“I am a merchant, and I have therefore my own philosophy about merchandising: That is, to do something that no one else is doing, and to be able to offer the customer a choice she doesn’t have at the moment. This is the only reason for being in business. To my own way of thinking, this is the only way it should be.
“I think that uniqueness gives one an opportunity to profit If you are doing the same thing that everyone else is doing, your opportunity for a substantial profit is materially reduced because of the price ceiling your competition will impose. Thus, good merchandising resolves itself into rendering a service in such a way as to be difficult for your competitors to emulate. This is the basic premise of the way we at Wegmans operate.”
It’s been more than 45 years since the late Robert Wegman spelled out the philosophy of his family’s namesake food retailer in an address known around Wegmans Food Markets as the “‘I Am a Merchant’ speech.” The company since 1967 has been passed on to his son and granddaughters, and has spread from its Rochester, N.Y., base to six East Coast states as far south as Virginia, but his words could still describe the $6.6 billion company today.
Read More: Map of Historic Wegmans' Sites
There is little doubt Wegmans remains a unique entity in the supermarket business, owing in large part to its premise of being difficult to emulate and providing shoppers with experiences and choices they cannot get elsewhere. While company officials are careful to keep the details of precisely how they do this under wraps — the company declined to grant an interview with SN — industry observers credit a combination of institutional technical skill and creative spirit, bolstered by a collaborative effort of employees bringing the power of the organization to bear upon even the smallest of details. The result is some of the largest, busiest and most productive food stores anywhere in the country.
And as Wegmans seeks to replicate its success as stores multiply, observers envision Wegmans prevailing amid an ongoing restructuring of food retailing on the East Coast that will eliminate all but the best operators. This shakeup has already claimed competitors in the markets where Wegmans does business. And in its’ newest market of Boston, the fight is only beginning.
“I would expect Wegmans to be the worst nightmare for every food retailer in New England, with the exception of Market Basket, as they go from two stores [one currently] to 12, to 20,” Burt P. Flickinger III, managing director of Strategic Resource Group, New York, told SN. “I think they will have the most productive stores per property of anywhere in the country. I think one of the reasons you’re seeing Publix accelerating its move north is to try and capture as much of the Carolinas before Wegmans gets through Virginia.”
Much of Wegmans’ historic appeal to shoppers — and one of its key advantages over competitors — lies in its creative presentations of fresh food supporting an institutional knowledge of cross-merchandising.
“I think Wegmans is a merchandising leader, and I think others look to them for ideas and concepts,” Anthony Totta, a Kansas City-based consultant and vice chairman of Fresh Xperts, told SN. “There’s nobody really in their league.”
Jonathan Raduns, a former Wegmans food merchandiser, today operates Merchandise Food, a Somerdale, N.J.-based firm specializing in visual food merchandising. According to Raduns, Wegmans’ signature skill in its fresh departments is combining precise technical know-how with flair and creativity.
“I think in general Wegmans has an ability to maximize visual appeal and presentation of their product, and I mean that both generally and technically,” Raduns said in an interview. “I think in many cases, they have figured out the optimal way to present products, and they are very methodical about doing that now.”
Raduns said many of the techniques he employs today were refined during his time at Wegmans. Many he simply considers good merchandising practice.
“One of the things I try to do often is train people to remove visual hurdles — the things that get in the way of seeing food properly. And that’s everything from the packaging to way it sits on the shelf,” he said. “They [Wegmans] are meticulous about making sure shelves are set properly, and that they are not wasting space, and that things are seated next to products that allow your eye adjust well to the display you are looking at.
“From a bigger picture standpoint, they do not like to make any displays that don’t make sense,” he added. “It’s so common to go into a supermarket and just see various piles of things that are not next to the right items. Wegmans is very good at complimentary items next to each other, but also at building very focused displays built around a topic that tell a story.”
