Wegmans defying assumptionsSeptember 22, 2017
By Kerry Feltner | Rochester Business Journal
For over a century, Wegmans Food Markets Inc. has been an integral part of Rochester’s DNA.
But these days, it’s far more than just a regional brand. In the last three decades the company has grown into one of the world’s top supermarkets, logging about $8.3 billion in revenue last year alone.
The story of Wegmans can be summed up by a proverb, one expert says. Burt Flickinger is managing director of the Strategic Resource Group, an executive lecturer on the future of marketing and retailing at Cornell University, and also sits on the business school’s executive advisory council. How Wegmans has grown in 30 years has been amazing to watch, he says.
“Wegmans is that proverbial David-versus-Goliath story,” Flickinger said, “because you go back to late-‘60s, early-‘70s and Wegmans is only the fourth-largest retailer in Rochester. Wegmans has the best professional leadership, but it also has a strong spiritual foundation with a professional foundation. They’ve always believed in the biblical golden rule of the Old Testament: Do unto others as one would have done unto themselves.”
Through changes in technology, consumer demands and Rochester, itself, Wegmans looks at the world through one filter: what’s best for its employees.
“Our success is the result of our business philosophy,” said Jo Natale, vice president of media relations for Wegmans. “We set our goal to be the very best in serving the needs of the customer. We also believe that we can only achieve our goal if we first fulfill the needs of our people. It’s that idea of putting your employees first and knowing that, if you do that, they will take care of your customer.”
Natale says that mission has always helped the company navigate the changing times.
“Through all of that change, the first question that is always asked is, ‘what will this mean for our employees?’ No matter what decision is made here, that’s the first question that’s asked,” Natale said.
In 1987 Wegmans had 38 stores, limited to New York state. The company started expanding outside of New York in 1993 with a store in Erie, Pennsylvania.
Today, Wegmans operates 95 stores in six states: Virginia, Massachusetts, New Jersey, Pennsylvania, Maryland and New York. The company also has plans in the works to open a store in North Carolina.
“Wegmans is just very humble,” Flickinger said. “They don’t celebrate. Wegmans just quietly wins. Wegmans wins in every store, in every season, every year.”
The company employed some 47,000 people at the end of 2016. It ranked No. 3 on the 2016 RBJ 75, a list chronicling the region’s top employers, with more than 13,000 local employees last year.
“Wegmans has always taken its time selecting new sites,” Natale said. “We build just three or four new stores each year and that allows us to take the time necessary to hire the best people and invest in training. As a family-owned company we don’t feel the pressure to grow rapidly.”
Retail is experiencing store closings, the demise of shopping centers and malls, and the loss of many jobs. But Wegmans seems immune to this downward spiral, Flickinger says.
“We’re in this accelerating retail ice age across America that’s just creating the destruction of shopping centers and food retailers, where Wegmans, on the other hand, is saving shopping centers and saving communities,” Flickinger said. “Everybody wants to be co-located with Wegmans because they’re a responsible tenant. They contribute to the community and raise everybody’s standard of living, and save shoppers so much money that shoppers can afford to shop at every other store in the mall.”
The focus on serving employees well, who then serve customers well, is what has set Wegmans apart.
“What Wegmans does exponentially better than any other retailer is to really identify the best families, the best students, the best student leaders,” Flickinger said. “Wegmans gets the best and the brightest and really has loyalty for life, and they develop such a great esprit de corps amongst their workforce.”
The company has also maintained a focus on saving customers money.
“Wegmans was the only retailer to consistently line price with Walmart,” Flickinger said. “Ninety-nine-point-seven percent of America is suffering economically. Working people are getting crushed, students are getting crushed, middle class has been getting crushed for 20 years and Wegmans is the solution.”
“Looking at the new Whole Foods prototype, it’s proverbially sucking air compared to the Wegmans around the corner,” he added.
In 2008 Wegmans decided to stop selling cigarettes. That decision says a lot about what the company’s goals are, says Bob Duffy, president and CEO of the Greater Rochester Chamber of Commerce.
“They’re committed to raising the level of health for this community,” Duffy said. “They’ve made decisions such as stopping selling cigarettes at one point. That decision lost them millions of dollars in profits but they made that decision on principle, and that defines their success.”
“The aspect of the Wegman family which I love most is they do so much of this quietly, behind the scenes. They don’t seek recognition, they only seek results and change, and it defines who they are,” he added.
Rochester’s support has helped propel Wegmans forward. The city and its people have helped the company become what it is today, Natale says.
“It’s very difficult to overstate the role that Rochester has played in so many ways,” Natale said. “I think first and foremost it’s the people from Rochester. Not only the customers—of course, the customers—but so many people in Rochester have worked at Wegmans. We were the first job for many. There are so many who came to Wegmans as teenagers and have grown with the company, and they’re in leadership roles today.”
“This place and the people who live here have been vital to our success and the growth of our company,” she added.
The phenomenon of Wegmans continues as the company expands. Consumers have an affinity for the brand that is deeply felt, Duffy says.
“How many supermarkets in this country will open up a store and have hundreds of people lined up outside to get in with no coupons, nothing, just to get in the store because it’s the experience, it’s the customer service that they provide, it’s the quality,” Duffy said.
Despite the changing retail landscape, Flickinger says one thing is clear for the next 30 years:
“If you look into the future 30 years from now, Wegmans will likely be one of the top three to top five retailers and restaurateurs across America,” Flickinger said. “This retail ice age we’re forecasting is hitting. This time next year there will be 10,000-plus store closings; there’ll be hundreds of retail bankruptcies from numerous top 10, top 20 chains. Everybody will be on the run, from discount stores to dollar stores to chain drug to food retail.”
“The one lighthouse that will be leading the way for successful retailing, anchoring the successful AAA shopping centers in America, will be Wegmans,” he added.
The company could become a more-than-$100-billion firm at the pace it’s going, Flickinger says.
“Looking out 30 years from now Wegmans can easily be a chain of $100 billion, and if they want to accelerate their growth, they’ve certainly developed a leadership team at the store level. Wegmans could easily be $140-170 billion,” he said, “and be, if not number one, one of the top two food retailers anywhere in America.”
Even with the purchase of Whole Foods Market Inc. by Amazon.com Inc., Wegmans will continue to dominate the markets it serves, Flickinger says. The key with Wegmans is the focus on detail.
“Wegmans is very conservative and financially astute,” Flickinger said. “They tend to buy their own real estate; they pick the people with whom they co-locate. Wegmans will bury Whole Foods. Amazon.com will lay waste to retail worldwide; yet, at the same time, Amazon will not touch Wegmans because Wegmans is ahead of Amazon with the brilliant Instacart delivery.”
The real reason for success is multiple generations of solid leadership, Flickinger says. Keeping a united vision for over a century takes thoughtful planning and strategic leadership.
“The key is leadership, and Wegmans has great family leadership combined with great professional leadership,” he said. “Wegmans does all the little things right, which is why Wegmans wins in a very major, meaningful way every time.”
Wegmans also wins by always striving to be better, Natale says.
“We’re not a public company,” she said. “We believe that measured growth has been one of the reasons for our success. As a family-owned company, we can take a long-range view of the business. We’re not concerned about short-term results. Our goal has never been to be the biggest, just the best.”