Photo: Wegmans
Will Wegmans need a post-pandemic makeover?
A Wall Street Journal article asserts Wegmans’ management is “rethinking how much food and how much customer experience it can offer — and how much customers will want” as the grocer adjusts to COVID-19.
The rethinking of assortments comes after Wegmans adjusted SKU counts at the height of the pandemic by as much as 40 percent to avoid out-of-stocks on staples. The cuts included fewer varieties of pasta sauce, yogurt and butter.
The Journal reports, “The company is learning that shoppers will accept fewer options and executives are thinking carefully about the level of assortment they will need in the future.”
Prior to the pandemic, Wegmans carried between 50,000 to 70,000 products versus the 40,000 in an average supermarket. The mix included more than 4,000 organic items, making it the go-to supermarket for hard-to-find specialty products, according to a new profile on the grocer by Frozen & Refrigerated Buyer.
Art Suriano, CEO of The TSI Company and a RetailWire BrainTrust panelist, told Frozen & Refrigerated Buyer that the extensive assortments are part of the reason Wegmans offers more of an “experience” than a routine trip to the supermarket. “Customers have an opportunity to not just shop but to explore,” he said.
The Journal also explored Wegmans’ closure of self-serve hot and cold food bars, sampling stations, cooking demonstrations, freshly-sliced deli meat options and other “indulgences” in response to COVID-19 safety protocols as well as the challenges the grocer will face bringing the services back.
The changes have led to speculation that Wegmans will make other changes, in part, to make room for emerging opportunities. The Journal reports that the chain’s executives see long-term opportunities from prepared family meals, with more cooking being done at home, as well as a bigger online opportunity.
On June 30, Wegmans announced it would be closing its 12 Pub by Wegmans locations in stores in New York state, Pennsylvania and Virginia. Wegmans said in a media statement, “We are focused on applying our culinary expertise to the increasing demand for fast, casual meal solutions available in our stores, for pickup, and through delivery.”
- Wegmans Pampered Its Shoppers. Now It Has to Protect Them. – The Wall Street Journal
- Frozen & Refrigerated Buyer July 2020
- Covid 19 Response – Wegmans
- Wegmans permanently closes all Pub locations in NY, Pennsylvania and Virginia – Rochester Democrat and Chronicle
- It’s closing time for the Pub by Wegmans – Buffalo News
- Wegmans Pivoting on Foodservice? – Progressive Grocer
Discussion Questions
DISCUSSION QUESTIONS: Does it make sense for Wegmans to trim back assortments and other parts of the store experience in response to the pandemic? Which offerings at Wegmans seem less relevant in the medium- and long-term?
Poll
BrainTrust
Ben Ball
Senior Vice President, Dechert-Hampe (retired)
Peter Messana
CEO, Searchspring
Grocery stores are in trouble, most saw online sales go from 4 percent to 15 percent. While that sounds awesome, most of them were not profitable with online sales. They were all still trying to figure out the best way to make it profitable when thrusted into handling the COVID-19 pandemic. It isn’t an assortment issue as much as a product discovery issue. You lose impulse buys and it is harder to drive higher margin items online if you aren’t well versed in online merchandising and don’t have the proper tools to curate search and browse pages properly with the added bonus of recommendations to drive impulse buys as much as possible.
Safeway knows how to do online sales profitably. In Northern California they charge 10% above their store prices for online orders (their store prices are already outrageous). This is the reality in the thin margin grocery business. You either mark up the service, or you lose money.
Wegmans’ assortment pruning makes nothing but sense and may even be a bit tardy. Impulse shopping has quickly evolved from an indulgence to a stress-inducing experience during COVID-19. With so much conflicting and blurry information being circulated regarding virus transmission, experiential food retailing and sampling are shopping speed bumps. Wegmans would be wise to reconfigure its stores to focus on grab-and-go rather than banking on dwelling and browsing.
Carol, thank you for pointing out something that subconsciously I knew but as a shopper didn’t realize – that is, I don’t go down the aisles and look for new products when I go shopping now. It is very much get in, get what I need and get out. I think this applies to most shoppers now. Shopping used to be a family event, but it’s far from that now.
