How Wegmans Keeps Winning
Since the beginning of the COVID-19 crisis, dire predictions about the state of the grocery industry have been pouring in from all directions:
“It’s an extinction event for the grocery store as we know it.”
“The pandemic will change the grocery experience, and not for the better.”
- At its new West Cary, North Carolina, store, which opened in July, Wegmans has adapted its signature expansive foodservice offering to emphasize safety and sanitation during the current pandemic and beyond.
- The grocer is also attracting customers by accelerating efforts to become an online destination and focusing on sustainability.
- Wegmans’ formula for the ultimate one-stop shop might be the path forward for the grocery industry in a post-COVID world.
But the post-pandemic grocery experience is already here, and it might be even better than the pre-pandemic grocery experience.
In a sparkling new strip center in the Raleigh, North Carolina, suburb of West Cary, shoppers at the new 103,000-square-foot Wegmans Food Market there enthusiastically proved all of the doom and gloomers wrong last July 29 with a packed house on opening day — attended by customers wearing masks and socially distancing, of course.
Shoppers grabbed tongs with their bare hands and served themselves chocolate chip cookies and bagels from the self-service bakery case. A woman and her grandson headed for one of the store’s many restaurants to sample — yes, sample — Carolina pulled pork. And for digital shoppers avoiding the store, cars could pull into a lane outside and pick up groceries curbside.
Curbside grocery pickup during a pandemic is nothing new, of course. But the premise of opening an experiential grocery store in 2020 with restaurants, sampling and self-service features would seem at odds with the behaviors required to curb the COVID-19 pandemic.
Yet Wegmans, the family-owned grocer with one of the most devoted followings in retail, is betting big on this strategy as it continues its expansion southward during a historic crisis. And “The Wegmans Way” could serve as a blueprint for grocery retailers desperately trying to figure out what shoppers will want, and how they will want it, in 2021 and beyond.
Major Supply-Chain Move Aids Southern Expansion
By Mike Troy
One of the ways that Wegmans Food Markets plans to keep winning is with much-needed supply-chain investments to serve the expanding base of stores that it operates in a wide range of sizes and sometimes unique locations.
A good example of the latter is a store scheduled to open later this fall in Tysons Corner, Va. The urban location is part of the Capital One Center mixed-use development, a complex of buildings that includes the headquarters of financial services firm Capital One, a hotel, residences and an 80,000-square-foot Wegmans on the ground floor of a 10-story building with a 1.2-acre rooftop park dubbed The Perch.
The Tysons Corner store is a little on the small side for a Wegmans, although it’s larger than a 74,000-square-foot store that opened in Brooklyn, N.Y., in October 2019. The company has also been known to think much bigger when the right opportunity arises. That was the case in April 2018, when the retailer took advantage of a two-level space vacated by J.C. Penney at the Natick Mall, in Massachusetts, to open a 146,500-square-foot store.
These locations tend to be anomalies, though, as Wegmans’ sweet spot, based on the majority of recent openings, is in the 100,000- to 120,000-square-foot range. This was evident with the company’s first North Carolina store, a 104,000-square-foot location in Raleigh that opened last September, followed by a 103,000-square-foot location that opened in West Cary in July. Rochester, New York-based Wegmans has big plans for North Carolina, with two more locations confirmed to open next year in Chapel Hill (spring) and Wake Forest (summer), followed by other locations in Holly Springs and Cary.
To support those locations, Wegmans plans to open what it calls a “retail service center,” or what others refer to as a distribution or fulfillment center, near Ashland, Virginia. The $175 million facility won’t become operational until 2022, but when it does, the roughly 1.3 million square feet of office and warehouse space will accommodate further growth in North Carolina while improving support for stores in Virginia and Maryland.
The facility is much needed, since Wegmans’ current retail service center in the central Pennsylvania community of Pottsville requires trucks to travel great distances to service stores. For example, the new stores in North Carolina are nearly a seven-hour drive from the Pottsville facility, which also services stores in eastern Massachusetts that are roughly five hours away.
Retailers typically prefer supply-chain facilities to be in closer proximity to stores for more efficient and timely replenishment, and reduced transportation costs. Wegmans’ Ashland facility addresses the proximity issue and sets the company up for growth in southern markets with growing populations to offset challenges in some northeastern areas with flat to declining populations.