Wegmans’ considerable well of technical cross-selling skill is bolstered by the often more difficult expertise of orchestrating the organization around it on multiple fronts. For example, a special package including a fresh salmon fillet, a spice rub, and a cedar plank on which to grill the fish displayed in Wegmans’ seafood department is backed up with an article in the company’s Menu magazine, and by a video demonstrating the cooking technique at Wegmans’ website. More subtle reminders are scattered throughout the department by price signs written on cedar planks.
“I think they are very good at communicating an idea — a message or a thought through a display,” Raduns said. “And when they build a display they want it to be obvious enough and logical enough that a customer could walk up, generate an idea of how to use some culinary element, and to very easily be able to purchase what they need for that concept. That involves a level of dictation — through signage or a recipe card. Or maybe someone is manning a display. It’s a strong, collaborative effort.”
“If it’s one idea that they do better than anyone, it’s identifying that [recipe] mission for their customer and then, flawlessly executing it,” Jim Hertel, managing partner at Willard Bishop Consulting, Barrington, Ill., told SN. “It’s the execution that makes them so much better than the broad swath of retailers.”
Competitors looking to learn merchandising from Wegmans should observe stores with an eye for detail — because that’s what Wegmans would have also done, Raduns noted.
“I would look very technically at how they do things,” he recommended. “Some people can see it and some can’t. But look, literally, at the angle products face and the spacing between them. It’s all very intentional. The minutia of it is really important to them. And from my perspective that’s what really sets them apart.
“For example, they’re experts in color breaks, they way they set contrasts between products and fine lines between different products in their displays,” Raduns added. “They are also very in tune with the seasonality. It seems many chains are kneejerk — they shoot from the hip in terms of what items they put out front. Wegmans is all about concepts and ideas that are seasonal and appropriate.”
Sources said Wegmans has developed these skills over the years in part by being keen observers themselves. Its merchandisers dating back to Robert Wegman’s tenure studied other retailers — particularly small specialty stores where space is at a premium — to understand how to make impactful displays.
If merchandising at Wegmans is “telling a story,” it’s one with many narrators. Observers say they are impressed with the company’s ability to orchestrate itself in support of its programs, which they say indicates strong internal discipline.
“The amount of collaboration and communication, professional integrity and follow-through to pull these displays requires a lot of effort, and to do them in a timely fashion requires pulling a lot of elements together. A company has to have high standards just to do that,” Raduns noted. “A lot of companies can have a good idea, but to do it requires a high level of expectation for employees to be professional and follow though.”
Competing vs. Wegmans
Wegmans reinforces its differences between it and its competitors — and likely helps its own profits — in part through a well-developed private-label program.
Its skill at moving volumes and its reputation for quality is such that food producers are battling to be to the chain’s preferred providers.
“Wegmans has reached that tipping point where they have become a preferred customer to so many key commercial growers and producers,” Totta said. “Selling to Wegmans is at the top of everyone’s list. When you’ve developed vendor relations to the point where the vendors are lined up to support you, then you have a big competitive advantage.”
This holds true even though Wegmans tends not to market growers’ brands, but rather uses their product to support its own lines. It’s a trade many are more than willing to make: Totta noted that one New York supplier put the Wegmans name on the side of its barn.
Flickinger said Wegmans’ strong reliance on private brands didn’t evolve wholly for strategic purposes.
“For years Wegmans being up in Rochester did not get the same deals offered to them that competitors in New York, New Jersey and Philadelphia got,” Flickinger explained. “Without the mistakes many manufacturers made offering more pernicious promotional programs in the Rochester and Great Lakes region, Wegmans made a pronounced commitment to an exclusive private label portfolio. At this point they have a good balance of exclusive brands and major regional and national brands, but ultimately if they wanted to get stores doing $90 million a year to $100 million per store per year, they would have to slow their exclusive brands growth to a degree and emphasize more regional and national brands.”
The flip side of Wegmans’ strength in private goods is that it can allow more brand-heavy retail competitors to tout their own variety and price favorably. “It’s a little extra ammunition,” Flickinger noted.