Changing a formula as successful as Wegmans’ in response to an episodic event seems extreme. It will take many months to know how much of the supply and risk driven behaviors adopted by shoppers during COVID-19 will stick and to what degree. There will certainly be strong adoption of shopping options accelerated by the virus like online ordering and curbside pickup. But those don’t necessarily negate the advantages of Wegmans’ format that shoppers have rewarded for many years. Let the dust settle and add more than you take away from your overall offering.
Once again, we need to be careful in extrapolating actions taken during the pandemic into longer term post-pandemic trends. During the height of this crisis most retailers and shoppers became less concerned with choice, and more concerned with simply being able to get the products they needed. That already has reverted, and will continue to revert, as supply chain pressures ease and shopping habits revert to normal.
That said, due to margin pressures from a whole variety of sources there is no doubt that most grocery retailers will be looking to make operations more efficient. Part of that means eliminating SKUs that do not pull their weight – either in terms of profit or the differentiation they provide. So yes there will be some consolidation and rationalization, but it doesn’t automatically follow that the wide choice offered by Wegmans – or others – will simply disappear. After all, it’s part of what makes the chain unique.
As a 100-year-old company, I think their understanding of their business is enviable and not tied to whims but data. I’m sorry to see their Pub experiment fall victim to COVID-19 but I trust they will figure it out to find a way to again pamper their customers to a level they are used to.
Wegmans, H-E-B’s Central Market and similar stores that are very food-centric will need to rethink how to re-assort stores (disposable income seems to be less now and people are more careful to hold back their monies due to the unknown) and additionally evaluate how you pull back outdoor dining/music, indoor restaurants, wine tastings and the like.
A lot of the fresh assortment is self-serve (olives, salad bars, soups, etc.) and most have taken that to either that being prepared by an associate (following the strict guidelines in place) or as a pre-made product. I believe until the virus is under control any dining (indoor or out) and any music performances should be tabled so as to not increase the chance for transmission.
Wegmans is one of the most customer-focused retailers – not just in grocery, but any industry. They know what needs to be done to manage the in-store and online experience. They will make sound choices based on hard data and customer feedback.
Wegmans is doing what every business needs to do on a regular basis, and that is asking questions about the way they are doing things. Why are we doing things this way? Should we be doing things differently? Should we keep doing what we are doing at all?
They should not only ask these questions to their customers; they should also be asking these questions to their employees and their vendors.
I wouldn’t bet against Wegmans. Reducing SKUs is not necessarily a bad idea. SKU pruning doesn’t automatically translate into a significant change in customer treasure hunt perspectives. On the other hand, focusing on fast casual meals fits the Wegmans image. A couple of caveats: 1.) Customers who are COVID-19 fatigued will return to Wegmans to enjoy the freedom and fun of a Wegmans shopping experience. 2.) Whenever we get to a new normal, I see a return of some aspect of the Pub.
I shopped Wegmans the first time 50 years ago. My observation is that Wegmans is not just the most innovative grocer, it is one of the most innovative companies in the world. There is no status quo at Wegmans. They are always working to make the experience for their customer better. (My kids still remember the “cookie club” and my kids now have teenagers of their own.)
Whatever adjustment Wegmans is doing is well thought-out and based on data, experience, research and much observation. If the direction proves wrong, it will change.
I believe Wegmans should trim assortments and switch some stores to a semi-dark model with robotic pick and pack capabilities for customer pickup. Micro-fulfillment in a store footprint is the model of the future. I believe the grocery store of the future will provide a combination of customer browsing for perishables like fruit, vegetables, meat, prepared foods and deli. While ambient, chilled and frozen product is picked electronically in a high density cube that picks in-store orders along with pick up and delivery. These solutions are available, affordable and amazing.
Wegmans’ SKU rationalization means it’s losing one of its key points of differentiation. At what point does Wegmans simply become another grocery store? When it does, can it ever regain what made it a great place to shop?
Wegmans is known for providing a great customer experience–now they just need to determine how to modify that for what consumers want in our new environment. I think this holds true for many retailers that were known for providing an experience, not just selling products. I like the idea of going deeper on meal kits–I’ve seen grocery stores in my area selling kits and positioning them as activities for kids or families to do together. If Wegmans listens to their data and customers, I’m sure they will figure it out.
