Supervalu's Hyper-Local Initiative Enlists Store Managers

JON SPRINGER

NEW YORK — Supervalu's attempt to “hyper-localize” its stores is changing the role — and the potential compensation — of its store managers.

Store managers who succeed in meeting sales and earnings goals under the retailer's “hyper-local” strategy launched earlier this year can more than double their previous bonuses, Sherry Smith, Supervalu's chief financial officer, said in remarks at the Goldman Sachs Global Retailing Conference here last week. The strategy involves turning control of 50% of the endcaps at more than 1,100 Supervalu-owned stores to local store managers, who can use their own customer and market expertise — in combination with data supplied by the retailer — to more effectively merchandise their stores.

The program runs counter to a trend among some retailers in recent years to centralize merchandising and recast the store manager as a local executor of a blueprint from the home office. Supervalu's new program doesn't abandon central control, but instead combines centralized data and selection to the quantities and displays deemed appropriate by local store directors.

“A lot of it comes down to giving more autonomy to the store director to meet the needs of their individual neighborhood,” Michael Siemienas, a spokesman for the Minneapolis-based retailer, told SN in an interview last week. “It doesn't mean that they are completely changing everything they have done, but based on the demographics of their neighborhood and what they know about what people in their community like to purchase, they can market on their endcaps. They can also make sure that of the products we offer, they are ordering the items that best meet their community's needs.”

Supervalu introduced the program this spring at selected stores, allowing managers to merchandise 25% of the endcaps at their stores, and expanded the program to 50% in July. Supervalu previously controlled all of its endcaps centrally. Officials said the reception among store managers — introduced to the program by Craig Herkert, Supervalu's chief executive officer, at an event earlier this year — has been strong.

“From what we have seen to date, the store directors are very excited about this program. They're reinvigorated, not just because there are new responsibilities, but the fact that they can run their stores to meet the needs of their community,” Siemienas said.

The bonus program has been enhanced to reward store managers who exceed sales and earnings targets for their stores, Smith said. This should help managers consider not only what will drive sales, but overall store performance in selecting items to merchandise.

“We've always had [incentives] driven around the metrics of the store performance in terms of sales and earnings,” Smith said, “but now if they exceed those earnings at a certain level, they have the ability to more than double the formal incentive they had in the past. So as they think about these different endcaps from what they're putting on display, it's not all just about what might drive the sales, but it is also what's going to help drive more profitable sales throughout the store.”

Supervalu is supporting the effort through a “dashboard” tool that provides store managers with demographic information about their neighborhood including income, ethnic makeup and an estimate of the store's market share.

“Supervalu is recognizing that a store manager is the leader of one of the largest businesses in his or her community, and is a very educated, talented team leader who knows the consumer and competition best,” Burt P. Flickinger III, managing director of Strategic Resource Group, New York, told SN last week. “They are the kind of people who can look at anything from the local bodega in the trading area to the conventional supermarkets and supercenters to determine the best assortment mix.

“With the industry going to central buying and central decision making, it's simpler to control things from corporate, but I think [Supervalu] correctly realizes that food retailing has always been a neighborhood business.”

Other observers, however, noted that Supervalu was likely to have lost talented store managers amid past struggles.

Company officials have been outspoken about the early successes. Herkert recently cited a store manager at its Shoppers Food & Pharmacy division who was able to expand ethnic selections to better serve a local Indian population, and an Oregon Albertsons manager who used his store to host an event showcasing local specialty food purveyors.

“We're seeing some great ideas coming out of the stores, some really creative ideas,” Siemienas said.