SUPERMARKET INDUSTRY NEEDS CREATIVE LABOR SOLUTIONS

Mark Hamstra

Larry Johnston might not have been able to turn Albertsons around, but he did bring at least one solid idea over from General Electric - the importance of human resources, which he told SN when he was hired would be integral to Albertsons' success.

As supermarkets increasingly roll out "fresh" formats with more prepared foods and organics and a greater variety of perishables, they will need to make parallel adjustments in the way they approach their labor practices.

Offering exotic cheeses, Ugli fruit and $200 bottles of wine will only go so far if the people hired to sell those products aren't motivated to take an interest in doing so or lack the requisite product knowledge.

It's an obstacle that companies like Food Lion, Safeway and A&P are bound to encounter as they recast their traditional supermarkets with more upscale and service-oriented flourishes. Some analysts have pointed out that Safeway's aggressive rollout of "lifestyle" stores appears to put it at odds with its effort to minimize labor costs by battling unions. Highly trained and well-compensated workers are essential to the success of this new format, they argue.

One retail executive, who asked not to be identified, said at a recent industry event that the biggest impediment to the rollout of his company's upscale format was the difficulty in finding people qualified to work in such stores.

Another retail executive, Ric Jurgens, president and chief executive officer of Hy-Vee, West Des Moines, Iowa, addressed that issue at last week's Food Marketing Institute Distribution Conference, when he noted that the industry "can't afford to get by with paying as little as we can." (See Page 20.) Hy-Vee, known for the high levels of service it provides in its stores, has deployed several innovative human resources strategies to attract, train and retain good employees.

The industry will need more thinking along those lines if it is going to be successful with its effort to transition to a more upscale, service-oriented presentation. Well-respected food retailers Wegmans and Costco operate with relatively high labor costs, which they cite as integral to their business models.

But perhaps one of food retailing's greatest challenges is finding creative solutions that contain labor costs while at the same time reward those people who are capable of delivering the kind of service that is needed to achieve meaningful differentiation. Tools like profit-sharing and rewards like bonus vacation time or public recognition for accomplishments could be part of a solution.

Fortunately for supermarkets, the shift is not as great for them as it is for Wal-Mart Stores, which has built its empire upon a foundation of low service levels. As the Bentonville, Ark.-based operator seeks to draw high-end customers with new product offerings like organics, it may find that its shoppers need more than an attractive display - they need workers in the stores who can answer questions, offer suggestions and otherwise help sell the products.

That is why, if supermarkets are going to continue down a path of differentiation by enhancing their fresh offerings, they will need to bite the bullet and find ways to staff their stores with people who make a difference.