WinCo Succeeds By Knowing and Serving Its Customers
Bill Long, the chairman and former CEO of WinCo Foods, knows there are certain groups of customers that his company doesn’t do very well with.
“We do very poorly with the elderly,” he told the Idaho Statesman. “Our stores are too big, we don’t carry small sizes, and we don’t have a lot of services. And single people aren’t that interested in our product mix because we don’t carry the high-end stuff.”
On the other hand, Mr. Long said, “Growing families like us, and there are a lot of them. That’s our customer base.”
The employee-owned company, headquartered in Boise, has succeeded by not attempting to be all things to all people. Instead WinCo has focused on cutting costs in every area of its business so it can offer prices that can compete even with the likes of Wal-Mart.
Speaking of the emergence of Wal-Mart’s Supercenters, Mr. Long said, “We decided there is no way we can change. We either took them on, or we went away. There was nothing else to do.”
While WinCo has grown to a $3 billion enterprise with about 10,000 employees, the company (despite the Statesman article) tends to keep a low profile.
Mr. Long, who resigned as CEO back in December and was replaced by Steven Goddard, said, “I always disliked the CEO being interviewed at his desk, saying how he changed the structure of the company. I refrained from doing interviews because I thought it was detrimental to the morale in the company. WinCo was built with the help of a lot of people.”
A focus on its people is a WinCo constant. Under Mr. Long’s leadership, company executives were required to work at all new store openings doing cart runs and other tasks handled by the front line.
He made a point of getting out to stores during the Christmas season to meet with as many workers as possible.
“It gives the employees a lot of confidence,” Mr. Long told the Statesman. “If they got a problem they know where to go. Employees should always know their CEO.”
Discussion Questions: What do you see as the strengths of WinCo Foods? How much of a part, for example, does being employee-owned play in the company’s success? What challenges does WinCo face?
WinCo’s greatest asset is its knowledge that it isn’t a store for everyone. Nor trying to be all things to all people is a huge advantage in retailing. The major challenge is successfully determining the upper limits of growth based and stopping once they are reached. Overextension is a curse in retailing, one that should be avoided at all costs. As to whether or not employee owerership is an advantage, do we have to look much past Hy-Vee?
WinCo works because it knows what it does best and sticks to it. Focus creates economic value and WinCo subscribes to the philosophy 100%. It’s certainly something most other retailers could learn from. There is very little difference between WinCo and Southwest Airlines. Both have a very tight business model, both don’t try to serve everyone and both are led by management that is not ego-driven.
WinCo stores average 90,000 square feet, so their merchandising impact is much greater than many other supermarkets. That merchandising dominance leads to the profits that have given the employee-owners a 21% compounded return on investment since 1985. Without the profits, the ESOP wouldn’t be a great employee loyalty tool. Without the merchandising impact, the profits would be mediocre. WinCo’s success is not just because of employee ownership. It’s the combination of successful merchandising profits combined with employee ownership. If Farmer Jack was 100% employee owned starting tomorrow, the company wouldn’t do well until its other basic business strategies changed, too.
WinCo faces the same challenges as any other retailer, however, it’s how you address and respond to such challenges that matters. The success in relationship to being an ESOP company is obvious. It plays a huge role. Yet, that must combine with leadership. Publix is also another great example where ESOP and sound leadership have worked.
And a brief note to Mark, the major reason that an ESOP program wouldn’t work for Farmer Jack is “A&P closed the remaining Farmer Jack stores on July 7, 2007.” However, he is correct. The major flaw with Farmer Jack’s success–or better put, failure–had less to do with its associates and their ownership or lack of ownership, it was far greater than just one factor.
A clear focus on knowing your customer, meeting their needs and not deviating from your mission is a very large factor. While they are not an ESOP, these same factors play significant roles in other successful retailers’ performance. Costco and Target come to mind.
WinCo has one of the most unique store layouts I’ve ever seen. If you look closely, everything is laid out in proportion to how often it needs to be replenished. The skids at the entrance aren’t just there to entice you; they’re there so they don’t have to be filled often. This is a basic principal in retail, but WinCo executes on it throughout the store.