A bigger slice of a smaller pie.
"When you operate in a trade area that has negative growth and is overstored, you look at the competition as your source of sales," says Russ Van Gilder, owner of VG Food Centers Inc., which has five supermarkets around Flint, Mich. "You attempt to be the grocer that people shift to within the shrinking population. It's more difficult to expand in a saturated market, but growth is possible if you are a good operator."
VG Food Centers' new store in Howell proves that expansion is possible in the face of unfavorable market conditions. Van Gilder saw a void in the supermarketing scene and built a 29,000-square-foot store to fill it. He originally expected volume to run between $100,000 and $125,000 a week.
Since opening in November 1983, the new VG has consistently topped $150,000 a week and has boasted as much as $175,000 a week. The population of Howell is 8,000. They divide their shopping between one Kroger and the new VG Food Center. Weathering Michigan's Recession
When Van Gilder first purchased equity in a grocery store in 1962, the Michigan economy--i.e., the auto industry--was booming. When he bought out his partner, Ken Fox, in 1975, the growth years of the American automotive industry were just about over. Although operating supermarkets in metropolitan Flint would be a trying task, Van Gilder confronted the situation with the optimism of an enterprising independent.
"My Goal from the outset was to run the best store I could," says Van Gilder, who also serves as chairman of the board of Spartan Stores Inc., Grand Rapids. "If I hired good people and trained them properly, the stores would be profitable. And with profitable stores, I would have the financial resources to expand. I didn't set any goals as to the number and size of stores I wanted--my philosophy was to be the best, not the biggest."
As the '70s progressed, Van Gilder remodeled his two original stores and bought a former chain store. In 1980, in the midst of Michigan's deepening recession, he constructed a 24,000-footer. It took awhile for that store to get off the ground because of the increasing economic difficulties besetting area consumers.
Yet that did not dampen Van Gilder's commitment to growth. As soon as the store was on its feet, he began looking for another small community to build in. He targeted Howell, a bedroom and farming community located on I-96 midway between Detroit and Lansing.
"Howell was an excellent market to expand into because it is not that heavily industrialized and has not suffered as severely from the recession as other towns," Van Gilde says. "It is in a growth corridor where people who work in the suburban office facilities around Detroit, Lansing and even Ann Arbor are moving. Looking down the roas 20 years, Howell should be a much bigger town.
"We started to look at Howell back in 1981 but waited for the economy to bottom out before committing ourselves. When you operate in eastern Michigan, you learn to judge the business cycle before calculating your next move." Hit "Em Where it Hurst
Howell was ideal for an independent that operated a spacious, people-oriented super. The only competition in town was a small independent and a conventional Kroger. The independent had limited selection and Kroger had limited service.
"Customers are looking to be treated as an important human being when they go grocery shopping," says Van Gilder. "They want personalized service and an independent can provide that much better than a chain. An owner inspires his people by setting a good example. That is something a chain executive cannot do because of the nature of a chain operation."
Van Gilder credits the people in his company for the success of all VG Food Centers and for the fast start of the Howell store. He prides himself on his ability to select good people, to train them in the VG point-of-view, and to promote them to responsible positions.
"All store managers and department heads started as service clerks and progressed through the company step by step," Van Gilder says. "You have to start at the bottom to truly understand the grocery business. We bring people in at low levels, then teach them to operate the VG way.
"Employees must learn the people-oriented philosophy of VG from within. When we hire, we prefer people with no experience in the grocery industry. People who have previously worked for the chains have too many bad habits."
After working in the stores for 10 years, Van Gilder's 24-year-old son, Russ Jr., was ready to manage a store on his own. "The only thing I've ever wanted to do in my life is to manage a supermarket," says Van Gilder Jr. "But it was important to progress through the ranks so I knew what to do when I finally got an opportunity to manage."
The father and son team worked together to select department head candidates from the other VG Food Centers. "Our department heads are the heart and soul of our business," Van Gilder says. The department heads chosen for the Howell store were clerks in the other units, so the move to Howell meant a step up in status and remuneration.
"We reward our best workers by promoting them to departemnt head positions in a new store," says Van Gilder. "And they reward us by putting their full energy into making the department a success. A new store and a new position present quite a challenge to our department heads. And they love it."
