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Talking shop with ... Harry McHugh: the senior vice president of operations for c-store chain Wawa says tomorrow's retail winners will thrive on innovation and a commitment to people and values.

Grocery Headquarters: What's the state of the retail industry? What factors have caused some of the most recent changes?

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Harry McHugh: It's just obviously increasingly competitive, and the channels are increasingly blurred. Wal-Mart, on one end of the spectrum, is such a dominant player and has entered so many elements and parts of retail that even in the convenience store industry we pay attention to them, simply because they are now a big box player that sells a lot of gasoline and also defines themselves, in terms of their neighborhood stores, as being in the convenience industry.

On the other side of the spectrum, the dollar stores are selling for $1 or less a lot of items that convenience stores sell. Then you have the large drug chains that also see themselves in the convenience business, because at the front they have an increasing array of convenience items, many of which are value priced and have lots of promotions.

The supermarkets have also realized that they are being threatened. The conventional supermarket is in trouble; they're getting crushed on all sides. I think some are trying to compete on price with Wal-Mart and won't win that war, because it isn't just Wal-Mart. It's Costco and lots of other big box retailers who are just simply going to win that war.

Then there's the convenience store segment, which is really getting shaken. A lot of former gas retailers are crushing toward the middle, meaning they're trying to offer beverages or hot beverages, increasing foodservice and trying to, if you will, make up for the lost GP at the pump.

Implications for our business are to improve or get out. The old standbys no longer suffice. Customers are increasingly fickle and have many, many choices, and they are ever more demanding.

GH: How does the increasing cost of real estate play into this mix?

McHugh: It's a double-edged sword. The increasing prices also affect your competition. There is no substitute for the best site.

GH: What would you say defines that?

McHugh: Well, the old slogan of location, location, location still applies. People are time-starved, even more so today. So one needs to offer the most convenience in terms of location, easy access, easy parking, quick service, ready-to-eat foods--kind of one-stop shopping for convenience. To do all of that, you really have to have a dominant piece of real estate. And the question is, Can you afford not to?

GH: In the retail sector, what would you say are Wawa's strengths in terms of differentiating from the competition?

McHugh: Wawa's biggest strength is our people. We are a privately held company-owned and operated chain. We've always striven to be the best, not the biggest. Our focus has always been on getting, retaining, developing, awarding and challenging the best people. If you do an outstanding job on people, they in turn will delight customers. To that end, we have developed a powerful culture that is a people-centric, value-centric culture. We describe ourselves--a little abashedly, I might say--as being a family. We start with people, and we have a very clear vision of what it is we're trying to achieve, and we get people aligned on those goals.

Also, about a third of our company is owned by our associates, so there's a sense of ownership and engagement. Our store managers are the best paid in the industry, as are our area managers. We're very proud of that, because money is important. People will only go so far for love. At the end of the day, they have to be rewarded by more than love and recognition and celebration. They have to be able to satisfy their own aspirations, achieve their own financial ends, take care of their family and continue to invest in themselves. It gives them a sort of balance in their lives.

GH: Having outlined your strengths, do you think Wawa--or convenience stores in general--can challenge supermarkets for market share?

McHugh: We don't focus necessarily on challenging the supermarket. What we want to do is focus on our customer and focus on our associate. Not always are we the innovators; sometimes we're close followers. But we have to be able to quickly fill that gap in the convenience needs of the customer.

GH: What do you see happening to the retail market in the future?

McHugh: I just see it getting more competitive. I see more pressure on delivering convenience products, fresh products and delicious products. Taste still rules. We can't get so carried away with health that we forget taste. The more discriminating the consumer is, the better for us who have made that investment in quality assurance, who have made that investment in variety and choice, and freshness and service.

So the winners are going to be those who continue to invest, continue to innovate, continue to delight, because with more choice comes faster boredom. Instead of talking about competitive niches and products, what we need to talk about are values, principles and our commitment to doing the right things for our customers and communities. I mean, how can you argue about minimum wage and then talk about being the employer of choice?
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Publication:Grocery Headquarters
Article Type:Interview
Geographic Code:1USA
Date:Jan 1, 2006
Words:866
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