MARKET EXPERTISE KEY TO GOING UPSCALE

ELLIOT ZWIEBACH

INDIAN WELLS, Calif. - Wal-Mart Stores' move toward offering more high-end products could lead some conventional supermarkets to consider adding more upscale elements to their own stores, Dan Portnoy, retired president and chief executive officer of Kings Super Markets, Parsippany, N.J., said here during the National Grocers Associations's annual Executive Management Conference.

Portnoy said market dynamics in the U.S. have tended to discourage retailers from going more high-end. "In the United Kingdom everyone is upscale," he noted, "and there are several upscale operators in Canada in terms of product offerings. But in the U.S., pressures on the price side have kept some retailers from going upscale on a mass scale.

"But with Wal-Mart moving toward more market segmentation, including trying to appeal to more upscale shoppers at some locations, other retailers will probably follow suit."

Portnoy, who left Kings last summer after nearly eight years, offered suggestions on what operators need to do to succeed in upscale merchandising, based on some of the principles Kings followed in reinventing itself four years ago.

"You need to understand your market and where you fit in, and you need to know your core strengths," he said. "You also have to pick the areas where you want to differentiate yourself because you can't be all things to all people. And you have to get your associates involved."

In an effort to re-emphasize its status as a premium retailer, Kings talked with associates to determine how the 26-store chain could improve its offerings, Portnoy said. It also got management together "on one page and restored accountability, which was the real secret behind our recovery gains," he pointed out.

The chain also conducted consumer research, Portnoy said, which indicated shoppers wanted to be greeted and thanked; to find better quality produce, healthier choices in the deli, and more natural and organic offerings; and to see less talking behind the service counters.

After implementing some of those changes and others, Kings ran a series of ads under the heading, "You Spoke, and we're getting back in touch with you," that indicated where improvements had been made, Portnoy said.

To strengthen its competitive position, Kings reviewed each department and made recommendations for short-term and long-term improvements, based in part on best practices it observed by visiting stores around the country, and it developed new marketing programs for its natural and organic private-label lines, he said.

Asked about the long-term future of Kings, Portnoy said, "The onslaught of competition never stops, and there's likely to be more niche players coming into the market along with more consolidation. But Kings must stick with what it does best and not get lost trying to do too many things."

Sharing the podium with Portnoy was Paul Adams, a consultant based in Olathe, Kan., who said operating upscale stores requires a sense of passion from a company's top management. "If the leader doesn't have a clear vision, it's not going to happen," he said. "Leaders must teach the culture, practice it, evaluate it and correct any deviations from it immediately."

To run a successful operation of any sort, Adams added, top managers must be willing to make an investment in their employees, including providing training; clearly communicate the company's values to employees; and assign accountability to team members.

Asked about Whole Foods Market's practice of allowing existing employees to evaluate new hires, Adams said, "I love it. The person who is responsible for an individual to succeed makes sure he does, and if that person doesn't fit into the culture, it will come out within a 30-day evaluation period."