Wegmans Sees Smaller Stores as Good Fit in Beantown
Wegmans is looking into opening up locations in the city of Boston but officials are admitting to being apprehensive about the move.
"In some ways, coming to Boston is terrifying,’ Wegmans chief executive Danny Wegman said in late March during a speech before the Greater Boston Chamber of Commerce, according to The Boston Globe. "Going from 130,000 feet to 70,000, you’re making an enormous amount of guesses. This is a big deal for us.’
Last October, the Rochester, N.Y.-based company, which has 72 stores, opened its first store in Massachusetts in Northborough, measuring 138,000 square feet. In Spring 2013, a 140,000 square foot store is scheduled to open in Burlington, MA. In Fall 2013, a third location, measuring only 70,000 square feet, is due to open in Newton, about eight miles outside of Boston. Representing Wegmans’ smallest opening in a decade, Newton is expected to serve as a model for potential Boston locations.
"It is a new design for us, a new concept for us,’ Jo Natale, a Wegmans spokeswoman, told the Globe at the time the Newton opening was announced in December. "It’s a great location in a densely populated area that is close to Boston.’
While equally praised for its friendly staff, a scaled-down Wegmans may dilute the expansive selections that the chain is known for. A typical Wegmans has 70,000 items compared with about 45,000 at a traditional supermarket. Its enormous displays of cheeses, chocolates, wines and other categories would likely be shrunk. The Newton location will still feature a Market Café, its popular sit-down area featuring prepared foods offerings.
The Globe report noted that at 70,000 square feet, the store would still be larger than most New England supermarkets.
Before the Greater Boston Chamber of Commerce, Mr. Wegman indicated the Wegmans was "looking at a couple of sites’ in the city of Boston and reports indicated locations in the South End and Fenway neighborhoods were being scouted.
While admitting some trepidation, the CEO told the audience that he is "fascinated" with the Boston region because it is the most highly educated and densely populated market the chain has entered, according to the Globe.
"We believe we belong in Boston, not just in the suburbs,’ Mr. Wegman said.
Discussion Questions
Discussion Questions: What challenges will Wegmans face with its smaller format that it does not with larger stores? Do you see Wegmans taking a similar approach in other urban centers, such as in New York and Washington, D.C.?
I would think the challenge in Boston would be less about store size (I grew up there with small suburban stores) but with coming into a new market with long-established players (Stop & Shop, Shaws) and not a lot of economy of scale (only a few stores in the area).
Greater attention to shopper logistics is one challenge that comes to mind. Parking, supplier deliveries and efficient planogram design and execution come to mind. It is easier to overlook these issues when you have 100,000+ square feet of store and at least that much for parking in a suburban environment. The urban environment challenges the effective and efficient use of square footage and of course the items you choose and how to sell them within those square feet requires understanding the community your store will serve. Trader Joe’s has been dealing successfully with these challenges and may serve as a good model. After several years of debate, Lund’s will be opening a store in downtown Minneapolis. Being similar to Wegman’s, it will be interesting to see how they address the challenges.
While I can’t speak specifically to Wegmans and their own situation, I can share the success that grocers like Longo’s has had with their move into the city-centre of Toronto. Long known as a full line grocer, they’ve opened stores in the ‘heart’ of the city. One third the size of a normal store. An intelligent pairing down of the product offering that recognizes the customer at this location lives in a condo, lives fast, lives a lifestyle, and lives without much storage space. Beyond the challenge of product assortment (which they’ve solved well), logistics form the biggest hurdle. Ever try driving into the city during the day?
Setting aside all these challenges that Wegman’s or others may face is the one simple retail truth … go where the people are. More grocers should be building city-centre concepts.
Wegmans should have no trouble downsizing a bit. As noted, 70,000 sq. ft. will still be larger than all those boring and dull chain grocers currently operating in the area. The only thing boring about Wegmans is they are predictable — they win every time.
It’ll be SKU rationalization, and probably labor. To my mind, Wegmans is practically a different class of trade from “supermarkets.” They should be very well received. I agree that choosing what to cut will be difficult, but Wegmans’ instincts have always been terrific. Call it a bias of someone who moved from the city to the wilds, but I have a hard time imagining store associates being as consistently good in Newton as they are in the more countrified versions of Wegmans that I commonly visit. I suspect that if Wegmans succeeds here, it’ll use its learnings in other urban locations. But I doubt you’ll see anything approaching a cookie-cutter format.
