ANAHEIM, Calif. -- Competition from Wal-Mart supercenters may be inevitable, but it is not a death sentence for the independent operator, according to Thomas K. Zaucha, president and chief executive officer of the National Grocers Association, Arlington, Va.
That was the message he delivered in a talk with members of Unified Western Grocers, the Los Angeles-based, retailer-owned cooperative, during Unified's Expo here, and that message will be the focus of a series of operational seminars NGA plans to hold around the country to help retailers prepare to compete more effectively with Wal-Mart, Zaucha told SN after his speech.
"The goal is to help retailers understand how formidable a competitor Wal-Mart is and to give them a sense of optimism that they can compete if they follow certain steps," he sold SN.
In his talk, Zaucha said, "There's no question Wal-Mart will take volume from even the best operator, but the question is, can it maintain that volume over time, or do loyal customers go back to a community-oriented, independent supermarket?
"The Wal-Mart threat causes some companies to close their doors for fear they can't compete, and that's a defeatist attitude. The critical thing is to have the will to win."
Unified members are facing the prospect of competing against Wal-Mart supercenters for the first time following Wal-Mart's announcement a couple of months ago that it plans to open 40 supercenters in California over the next four to six years -- a prospect reflected in opening remarks by Chuck Pilliter, Unified's president and chief operating officer, who said Zaucha's speech was intended "to help prepare us for the battle we're about to face."
But the prospects are not all dreary. Zaucha said, "We can still win the war -- if we focus on the consumer."
Keeping the focus on the consumer is a logical approach to competing against Wal-Mart, he pointed out, "because ultimately, what the consumer decides to do will determine if you continue to grow and prosper or if Wal-Mart continues its double-digit growth."
Although consumers like to shop multiple channels, the traditional supermarket is still the place most of them prefer to buy food and beverages, he said.
The goal should be to win customer loyalty, not necessarily to provide complete customer satisfaction, Zaucha said. "You must be absolutely committed and obsessed with gaining customer loyalty because a loyal customer feels compelled to drive past a competitor's store to shop at his favorite store, whereas a satisfied customer is willing to shop anywhere.
"What drives loyalty is the total shopping experience, which includes consistent value and good experiences with employees. Customers agree supercenters have competitive prices, friendly employees and good store conditions, but they tell us price is not more important than quality and freshness; that there aren't always enough employees [at supercenters] to serve customers; that managers aren't always available to solve problems; and that the products they want are not always in stock -- all of which provide opportunities for traditional supermarket operators to make hay in an effort to gain customer loyalty."
One area in which supercenters are most vulnerable, Zaucha said, is customer service. "Wal-Mart supercenters are too crowded and too big, with poor service and poor layouts, and fast service suffers, especially on the weekend,"Zaucha said.
"Wal-Mart is coming. Start preparing now. Be the first with new seasonal items. React to new trends. Invest in technology. The bottom line is, you need to differentiate your company from the competition. Be creative in an appealing way."
His other suggestions for retailers included these:
Work with wholesalers and direct-store-delivery companies to develop marketing strategies.
Identify their own strengths and the supercenters' weaknesses and capitalize on those.
Promote aggressively rather than being buying-driven.
Operate clean, modern, friendly stores that let customers know they have the best shopping environment available.
Empower employees by treating them fairly, encouraging and rewarding good performance, and involving them in decision making.
When Wal-Mart opens a store in a new town, it uses a specific strategy, Zaucha said. "They tell your employees to come work for them before your store goes out of business. Yet thousands of Wal-Mart employees in 28 states have filed litigation against the company for off-the-clock work.
"Wal-Mart says that's not its policy. But management bonuses are predicated on keeping costs down, and the reality is, that kind of culture can result in violations of company policy."
Drawing a parallel, Zaucha cited a recent NBC "Dateline" report about supermarkets that allegedly alter pull dates on fresh meat. "That report was not one of the industry's proudest moments," he said. "We don't condone that policy, but managers say they need to move as much product as they can. So while corporate offices set policy, many at store level violate it to achieve the bottom line results the company is looking for."
Manufacturers can be valuable partners in the independents' fight to compete with Wal-Mart, Zaucha said. "Manufacturers recognize the need for diversity in the marketplace, and independent operators represent the keystone to that diversity," he explained.
"Manufacturers are beginning to ask themselves whether they're putting too many eggs in one basket. While no one is questioning their commitment to Wal-Mart, they are beginning to understand how important a diversified market is.
"When a vendor deals with only a handful of companies, variety goes by the wayside. What will ultimately happen to variety and consumer choice if the marketplace consolidates to a point that Wal-Mart is in control? Regional retailers and manufacturers, as well as national brand companies, will suffer.
"Wal-Mart is certainly a good customer, but if it forces other competition to go out of business, then the U.S. food industry will look like the European model, with a high percentage of private-label products and a reduction in overall gross profit."
