[Corporations] FW: Meijer vs. Wal-Mart

[Mike Spears]

http://www.freep.com/money/business/meijer24_20040224.htm

Retail innovator Meijer now adapting
New merchandise, stores coming
February 24, 2004

BY GRETA GUEST
FREE PRESS BUSINESS WRITER

 
HUGH GRANNUM/DFP
Karen Hembrough of Ada shops at the Meijer store in Cascade Township near
Grand Rapids: "I got the cutest suede coat here that I love to brag about
where I got it for $50. You can get your lettuce and suede coat on the same
trip."
GRAND RAPIDS -- Meijer celebrates its 70th anniversary this summer by
reinventing the supercenter concept it created in 1962 and then watched as
Wal-Mart cloned the concept to become the largest company on the planet.

Meijer Inc., the nation's ninth-largest private company, with an estimated
$11.1 billion in annual revenues, has aggressive remodeling projects planned
for the chain's 158 stores along with several new stores in the next few
years. 

It is testing new grocery and general merchandise strategies by New York
designer and architect David Rockwell at two stores near Meijer's Grand
Rapids headquarters. Rockwell is best known for designing the Kodak Theater
in Los Angeles and the Planet Hollywood restaurants.

Meijer plans to compete with Wal-Mart on price, in some cases, and with
offerings not typically found at a discount supercenter. Besides Wal-Mart,
the company sees competitors in Kroger, Target, Kohl's, Whole Foods Market,
Costco, Walgreen's and others.

RELATED CONTENT 

*    Q&A WITH HANK MEIJER: CEO calls Wal-Mart a challenge, not a threat


MEIJER FACTS 

Founded: 1934 in Greenville by Hendrik Meijer

CEO: Hank Meijer

Headquarters: Grand Rapids

Annual revenue: $11.1 billion (estimated)

Employees: 75,000

Stores: 158 in Michigan, Illinois, Ohio, Indiana and Kentucky

Innovations: 

*    1938: First offers shopping carts.

*    1954: Starts using automated conveyor belts at checkout lanes.

*    1962: Opens first Thrifty Acres, a food and general merchandise store,
in Grand Rapids.

*    1977: Lane scanners are introduced in a pilot program and expand
throughout the chain.

*    1988: Starts 24-hour service at all stores.

*    1995: First in the market to open self-checkout terminals.

*    2004: Introduces new six-bag carousel bagging system to make checkout
faster. 

The test stores are offering items like sushi, $120 bottles of wine, organic
food, gourmet food to go and hand-painted chocolates. They also are testing
a drive-through pharmacy and have placed the pharmacy, along with health and
beauty products, at the entrance.

Hank Meijer, chief executive officer and cochairman, says the competition
has made the company his grandfather founded in 1934 more frugal. Inside
costs are being pared, from selling one of two corporate jets to laying off
1,900 salaried workers last month. And he's trimming the cost to build a new
store by a third. 

"It's a new climate in which there is an imperative for us to be low-cost in
our operation so we can be low cost for our guests," Meijer said during a
recent tour of the retailer's test stores.

"In a sense, part of what makes what we do exciting is that we are in
competition with as formidable a competitor as anyone has ever conceived of.
That has a sense of adventure about it that I guess also implies a lot of
risk," Meijer said.

Meijer now leads its competitors in market share in eight metropolitan areas
including Detroit, Ann Arbor and Columbus, Ohio, according to Mass Market
Retailers, a New York-based industry publication.

In comparison, Wal-Mart, with about $245 billion in annual sales, is the
dominant general merchandise retailer in 73 of the top 100 markets, the
publication said. And Wal-Mart plans a major expansion in the next two
years, including seven new Michigan stores this year.

Meijer plans to open five stores this year and then start opening
supercenters at a rate of eight per year.

One Meijer pilot store is testing the grocery operation and the other is
testing out the new general merchandise design. Company spokesman John
Zimmerman said the supercenter plans to remodel up to 45 stores this year
with the new concept, including stores in Commerce and Chesterfield
townships. 

The new grocery and general merchandise concepts will be combined in the new
Southfield store in the Tel-Twelve shopping center in 2005. Meijer plans to
demolish the former Kmart at that location and build a 194,000-square-foot
supercenter. 

Zimmerman said that Meijer competes head-on with 50 supercenters, most of
them Wal-Marts. By 2007, he projects the company will be competing with 350.

Fred Marx, a Farmington Hills retail analyst and public relations
consultant, said Meijer has survived because it keeps evolving.

"I think Mejier has kind of met the barbarians at the gate," Marx said.
"Meijer is to be commended for getting out in front of this. I think they
are far better prepared to withstand the assault than other players in the
country who have had Wal-Mart coming in."

Key changes for shoppers in the grocery area include:

*    An expanded deli with gourmet food to go, including prime rib and
grilled salmon. 
*    An expanded bakery with specialty cakes and hand-painted chocolates.
*    An expanded cheese section with 200 varieties.
*    An expanded wine area with bottles priced at $6.99 to $120. The area
has hardwood floors, and wine is displayed in long polished wooden bins.

In the second test store, highlights of changes in general merchandise are:

*    New signs and lower shelving for a more open floor plan.
*    More private-label brands including At Home with Meijer by Rockwell,
which includes bedding, doormats and other items.
*    Kitchen supplies and baby clothes displayed directly across from the
grocery section. 
*    Wood and carpeted floors in the clothing section. New brand names
include Sag Harbor and Gloria Vanderbilt.
*    A new electronics section called E4. The area has televisions,
computers, digital cameras, video games and small electronics.

Bob Phibbs, a Long Beach, Calif., retail consultant and author, said that
while Meijer has a history of innovation, it might overreach its core
customer with the new concept.

"People shop at a wine merchant because they know everything about wine and
they can help you out with it. I doubt a $7-a-hour-clerk can do that,"
Phibbs said. "It's good to have the upscale merchandise, but you have to
have the upscale help to go with it."

Tony Camilletti, senior vice president of JGA, a design firm in Southfield,
said the firm consulted with Meijer two years ago on its fashion
presentation. 

With recent layoffs, he wonders if Meijer is moving toward a more
self-service approach while offering more upscale goods.

"A very large superstore concept to approach a luxury market I think is kind
of like an oxymoron," Camilletti said.

Still, what has differentiated Meijer from the beginning, Camilletti said,
is that you could buy a T-shirt and a gallon of milk on the same trip.

That appeals to Karen Hembrough of Ada. Steering around a cart loaded down
with food, she said she spends at least $200 a trip, "and that's when I
don't wander into the other section.

"I got the cutest suede coat here that I love to brag about where I got it
for $50. You can get your lettuce and suede coat on the same trip," she
said. 

Hank Meijer said the company has a better sense of itself now than it did
two years ago. It plans to expand by 6 percent a year.

"We all want to be part of a team that's not merely going to cling to
survival," Meijer said.

Contact GRETA GUEST at 313-223-4192 or gguest at freepress.com.