Alfred “Butch” Castellani, whose family formerly operated the upstate New York chain Tops, a longtime Wegmans’ foe, said national brand variety was among the many tools Tops used to drive a differences between the rivals. Castellani said retailers going against Wegmans today have to be prepared to raise their game on numerous fronts from store cleanliness to community outreach. He points to Wakefern/ShopRite’s successful defense against Wegmans in New Jersey as a contemporary example.
“If you’re an independent, you take the model of [Wakefern Chairman and Chief Exceutive Officer] Joe Colalillo and the ShopRite people: You get heavily involved in the community. You get involved with the local high school and college, start a scholarship fund and let people know you’re doing it. Get involved with local products and local vendors. If there’s a food made locally, form a relationship with that guy. You make sure your hometown marketing is better than anybody.”
Castellani said it was important also to establish a strong identity behind signature offerings in much the way Wegmans does today. While at Tops in the 1990s, signature “Mighty Muffins” and other specialty bakery products helped to distinguish his chain, he said.
While Wegmans’ measured store growth — it averages around two to four new stores a year — doesn’t result in sudden catastrophe for a market, its effects are there from the start, observers say. “Wegmans is one of the few retailers that’s savvy enough from a merchandising perspective and sophisticated enough from a technological perspective to move into a new geographical area and be successful from Day 1,” one industry observer, who asked not to be identified, said. “That’s because they’ve done their homework, and they employ the lessons learned in their homeland to new markets.”
“Most food stores will attract clientele from three miles out. Wegmans doubles and sometimes triples that, easily,” said Barry Scher, a retired officer of Ahold’s Giant-Landover division who witnessed Wegmans’ arrival in Giant’s Washington-Baltimore trade area beginning in 2004. “What happens when Wegmans comes along is that companies have to find a second gear. They will start new promotional programs to re-establish their identities in the market. They need remodeling and other in-store activities to hype up the staff.”
Giant’s response included a marketwide store renovation program along with specific tactics around service and pricing at specific stores in the trade area. But not everyone makes it. Since Wegmans’ arrival in the DC market, both SuperFresh and Magruders have pulled out, although industry watchers say a variety of factors contributed to those departures.
“Wegmans has definitely had an effect in pockets of the Baltimore area grocery market given the size, product selection, and pricing in their stores,” Jeremy Diamond, a consultant with the Diamond Group, Baltimore, told SN. “I’ve seen stores like Safeway and Food Lion hurt from Wegmans expansion. The stores that thrive are the stores that have a niche, despite Wegmans massive store size. Competitors who have a niche such as neighborhood grocery store where the associates know their customer’s by name, carry an abundance of natural/organic products, or are simply very price competitive can compete effectively with Wegmans.”
Looking further ahead, many observers see Wegmans’ East Coast markets falling into the hands of still fewer players.
“Wegmans brings a strong merchandising and operating team to every store that they open, and over the last few years they’ve become even better merchants and offered even better pricing. So they are formidable,” one source said. “However, strong operators like ShopRite, that have an established customer base and strong merchandising and pricing programs of their own, can compete very well with Wegmans. But the weaker players will find they have very little in their arsenal to compete.”
ShopRite, considered by many to have successfully faced down Wegmans in New Jersey, is now encountering Wegmans around parts of Maryland and New York.
“The most formidable, and only true competitor they have in the Northeast is ShopRite, especially with the new larger format stores they are opening,” the observer added. “Wegmans pays attention to Whole Foods, and they pay attention to Fairway, but they pay very close attention to ShopRite. I think ShopRite is the only competitor who can limit Wegmans’ growth.”
In Massachusetts, where Wegmans has opened a single store in Northborough in 2010 but has plans for at least three additional in the greater Boston area, Demoulas Supermarkets — whose Market Basket stores, like ShopRite, large and price-focused — should also withstand Wegmans’ arrival, Flickinger said. But others may need to worry, at least based on the sales volumes Wegmans was showing in Northborough.