Manhattan is ready for Wegmans. The alternative supermarkets (Whole Foods and Traders Joe’s) have been successful. The old line stores (D’Agostinos and Food Emporium) offer nothing unique. The challenge of course is space, but like Whole Foods, Wegmans’ type merchandising would be conducive to a multi-floor layout.
Downtown Boston has a long history of hostility towards big box retailers. Once past the construction phase (no small task), Wegmans will have to face fitting 130k into 70k. IMHO, they would be much better served in editing departments than trying to downscale every department to fit into the smaller footprint. One of Wegmans greatest attribute is the incredible visual impact of its key departments and the authority that provides.
Wegmans’ management is simply the best in the business. I expect they will figure this out.
The cost of doing business is very high in Boston, but Wegmans caters to the high-end customer anyway, so it should be no problem. Wegmans runs great stores, and they will succeed for sure.
They face the challenge of what to keep in the smaller format. I’ve been to the new Northborough store several times and can’t believe the traffic and ‘buzz’ this market entry created. They will win in small format by keeping all the fresh foods and home meal replacement items — beer and wine would also be a ‘keeper’.
Wegmans will do just fine in Boston, even with their smaller store format. Look at the competition; Stop & Shop survives on its past rep and excellent real estate. But its stores are either old and tired, or the new ones are unimaginative. Shaws is dying on the vine. Market Basket is doing phenomenally well, but goes after a different customer than Wegmans.
I am sure in Wegmans’ quest to “wedge” smaller stores into Boston’s denser, more upscale areas, it will take space from the less image sensitive dry areas while still leveraging what it does best: perishables and prepared foods. Wegmans could easily take 25% out of its dry grocery and GM without hurting its ability to excel in this market. Greater Boston retailers better beware; the market could ultimately be dominated by three operators: BJ’s, Market Basket, and Wegmans.
I think Wegmans will use this smaller store in other market areas as well, but it will always be as part of a hub and spoke strategy. Strategically placed aircraft carriers [130k square foot stores] surrounded by cruisers.
Location, location, location are the key challenges for Wegmans. Boston is a location town with many neighborhoods. Getting the right mix for the right location will be the greatest challenge for Wegmans, not just getting the right mix for the right size store. This, combined with keeping their excellent customer service excellent, should be Wegmans’ key focus.
Wegmans is at the threshold of something new and very intriguing. I believe they will be successful and starting something the larger cities need. This will be interesting to go back to in a year and review what the results show.
First off, everything’s different about a smaller concept; assortment, staff, marketing, building cost … but the biggest challenge is simply logistics. Think recalibrating the docks of your distribution center, buying new trucks, changing skid size (!), smaller trucks in store … on and on.
Logistics and the math issue. How long does it take for an urban store to hit the revenue/profit numbers of a single big box out in the boonies? Or, how many urban stores do you have to build and at what cost to reach the equivalent of one big box? Yeah, simple math.
Despite the difficulties (including entrenched locals), it may still be worth it for the brand. Depends on tolerance at leadership level. So, for Wegmans and many others, we’ll soon find out!
Wegmans has a solid opportunity to succeed in Boston; their focus on fresh and deli products, and good quality products will appeal to local shoppers. They seek to understand the community they serve, then invest, experiment … and listen. With the right assortment and excellent customer service, this could be a winner here and in other urban areas.
Have you watched the CNBC documentary, “The Costco Craze?” It’s still available this week, and provides an interesting snapshot of the retailer.
A great deal of the documentary is devoted to profiling Jim Sinegal, a Costco co-founder. Among his many comments, one in particular struck me. He spoke about the 4,000 items Costco carries and compared it to the hundreds of thousands stocked by Walmart. His explanation for the success of such a limited assortment was that many customers often prefer fewer choices rather than several. For them, dozens of sizes, brands, and flavors for a single item causes them to make no choice at all. Thus, for example, Costco carries one Ketchup – Heinz – in one size. Period.
Warren Thayer is absolutely correct in identifying one of the challenges of a smaller Wegmans as knowing which SKUs to cut. “SKU rationalization.” And while the business models of Wegmans and Costco are very different, surely they can borrow successful ideas from each other.
I hope so. I tried to get them to open a severely smaller store, which was the first ShopRite, in South Orange, NJ years ago. It’s still a fraction of the 70k square feet, but is directly next to the commuter rail station that offers 1/2 hour ride to Penn Station, NYC and handles over 3,500 commuters/day. It would have been great to offer mostly prepared foods and some basics to the elderly population in the area and commuters. Eden Gourmet finally opened in the 14,000sf space, to rave reviews and much success.