend to have very deep roots. “This city is very provincial about its own, especially about hometown teams and businesses that originated in Chicago.

“However, when those businesses change owners, they lose some of the Chicago tradition and heritage the locals like, and that hurt Dominick's when it was sold to Safeway — especially because Safeway replaced a lot of well-known local brands with a lot of private-label brands from California that no one here recognized.

“Since Safeway has brought back some of the products local shoppers prefer, the situation has improved a little bit. But Dominick's is no longer regarded as the local company it was when the DiMatteo family ran it.”

Another Chicago-based observer said Dominick's has been in more of a defensive posture the last few years — trying to protect profits at the expense of market share, which he said is in line with Safeway's approach.

“So I don't see Dominick's gaining share, though it is growing sales at some individual stores,” he pointed out.

When SN asked Keprta about the chain's loss of market share, he said Chicago consumers tend to shop at several different supermarkets on a regular basis. “But when the holidays come, Dominick's is part of the habit they grew up with, and they know they can find the products they want and the quality they want at our stores, so they shift more of their business back to Dominick's at those times of the year.”

Pricing Initiatives

Keprta said he also believes consumers who may have left Dominick's have been coming back the past year because of the switch among all Safeway divisions to an everyday-low-pricing program on the items people buy most. “It's no secret Dominick's has had a high-priced image historically,” he pointed out. “That wasn't always true, but perception is reality.

“We now feature the items they want at a price they want whenever they want it rather than having to wait till those items went on sale in an ad,” he explained, “and we're seeing customers that may have shopped with us less often or who left completely coming back and telling us what they're seeing is something they didn't expect to see, and that's been quite a revelation that has resulted in a lot of positive word-of-mouth.”

According to one Chicago-based observer, a big part of what people remember about the original Dominick's was its strong price reputation and aggressive advertising programs. Regarding the chain's new lower-pricing program, the observer told SN, “I'm not sure it's been very effective in increasing store traffic, but it does put a better face on the chain's pricing position, and those efforts may ultimately pay off.

“Right now the sales improvements seem to be coming from greater spending by existing customers — possibly due to more targeted promotions by Dominick's among its existing customer base — more so than attracting new customers to the stores.”

The new pricing program, called “Promise” internally within Safeway, has been in place at Dominick's since August 2009. Asked how the chain judges consumer response to the program, Keprta said, “We get a lot of positive comments from shoppers at the stores and from focus groups, and we're seeing increases in the average spend.”

Asked about the influx of new competitors in the Chicago market — Wal-Mart Stores, Meijer, Whole Foods Market, Trader Joe's, Aldi and Target, among others — Keprta said, “Chicago is a market with very savvy shoppers who tend to shop at several different places.

“There have been customers who have remained loyal Dominick's shoppers, and there have been some who drifted away in search of lower prices and who have now drifted back because of the quality we offer that they couldn't get somewhere else.

“I read all the customer comments that come in to our 800 number, and what they tell us they like about Dominick's compared with the value offers of other competitors is the quality of the product, the value for the dollar, the service we provide and the selection we offer.

“Consumers want selection. There are operators who are lower-priced than we are, but consumers who shop there have to give up some things to get those prices.

“We've had excellent reviews on our new pricing, which has been in place for more than a year, and people locally now realize our commitment to lower prices is long-term — at the same time other operators have reduced SKUs and made a commitment to lower prices that didn't last for very long.”

Though Keprta was not specific, he may have been referring to cross-town rival Jewel, a division of Minneapolis-based Supervalu, which launched a “Big Relief” program in mid-2009 featuring lower prices — an effort that lasted only a few months.

Wal-Mart is on the verge of opening more stores in urban areas of Chicago, but Keprta said new competition is nothing new for Dominick's. “Over 85 years we've seen them come and go,” he said.

“We believe we are well positioned for whatever comes our way because we offer the whole package that people here have been loyal to for 85 years, and we believe we have what it takes to operate for the next 85 years.”

Anniversary Sweepstakes

Dominick's kicked off its year-long anniversary celebration two weeks ago by introducing a new logo, which features the words “85 years” in green and red below the traditional red Dominick's signature.

The chain will launch an anniversary-related customer sweepstakes next month — its first in several years, Keprta said.

“Sweepstakes are generally well received in the Midwest because people like to be part of something and have the opportunity to win prizes,” he explained.

The chain also plans to give out employee service awards and feature those winners in its advertising “as part of how we intend to celebrate our heritage and talk about our service to the community over the past 85 years,” he pointed out.

Dominick's community service involves raising funds for the Lynn Sage Cancer Center at Northwestern Memorial Hospital, the Urological Research Center in Chicago and Schwab Rehabilitation, a camp for disabled children, he pointed out.

Dominick's two newest stores, both replacement units, are urban locations — a 48,000-square-foot store on the city's north side, in the Lincoln Square neighborhood, that opened Sept. 29; and a 55,000-square-foot store three miles east in the Uptown-Edgewater area of Chicago, near Loyola University, that is scheduled to open late this month. They are the only new stores Dominick's will open this year.

Keprta said the potential sites the chain is working on for 2011 are all urban locations.

The Lincoln Square and Uptown stores feature expanded space for prepared foods and frozen foods; full-service pharmacies and banks; Starbucks locations, plus large seating areas; and rooftop parking.

“And they are the greenest stores we operate,” Keprta said, including more efficient lighting and refrigeration inside and “green” walls outside — a series of trellises with a variety of flowers at the Lincoln Square store and a rooftop garden at the Uptown store “to add to the beauty of the urban environments.”

Bioswales — landscaping elements designed to remove silt and pollution from surface runoff water — have been installed to collect runoff water from the roof and filter it before it reenters the ground. Runoffs from indoor freezers and produce units will irrigate the landscaping, Keprta explained.

In addition, each store will use at least 20% less energy, for an average savings of $80,000 a year, with a more efficient refrigeration system; an intelligent system that moves hot and cold air around to heat or cool the store, as needed; and the use of LED lighting on exterior signage; plus preferred parking spaces for low emission and fuel-efficient vehicles.

Dominick's is a charter member of the Chicago Climate Exchange, North America's only legally binding greenhouse gas allowance trading system, and a member through Safeway of the California Climate Registry, which commits the company to reduce its carbon footprint by 6% from year 2000 levels.