“Stop & Shop has some very interesting initiatives in foods that are good for you not only for kids but for seniors with special restrictive diets, so they’re drawing from a wider customer base. Market Basket is winning in terms of feeding large families, and it’s tough to beat their pricing and promotional discipline,” Flickinger said. “But Wegmans can win on all consumer constituencies. It’s going to be very difficult for anyone else to gain or hold market share and consistent sales levels once Wegmans opens there.”
Factors that may limit Wegmans’ growth include its deliberate store-development pace. The company also needs to maintain quality leadership.
“A limiting factor is that their store needs a certain type of trade area and population surrounding the trade area,” one industry source said. “So by definition there’s a finite number of places they can build, although there are plenty left. A more likely constraint will be the strength of their management team. Can the family develop strong management internally and externally to continue the approach that’s been successful? They are to be commended for policies that develop the rank and file but will they be able to have strong senior management?”
What’s Cooking at Wegmans?
The menu at Wegmans’ nascent restaurant division is always changing.
The company for years operated the Tastings fine-dining restaurant at a Pittsford, N.Y. store near its Rochester headquarters. That has since been replaced with The Food Bar, a crab-shack style restaurant offering items such as fish and chips and burgers.
Wegmans since expanded The Food Bar to a store in Columbia, Md. and until recently had a place at its Northborough, Mass. store. However, the Northborough location closed March 30. It was unclear at press time what was to replace it although Wegmans told customers the closure would “allow us to innovate exciting new programs” in the Market Café, the European market style food court that’s a regular feature in its stores.
Burt P. Flickinger III, managing director of Strategic Resource Group, New York, said Wegmans may have discontinued The Food Bar at Northborough because store volumes were such that it was too difficult to staff effectively. Wegmans officials declined to comment to SN.
“By having space and staff reallocated to other areas the shoppers will be more satisfied by being able to get through one of the most crowded stores in the country,” Flickinger told SN. “Wegmans was just besieged by volume, and because of that volume there’s a high degree of difficulty just getting in and out of the parking lot and the store.”
This is likely to improve as Wegmans opens additional units in Massachusetts, Flickinger said.
Across from the Pittsford store, Wegmans operates Next Door by Wegmans, a high-end restaurant featuring a mix of New American and Japanese selections including sushi, an extensive wine bar and a “test kitchen” for parties and events.
Three store locations in Pennsylvania include an Irish-style bar known as The Pub with bar food offering sandwiches, soups, pizzas and entrees.
This summer, following the opening of a replacement store on East Ave. in Rochester, Wegmans will open its first Italian restaurant, to be known as Amore Restaurant and Wine Bar. “Here, our Wegmans Italian Classics come to life in the healthy Mediterranean flavors and classic favorites, all made with fresh, seasonal ingredients for meals you won’t soon forget,” the company described.
The Italian theme — in addition to serving a large Italian heritage in Rochester — provides another opportunity to highlight Wegmans’ store specialties including cheeses, pastas, meats and pastries. It will also provide a complimentary showcase for the company’s growing wine division.
Wegmans operates 81 stores: 46 in New York, 15 in Pennsylvania, seven in New Jersey, six in Virginia, six in Maryland and one in Massachusetts.
The following locations are on the waiting list. Wegmans does not publish store openings before a rent deal is in place, so a planned store near Boston’s Fenway neighborhood and other potential sites are not on the below list.
The Charlottesville, Va., store, which according to reports could begin construction late this year, would be the company’s furthest south — more than 500 miles from its Rochester, N.Y. birthplace.
Alexandria, Va. 2014
Burlington, Mass. 2014
Charlottesville, Va. TBD
Chestnut Hill, Mass. Early 2014
Concordville, Pa. TBD
Germantown, Md. Fall 2013
Hanover Township, N.J. TBD
Montgomeryville, Pa. Fall 2013
Montvale, N.J. TBD
Owings Mills, Md. TBD
Westwood, Mass. TBD