Adds deli Manager Debbie Warner, "I come to work every day thinking of how I can make my section better." Warner has picked up several ideas in the three deli seminars that VG management sent her to during her first month as department manager. VG's Small-Town Style
Although Van Gilder wished to build a store to impress the people of Howell, he did not go overboard and build a monster that would lose money at a weekly volume of $150,000. After analyzing data from a market survey conducted by Spartan, he chose 29,000 square feet as the optimum size for the store. "We wanted space to have service perishables departments plus a wide selection of groceries and non-foods, but we were cautious not to construct a palace that a small town could not support. We didn't want a beautiful 40,000-footer that would go bankrupt within a year."
On the other hand, Van Gilder did not want a me-too supermarket. Working with Spartan's store development people, he concocted a store concept appropriate for a small town. The result of their collaboration is a bright, open store that uses design to focus customer attention on the merchandise. Notes Van Gilder, "We're trying to sell produce, meat and groceries, not chandeliers on the ceiling."
No signage is used over the perimeter sections. Rather, the walls are washed in a color corresponding to that department: red for meat, yellow for dairy and so on. Van Gilder's wife, Shirley, came up with that suggestion.
"Spartan does an excellent job of creating a store that matches the personality of the independent and his operation," says Van Gilder. "Their design people have worked with many different operators, and that breadth of experience enables them to understand what you want almost better than you do. They deserve a good deal of credit for taking our abstract ideas and creating a beautiful yet simple store."
Spartan was particularly helpful in the layout and design of the departments that VG had not previously operated. Service meat, on-premise bakery and bulk foods were completely new to the company. Service deli and produce were greatly expanded compared to the other stores.
"to differentiate ourselves from Kroger, we wanted to offer service in as many places as financially feasible." Van Gilder says. "The service departments give our employees an opportunity to pamper customers. We've been pleased with the performance of all the service sections so far."
The 20-foot service meat case has done surprisingly well, accounting for 15% of meat department sales, 2.7% of total store sales. As in all the service departments, the emphasis is on food that appeals to the meat-and-potatoes type consumer, not the gourmet. While store-made sausage, extra-thick steaks and stuffed pork chops are highlighted, rack of lamb and provimi veal are not. "I'm running a meat department in a country town, not a fancy butcher shop in a big city," says meat Manager Dana Cribley.
The bulk foods department, which Van Gilder decided to add shortly before the store opened, has been a traffic-building phenomenon. The 150 barrels, chutes and crocks sell everything from Tootsie Rolls to long-grain brown rice to dog biscuits.
Jerry Herbert, who managed the Sears catalog store in town until his retirement last year, was hired to man the bulk food scales during the day. When shoppers discover him there, it's as if they found a lost friend.
The small-town consumers seem to enjoy the return to the old-fashioned way of buying. As Van Gilder Jr. says, "When we get busy, that bulk section gets so crowded that it's difficult for customers to move from produce to bakery." Bulk food accounts for 3.2% of sales, or approximately $5,100 a week.
By November 1984, Van Gilder hopes the new store still be bringing in $200,000 weekly. So far, sales are ahead of schedule. "I would not change anything about the VG Food Center in Howell. We created a perfect store for a small Michigan town," he says.
1 FRONT WALL: After walking across the red carpet in the vestibule, customers turn right and pick up a shopping cart. The front wall is filled with special values, case-stacked on risers that also function as a cart tunnel. During the second week of December, the wall of specials featured 16 different products--the lead item was 16-ounce cans of Spartan vegetables, priced at three for 88 cents. "We change the items along our front wall every week to always offer shoppers something different at an extremely low price," says Russ Van Gilder Jr., store manager.
2 PRODUCE: Accounting for 7.5% of sales, about $11,600 a week, produce is performing well for the winter season. Managed by Debbie Metcalfe, the department is VG's first foray into bulk produce. A refrigerated case along the front wall starts with salad items, curves around the corner with vegetables and concludes along the right wall with fruit. To present as many products as possible in 80 feet of space, small green bins are used to display sparse movers such as bulk spinach and fresh artichokes. This permits stocking three products in space usually used by one.
3 BULK FOOD: A last-minute addition, bulk food is probably the most talked about aspect of the new store. The department is divided into four groups: cookies; candy and nuts; snacks, pasta and baking needs; and pet food. Candy and nuts run along the first gondola and are merchandised in three types of containers--chutes, plastic bins and large plastic buckets on wheels. "By using different types of merchandisers, we were able to get more varieties of bulk nuts and candies into that limited space," Van Gilder Jr. says. The majority of bulk items sit in cardboard barrels covered to look like wood. The 32 barrels in the first section contain mostly pasta and snacks; the barrels in the second section hold baking needs and other assorted items; and pet food sits alone. Two manned scales provide a point of customer contact. Bulk food represents 3.2% of sales.
