Opinion

David Rohde

The anti–Walmart

By David Rohde
March 22, 2012

ROCHESTER, N.Y. – Cashiers are barred from interacting with customers until they have completed 40 hours of training. Hundreds of staffers are sent on trips around the U.S. and world to become experts in their products. The company has no mandatory retirement age and has never laid off workers. All profits are reinvested in the company or shared with employees.

A doomed Internet startup? Occupy Wall Street fantasy? Bankrupt retailer recently purchased by Walmart?

No, a $6.2 billion-a-year, 79-store-supermarket chain with cult-like loyalty among its customers. Wegmans, which operates its 79 stores in New York, Pennsylvania and four other East Coast states, shows that a business can generously train its workforce and profit handsomely.

Privately owned by the Wegman family, the chain employs 42,000 people – 20 times the number who work for Facebook – and defies quarterly-driven Wall Street wisdom. Executives say their most important resource is their workers.

“Our employees are our number one asset, period,” said Kevin Stickles, the company’s vice-president for human resources. “The first question you ask is: ‘Is this the best thing for the employee?’ That’s a totally different model.”

Yet the company is profitable. Its prices are low. And it is lauded for exemplary customer service.

“When you think about employees first, the bottom line is better,” Stickles argued. “We want our employees to extend the brand to our customers.”

The Wegmans model is simple. A happy, knowledgeable and superbly trained employee creates a better experience for customers. Extraordinary service builds tremendous loyalty. Where, though, is the profit?

High volume, according to company executives. The chain’s stores are enormous – usually 80,000 to 120,000 square feet – larger than a typical Whole Foods and roughly double the size of a traditional supermarket. And they feature a dizzying array of 70,000 products, nearly twice the number available in a standard grocery store. Across the East Coast, Wegmans supermarkets have the highest average daily sales volumes in the industry.

Employees are omnipresent in stores and do seem knowledgeable. With little prompting, they launch into exhaustive but friendly accounts of where the meat, fish or produce they sell hails from, what each item tastes like and how best to prepare it.

A fish salesman raved about the exhausting standards of the company’s distributor in Alaska. A butcher said he had visited the ranch where a steak came from in Montana. And Maria Benjamin, a 38-year Wegmans veteran, started running a store bakery after managers loved her homemade Italian cookies.

“They let me bake whatever I want,” said Benjamin, one of 1,015 people employed at the company’s 135,000-foot flagship store in Pittsford, New York. “They’re really down-to-earth, wonderful people.”

Executives say the company is also able to invest in its employees and focus on steady, strategic growth because it is not publicly traded. They said cutting jobs or shipping them overseas was, in part, the product of having to relentlessly please the stock market.

“Some of that is that public mentality,” said Stickles, who has an MBA and once planned to be a stock broker. “The first thing they think about is the quarter. The first thing is that you cut labor.”

The Wegman family, which grants few interviews, has owned and run the company since 1916. Robert Wegman, whose father and uncle opened the first store, dramatically expanded the business in the 1970s by being one of the first chains to vastly expand store size, include pharmacies and use bar codes.

Today, the chain is run by Robert’s son, Danny, 65, and his two daughters, Colleen, 41, and Nicole, 38. Mary Ellen Burris, a 78-year-old senior vice-president and family confidant, said the owners refuse to open more than three stores a year because “we cannot continue to be the best if we try to go at a faster pace.” She said the family has no interest in taking the company public.

“No, absolutely not,” Burris said. “It takes away your ability to focus on your people and your customers.”

Like other companies, Wegmans has made mistakes. Over the years, it has had to close nine stores that failed to generate adequate revenues. And critics have accused it of moving stores out of poor urban neighborhoods and focusing its operations on wealthy suburbs. And while the benefits are generous, its pay rates are good, not extraordinary.

Wegmans has also clearly benefited from being based in Rochester, a small but historically prosperous area in upstate New York that was the birthplace of Western Union, Kodak, Xerox, Bausch & Lomb and other companies. Wegmans treats its employees well in part to keep them from gravitating to other firms.

Competition has also forced the company to change. The arrival of Walmart-owned supermarkets caused a sharp reduction in prices in 2004.

“It was clear that people were gravitating to the discount stores,” said Jo Natale, the company spokeswoman. “And so we completely changed the way we did our prices.”

But she and other executives insisted that Wegmans’ real advantage was the company’s happy, high-quality workforce. It sends butchers to Colorado, Uruguay and Argentina to learn about beef. It sends deli managers to Wisconsin, Italy, Germany and France to learn about cheese. Last year, it awarded $4.5 million in college scholarships to employees.

The company has half the turnover of its peers. In February, Fortune magazine declared it the fourth-best company to work for in America in 2012. In 2005, it was number one.

“What some companies believe is that you can’t grow and treat your people well,” Burris told me. “We’ve proven that you can grow and treat your people well.”

Wegmans is a model. It shows that companies can train, innovate and profit at the same time.

PHOTO: Daniel Wegman/Wegman handout

Comments
15 comments so far | RSS Comments RSS

companies can train, innovate, and profit at the same time AS LONG AS THEY DON’T GO PUBLIC.

I’m so pleased this article is about Wegmans, I shop there nearly every week. It’s the quality of their food that attracts me, but I have noticed the surprisingly cheerful cashiers.

I’ve worked for various companies, I’d think long and hard before ever taking another job at a publicly traded firm. There’s a world of difference between working for a company where the owner loves the enterprise for its own sake, and a business where the owners are focussed on short term profits.

I work in software development, by the way. And from what I’ve seen, many hi-tech companies (with a few notable exceptions like Apple and Google) turn into parodies of their former selves shortly after they go public. I sometimes wonder if stripping an organization of ethics and common sense is part of the IPO process.