Meal kits are a huge shrink creator for stores. Already discontinued once, they popped up again in my area at Kroger and Safeway operated stores a few months ago and didn’t sell yet again, even at steep markdowns. They are gone again. People have more time now at home and are preparing more food on their own. As people are watching their money, I have no clue why they would pay prices for a meal kid that are higher than many prepared foods are, then still have to do the work themself to cook it.
Also in talking to some people who used meal kits they did not like the proportion of ingredients. Too much of one thing, too little of another thing. Maybe they didn’t quite like the flavor of an included sauce even if they thought everything else in the kit was okay. So many variables. People have a lot of unique tastes and demands. Of course you can adjust the problem I described above by buying additional of what is “too little” outside the meal kit, but in that case you may as well just make it all on your own.
The meal kit may come back again, once more people are working again. I think a more buffet style meal kit (not loose food — buffet style in terms of components) may work. But Raleys in the west tried a similar concept over a decade ago and again it did not work and was just a huge shrink for the stores.
I seldom question management decisions on specific policies, since they almost certainly have more info available than I do (and I’m not going to change tactics here), but suffice it to say, when one of your major marketing advantages is a broad selection, paring back SKUs is problematic. This would be a really good opportunity to put that intelligence on customer buying habits to good use and make sure all the cutbacks don’t fall on a particular type of customer. I think people will be understanding, even when they lose a favorite item — particularly given the present circumstances — but losing five or six of them is likely to damage the relationship.
Wegmans (the ones I’ve been to in MD, VA, and PA) runs what I call destination stores. A big part of being a destination store is having more SKUs and offerings than the typical “neighborhood store” has. That is what makes people drive past the “neighborhood store” and go to the Wegmans.
Take away a big chunk of the perimeter (no stores in my area discontinued fresh sliced deli meat during the pandemic, though I will say I did not buy any and opted for all prepack off site stuff during the pandemic) and then center store SKUs, and suddenly you take away what made you a “destination store.”
Perhaps this will just be a temporary change and they will ramp things back up again whenever this pandemic is behind us, which appears to be something that will not be happening anytime soon. Those Wegmans stores are expensive to operate and no doubt they are looking for ways to cut costs, and this is one of those ways.
Sad for what was the best grocer in the US to be dumbing itself down.
Wegmans (and many other smart grocers) have learned from the pandemic shortages that shoppers are more flexible than we thought about their item preferences. Reducing assortments by limiting varieties within brands or categories is a prudent step — for now.
It seems clear now that the impact of COVID-19 shopping behaviors in grocery will be a long-lasting phenomenon, not just a “terrible spring.” Wegmans’ recent changes reflect that — for now — and we may be assured this very smart company will make additional adjustments in the future, as market conditions dictate.
Wegmans has survived a range of disasters in the last 100 years, but never a pandemic. But they very much understand a broad range of shoppers reflected in their Northern New York roots along with recessions and depressions which oddly no one here mentions. In that context they are looking at highly uncertain and near impossible couple of years to forecast all of their financials. So cutting back on almost all variables that add up to cash-on-hand while be critical for them to survive in a period that defies planning.
I sincerely doubt that in the surrounding chaos they will lose any of their brand equity or competitive positioning by eliminating SKUs that for the time being represent frozen and unproductive capital. Once something resembling predictable (dare call it normal?!) returns, they will shift back into the hybrid retailer we all admire.
I am fortunate to have worked with Wegmans as a consultant over the years and have observed their strategies.
Wegmans is interesting as they don’t think of themselves as a traditional “center store” grocery retailer. They see themselves (mindset) as a retailer whose objective is to provide quality food, “conveniently” to their customers at an affordable price. They realize they are competing on time and against Quick Service Restaurants (QSRs) and not necessarily against other grocery retail chains. They are relentless when it comes to operating margins and quality of their private label brands.
The closure of services that require close contact of humans and safety risk due to COVID-19 as mentioned in the article are obvious decisions. They, like other full service grocery store chains, have no choice. Wegmans is innovative and they will and have already started to transform the digital experience. Expect Wegmans to leverage their resources and assets to compete just not against brick and mortar, but QSRs, and other related grocery e-commerce providers.
With respect to their item assortment and SKU rationalization, this may only be temporary as they look to pivot to a focus on digital. My prediction is, they will become the “digital destination” for consumers looking for unique gourmet items and expand their assortment, not contract it in the future.