4 BAKERY: Although VG had never operated an on-premise bakery before, management felt a bakery was important to the perishables mix. With help from bakery specialists at Spartan, bakery Manager Tony Conrad set up a department to appeal to the tastes of country consumers. Two-thirds of the service case is filled with cinnamon twists, crullers, bismarcks and other variations of the doughnut. The remainder of the cases displays decorated cakes. Bread, rolls and other store-baked goods are merchandised from self-service wire racks. Bakery accounts for $4,185 in weekly sales, 2.7% of the total.
5 DELI: "Deli is a department where you can use your creativity to excite consumers," sayd deli Manager Debbie Warner. Her creative touches include a Pac-Man game made from a cookie and raisins placed in the tapioca pudding; a mouse made of radishes in the lime mousse; and a holiday wreath drawn in colored chalk on the blackboard that highlights specials. Deli represents 3% of sales, or $4,650 a week. The service cases are filled with 45 varieties of sandwich meat and eight types of cheese, and workers will gladly concoct any sandwich a customer requests. Fried chicken, priced at four pieces for $1.89, moves well. Says Warner, "We're the closest thing to a fast food restaurant that Howell has." Deli also oversees the island cheese case, which features specialty cheeses such as dill havarti and sharp pinconning.
6 GROCERY: Moving approximately $67,000 of product weekly, 43% of store sales, grocery has been performing well considering the predicament that operating in Howell presented. The elder Van Gilder explains, "Even though Howell is only 25 miles from our nearest store, it sits within the Detroit rather than the Flint marketing area. And Detroit has a different pricing structure than Flint. Whereas Flint stores have everyday low prices across the board, Detroit area supers have higher shelf prices and more low-ball specials. We've had to learn a totally different way of operating." To make a price impression, VG has been buying a lot of deal items and displaying them on endcaps.
7 MEAT: To give shoppers more choice, Van Gilder decided to make meat a mixture of service and self-service. Meat represents 18% of sales, about $28,000 weekly, with service meat making up 15% of the meat total. "We sell the same meat in our service and self-service cases, but we cut it much thicker for the service side. When people see those 1- to 2-inch steaks and chops, they buy them," says Dana Cribley, meat manager. Per pound prices of meat in the service case match self-service prices. The 48-foot, triple-deck case begins with 8 feet of family packs, including VG's own version of chicken nuggets. Signs above the self-service case say, "VG, Value Guaranteed."
8 NON-FOODS: Like most Spartan-supplied independents, VG has an extensive selection of health and beauty aids and general merchandise. "Non-foods are important to a small-town store because of their contribution to the bottom line," says Van Gilder Jr. "We do everything possible to sell as many non-foods as we can." Greeting cards and magazines receive a prime position next to the checkstands at the Howell store. General merchandise and health and beauty aids represent 7% of sales.
9 FROZEN FOOD: Positioned in the 11th aisle of the 13-aisle store, frozen food accounts for 5.5% of sales. The department consists of back-to-back, well-type cases stocked with ice cream, desserts, juices and breakfast items, plus 72 floor feet of multi-decks filled with frozen vegetables, TV dinners, fish, pizza and other products.
10 DAIRY: The 68 floor feet of dairy cases acount for 9% of sales. The store has a rear-loading milk cooler in the back rear corner and all milk is sold from wheeled racks. To create a massive cheese display in a standard dairy case, plastic laundry baskets are put on the bottom shelf, then filled to the rim with packages of colby, muenster, cheddar, Swiss, American and other popular cheeses. Eggs are sold in 24-count cartons.
11 FRONT END: Van Gilder is delaying the installation of scanners for several months. "We didn't want to both break in a new store and learn scanners during the holiday period," he says. The store stresses fast checkout, and will immediately open an additional register when a line develops. As Van Gilder says, "I'm a fanatic for front-end service," A double conveyor system moves bags of groceries outside where they are loaded into shoppers' cars as they drive up. Three-fourths of customers take advantage of the parcel pickup service.
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|Title Annotation:||supermarket competition|
|Date:||Feb 1, 1984|
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