Posted by bruce1963 | Report as abusive
 

I note that this great organization has been around almost 100 years. Very few of the quarterly-result chasers can say the same. Having also worked for a number of companies, I think the Wegmans model gives it huge adaptability and survivability regardless of the economy, the government, the international situation, etc. I tried to implement the same type of culture at some of my companies and it is enormously difficult to overcome the ‘numbers’ people who are bottom-line focused to the exclusion of everything else. Wegmans is a wonder.

Posted by steve778936 | Report as abusive
 

All companies have these stakeholders: owners, clients, and employees. Owners can, of course, be the share holders or simply an individual or family, like the Wegmans.

The key is priorities, and it seems that for publicly held companies, the first priority is to drive share prices up. When this is carried to extremes, the other stakeholders lose. Employees lose because jobs are shipped overseas, salaries stagnate, extra pressure is put on them to increase productivity. Clients lose because, when employees lose, product quality and innovation trends towards the bottom.

Society as whole also loses, but that is a topic that would take me too far afield.

Posted by NewConstitution | Report as abusive
 

We used to shop at Giant, on Saturdays generally, and weekly shopping seemed like a chore to me. Nothing against Giant, but it just didn’t float my boat. We had heard about Wegmans for months, in Fairfax, Virginia, and one day we decided to go in and check it out. We have never looked back. Everything you say in the article is true, but I might add that there is also festive atmosphere a most Wegmans, especially on Fall Saturdays when many people wear their college sweatshirts. And this is topped by the quality of the goods, their variety, and it’s not that expensive. There’s almost a European market feel about it. Life should be more than making money and being efficient. We do that all week at work and we want a break on the weekends.

Posted by AlMostonest | Report as abusive
 

Love shopping at Wegman’s in the Buffalo/Erie area when I visit family there. I’m jazzed that they are there to support their employees in many ways. They ARE attuned to local preferences with many Polish specialties in the Buffalo area markets. They were the first to tune into natural, organic & gluten-free needs and to thoughfully place the products in a special section instead of making us hunt-and-peck in every aisle for what we need. As an investor, I wish I could own their stock but I understand their decision not to kowtow to the short-term, quarterly driven markets.

Posted by paxdonnaverde | Report as abusive
 

Don’t believe the hype. I live in Rochester and am forced to shop at Wegmans. Awful store, awful experiences every time. Just today, two products I was shopping for weren’t available. That happens weekly. High prices, poor selection, poor store layout (way tooo big) and cashiers that don’t know how to bag. No coupons, ever and they never double a manufacturer’s coupon. I’d give my eye teeth for a Whole Foods or Shop Rite in this town. Can’t wait for the Trader Joe’s to open later this year.

Posted by gemini21 | Report as abusive
 

Sounds like a good company to work for, but the article fails to provide the actual facts to support the assertions made.

For example, what are the average wages (geographically) of this company compared to Walmart?

And what are the benefits comparisons?

Posted by Parker1227 | Report as abusive
 

Great People & Great Business Approach.
But, the very few comments posted here prove that no one is really interested in this approach for a healthy & honest economy. Everyone is after the fast buck. We deserve our miseries.

Posted by GMavros | Report as abusive
 

We need more companies like Wegmans. When is Wegmans planning to come to India.

Posted by yindu | Report as abusive
 

Good article. Wish I lived near one of these stores so I could check them out. All of the small private grocery stores where I live have closed or been bought out by the bigger chains. If things keep going in the direction they have been, soon it will just be a few monster companies with endless floor changes and no customer service wherever you go.

Posted by lhathaway | Report as abusive
 

When visiting Syracuse, NY in the mid 1980s, I went into a Wegman’s and have never forgotten how impressed I was with the cleanliness of the store, the friendliness of the employees and the variety of quality food. It’s nice to see this article about a company that actually lives its values, mission and vision. Few companies come close to being what they claim to be. Wegman’s is remarkable.

Posted by billybob1 | Report as abusive
 

V. interesting & inspiring article – I had the pleasure of visiting the Pittsford, NY store once while there for a wedding (this southern girl’s one & only Wegman’s experience)and was blown away w/selection, products and employees.
I wish this writer would do a similar study of Trader Joe’s. The products, pricing and employees are wonderful there with a fraction of the space.

Posted by miasmama | Report as abusive
 

There are other models that also work. Look at John Lewis here in the UK (which also owns the Waitrose supermarket chain). They are a co-operative, where the staff own the company, but one of the best liked (and most profitable) department store chains.
Vide http://www.johnlewispartnership.co.uk/

Posted by UKJim | Report as abusive
 

Did you know that the WalMart Distribution Center Killed someone and still was rewarded with Center of the year?

Posted by ANTIWALMART | Report as abusive
 

I registered just to say that I work at Wegmans and I LOVE it. Almost every employee here (I mean, except for teenagers who have never worked anyplace else and therefore have nothing to compare it to) also enjoys it. They are so friendly, no matter what section of the store they work in. Even the employees working in the back or night crew love it. We have countless specialty departments, our international section is PACKED, and everyone working in the departments are very knowledgeable. You have to train for months to be able to work in the specialty cheese shop, and you continue learning for years after that. They are so flexible with hours. Just like the article says, they are completely employee-focused. They’ve told me on numerous occasions (when I have to go home sick or cancel for a dr appointment) that their first concern and priority is that I am well. They’re so focused on health it’s almost crazy! Every year they have an Eat Well, Live Well month. In the winter we also raise money for the local food banks, we even compete with other stores and each other to see who can raise the most. I came in third place this year!

I meet a few first-time customers a week, and they ALL rave about how impressed they are. Obviously I cannot say enough good things about this company.

Posted by annier9 | Report as abusive
 

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