“Once it’s up and running, this facility will allow us to deliver products to our southernmost stores with increased speed and freshness, and will help support our growth well into the future,” Wegmans President and CEO Colleen Wegman said when the Ashland facility was revealed.
By the time the facility opens, in two years’ time, Wegmans expects to have 25 stores operating in Virginia and North Carolina, and to be expanding at a rate of two to three locations annually, according to planning documents submitted to Virginia’s Hanover County.
The seismic shift in shopping habits this year means that many consumers are making larger-basket, less frequent trips to the store (Wegmans reports that its basket size is up as much as 40% this year). At the same time, many shoppers have grown tired of cooking at home during months of quarantine, and they want convenient ready-to-eat meals at a value in a safe social setting as they continue to avoid traditional restaurants.
This means that operators such as Wegmans that have expansive foodservice offerings — with recession-friendly prices and pandemic-friendly larger spaces — seem poised to hold a significant advantage over competitors. The large common dining areas that are the hallmark of Wegmans stores can give shoppers a sense of dining in a safe yet social setting, with less risk of contracting the coronavirus.
“We opened West Cary with a team in place to focus solely on the sanitation of high-contact touchpoints and ensuring routine preventative measures throughout the store,” Duchnowski notes. “Plexiglass shields were installed at all our registers. We placed visual indicators throughout the store to encourage all customers and employees to be respectful of social-distancing guidelines. In addition, we installed a camera outside the store to allow customers to see if there is a line to enter the store.”
Another way that Wegmans is winning over customers is by accelerating efforts to become a destination online. Among its key competitors along the East Coast, Wegmans is blazing a new trail by putting everything — and I mean everything — online, from paper towels to hard seltzer to hot egg rolls.
Earlier this year, the grocer redesigned wegmans.com and the Wegmans app to allow shoppers to see digital coupons as they build a personalized shopping list. Shoppers also now get more personalized search results on both platforms. Additionally, both the website and app were updated to offer more options for curbside pickup or delivery.
At the West Cary store, Wegmans didn’t just add just one curbside pickup lane, it offered two: one for groceries and one for foodservice. Today, shoppers can order a hot dinner of chicken tikka masala for four — or 24 — and pick it up curbside while never having to get out of the car.
“Our catering is available on Meals 2 Go,” Duchnowski says, “so if a customer is hosting an event, having a party, or even just having a nice dinner with family, all of that can be ordered from our catering department, and all of it is something that we can deliver as well.”
In addition to partnerships with food delivery app DoorDash, Wegmans is also pioneering a new arrangement with Instacart.
“Instacart does our grocery delivery, but some of the shoppers in-store are Wegmans team members, and some are Instacart,” Duchnowski explains. “We team up with the Instacart shoppers. We learn from each other, grow efficiencies together. They teach us how to shop a little quicker, and we know the store better, and so we’re able to help them. So it’s kind of like a nice, you know, collaborative thing that we do that we started because of the demand we really had.”
Last year, Wegmans launched Wegmans SCAN, a free mobile app that customers can use to scan and bag their groceries while they shop. The app tracks a running total for the order, so consumers know how much they’re spending, and it automatically applies any available coupons or discounts. When customers finish their shopping, they simply walk up to a kiosk or register to pay.
“After a customer downloads our app, they can bring their bags and start filling them up as they go, and then they can take their phone to the self-checkout register and scan a bar code and they’re done,” Duchnowski says. The company is also working on checkoutless technology to make shopping even more convenient.
“In the near future, the customer won’t even have to go to the register,” Duchnowski observes. “We’re actually working with Toshiba on that project right now.”
Another way that Wegmans is winning is with its sustainability efforts. The grocer routinely tops various lists of best workplaces and grocery stores in the United States. It has been named one of the 100 best companies to work for by Fortune magazine for 22 consecutive years, and this year, it tied for first place as the top-rated grocery store chain on the American Customer Satisfaction Index.
Wegmans is also known for its history of charitable donations and community outreach programs, as well as for its environmental initiatives.
When the dust settles from the pandemic and Americans return to dining out and shopping their grocery stores with ease, Wegmans’ formula for the ultimate one-stop shop might be the path forward. The company has survived a range of disasters over the past 104 years and knows how to quickly pivot to satisfy a broad range of shoppers’ needs and wants.