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Wegmans' Sweet Spot. "Daniel Wegman lives in fear," opens a Forbes magazine article by Matthew Swibel (11/24/03). And why shouldn't he? The article continues: "Thirty-nine of his 65 Wegmans Food Markets, http://www.wegmans.com, are within 20 miles of a Wal-Mart supercenter." Says Danny (as everybody calls him): "There could be trouble ahead ... But fear," says Danny, "can be very liberating." And for Wegmans, it is also very profitable. Wegmans' sales, at $3.3 billion, are up nine percent this year, while operating earnings, at 7.5 percent compare favorably with "an industry average of five percent." In addition, at a time when 17 percent of all grocery stores closed down last year (often by Wal-Mart), Wegmans is expanding.
Danny Wegman's liberation manifests mostly as being just about everything that Wal-Mart is not. His stores are atmospheric (but in a good way). He's got chefs sauteing scrod under hammered-copper stove hoods. Artisan bread is presented as though in a "Parisian open air market." Customer service, as Danny puts it, is "telepathic." Where Wal-Mart is moving toward self-checkouts, Wegmans keeps its checkout lanes fully staffed. Where Wal-Mart touts low prices, Wegmans stresses both price and quality. That appeals to the Wegmans shopper, who tilt toward "career couples," and who appreciate Wegmans' gourmet items and prepared foods. Indeed, some 40 percent of Wegmans' floorspace takes aim at career couples.
The Wegman's difference is also apparent in the way it stocks its stores. While Wal-Mart is consolidating suppliers, "Wegmans works with 600 farmers to stock its produce section." Here's an interesting one: After deciding that circulars were wasteful, Danny Wegman reverted to "the classic grocer's gambit of underpricing the milk and eggs to get people in the store." He says the move, over time, has caused no loss in sales, while saving "$3 million a year in advertising." The article notes that Wegmans may be similar to Wal-Mart in its distaste for union workers and the heavy fines it imposes on suppliers who are late with deliveries. But for the most part, Wegmans is winning on differences: "We need to do what Wal-Mart can't," says Danny Wegman. The Wegmans empire, by the way, began in 1916 "with a single produce pushcart in Rochester," New York.
Tim Manners, editor
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