MEIJER LEARNS FROM RIVALS, TRIMS STORE, HEADQUARTERS STAFF

MARK HAMSTRA

GRAND RAPIDS, Mich. -- The teacher has become the student.

Meijer here, which pioneered the supercenter concept when it opened its Thrifty Acres discount store with groceries here in 1962, is eliminating about 1,900 employees from its payroll in order to bring its operations more in line with competitors that have emulated its supercenter format.

John Zimmerman, a spokesman for Meijer, said the company had been studying the operations of rival supercenters -- like those operated by Wal-Mart, Kmart and Target -- to better compete.

"What we've been doing since May is looking at how we operate our stores, how we operate our offices, how we work with our vendors, and we're looking for efficiencies," he told SN last week. "We're looking to simplify our processes.

"We've got some pretty tough competitors coming into our format and coming into our area," he continued. "We're competing against 50 supercenters right now, and we think that by 2007, we'll be competing against 350 supercenters."

The company will now operate with 30 department heads in each store, vs. 42, and will eliminate additional personnel from its headquarters. Those cuts follow the elimination of 350 positions in December and another 400 in 2001. Meijer employs about 75,000 people. The personnel being eliminated are non-union.

Zimmerman declined to specify which store-level department managers would be eliminated, or how the organization would be restructured.

"Some department heads will be used more in a leadership role instead of assisting in stocking shelves," he said.

Gary Ruffing, lead retail consultant at BBK Ltd., Southfield, Mich., said he thinks Meijer has made some significant investments in technology for the supply chain and for store operations during the past few years that have allowed it to reduce its staff.

"The requirements at the store level are now somewhat different," he said.

Zimmerman of Meijer declined to comment about how the chain was using technology to reduce labor, although he said the chain this month was rolling out a paperless payroll system using either debit cards or direct deposit.

Industry observers point out that Meijer, a privately owned company with 158 stores in five states, also is coming under increasing pressure from club stores, drug stores and traditional supermarket chains like Kroger, Cincinnati, that have been growing aggressively in Meijer's markets.

"I think they're getting hit by multichannel competition," said Bob Gorland, a vice president in the Harrisburg, Pa., office of Mathew P. Casey & Associates, a retail consulting firm based in Clark, N.J. "It's not just the supercenters, but the club stores, that sell a lot of general merchandise, and new supermarkets that sell food."

He cited one Meijer in Oakland County, Mich., where a Whole Foods, a Trader Joe's, a Costco and a Sam's Club all opened nearby within the last few years. In addition, he pointed out, drug chains Walgreens and CVS also have been expanding in Meijer's trading area, capturing a portion of the health and beauty care market that has been one of Meijer's strengths.

Other observers said Wal-Mart Stores, the Bentonville, Ark.-based retailing giant that this year plans to add more store supercenters than Meijer built in the last 42 years, remains the most troublesome thorn in Meijer's side.

"I view Meijer as a very effective grocer, but incapable of competing against Wal-Mart location by location and store by store," said James McTevia, chairman, McTevia & Associates, an Eastpointe, Mich.-based consulting firm. "Wal-Mart will consistently be able to buy better, and offer lower prices."

He said the fact that Wal-Mart has been opening centers in close proximity to Meijer stores "is a very bad omen." Faced with having to either bring in more income or cut expenses, McTevia said he sees little opportunity for Meijer to do the former, and has thus had to trim staff.

Ruffing said he was encouraged by Meijer's initiatives to reduce costs. "They are looking to stay cutting edge and get more efficient, and do it in a way that won't affect the pricing structure of the store. I think it's a progressive sign, that they are willing to change."

He said he thinks Meijer does have the ability to compete effectively against Wal-Mart.

"It's not the same as a small regional grocery store that's getting clobbered," he said. "Meijer is big enough to stay competitive, and if they do stay competitive, they certainly will be someone that Wal-Mart will have to deal with."

Meijer said it planned to open five new stores in 2004, and another eight to nine next year.