Hy-Vee: Autonomy in action

Hy-Vee c.e.o. Ron Pearson credits the autonomy of the chain's employees for making it so successful. The corporate culture empowers associates at all levels to make decisions and rewards them for it.

The company revolves around its store directors, who are permitted to make all decisions about store operations, including whether to buy from Hy-Vee's warehouse. Only projects that require large capital expenditures must have corporate sanction.

Here are four examples of how store directors have used their autonomy to boost business at their supermarkets and solidify their relationships with their customers.

The clinical approach

About two years ago Ankeny Hy-Vee store director Ken Butcher received a call from a doctor who ran a clinic in nearby Huxley that serves a small community of approximately 6,000 people. The local drug store had moved out, leaving the clinic's patients with no convenient place to fill prescriptions.

Seeing an opportunity to expand Hy-Vee's pharmacy business, Butcher approached headquarters about setting up a satellite pharmacy for the people in Huxley. "For something like this we have to go to corporate for the funds," Butcher says. "The first time we were turned down, but the second time it was approved."

Hy-Vee runs 10 such freestanding clinics, according to Gary Goodhall, assistant v.p., Drug Town and pharmacy operations. "It's basically a straight pharmacy for dispensing medication," he says. "They're located at doctors' offices or part of clinics, and are ideal for a market where the services are needed but a full-service pharmacy can't be supported."

The clinic's P&L is rolled into the P&L of the Ankeny location and falls under Butcher's management, which suits him just fine.

The operation broke even in three months.

Catering to the diners

In 1992, as Hy-Vee's Des Moines No. 2 location was preparing to move to a larger space on the opposite side of the street, its dining customers were concerned. "The dining area had a layout like a traditional diner," says store director Mike Kueny. "There was a horseshoe-shaped counter that wrapped around the kitchen, and the morning customers would gather around the counter and chat with each other for hours."

Although it wasn't in the plans, Kueny decided that if it would keep the customers happy, he would try to retain the same format for the new location. Not only did he succeed in giving it a similar format, he even had the original counter moved to the new place. "We also kept the tradition of 25-cent coffee every day, with free refills," Kueny says. "This is the only Hy-Vee store that does it, and the customers love it. They're here every morning."

When Kueny noticed that the greeting card aisle had less traffic than the food aisles, he moved his magazine section there. "I figured that less traffic would encourage shoppers to browse the magazines more," he says. "That's exactly what they did. Sales in both magazines and greeting cards jumped as a result."

Across the street, not far from the original store location, Kueny opened an outpost liquor store, one of only two operated by Hy-Vee; the remaining liquor stores are attached to supermarkets. "We're able to offer an expanded variety at the outpost store, and it's great for those customers who just want to drop by and grab some quick items," Kueny says.

Indeed, Kueny tries to react as quickly as possible to customer needs. "One morning, as I stopped by the dining area to say hello to the customers, one of them remarked that he could buy a bag of sugar for only 99 cents at the dollar store down the road," Kueny says. "Well, that evening I had four pallets of sugar on a truck headed to the store. The next morning I stopped by the dining area and told that customer not to forget to pick up his 99-cent sugar as he left the store."

On the trail of new business

Daryl Kruse, store director for Hy-Vee West Des Moines No. 2, noticed that nearby Chinese restaurants were doing a thriving delivery business. "First there was one truck out there making deliveries, then three, then five," he says. "I became interested in seeing where they were going and what the market was."

So Kruse did what any enterprising businessman would do: He studied the market—by following the delivery trucks for a day. "One of the places they delivered to fairly often was a nearby apartment complex," he says.

Kruse was already selling Chinese food. But he also offered a few other kinds of prepared food—all of which could be delivered. "We can go to these houses with Chinese food, as well, but also with sandwiches, rotisserie chicken, and pizza," he says. "We already have it here for customers to take home; delivery is just one additional step." Kruse launched the delivery service in November.

This is just one of the services Kruse offers his customers, who span a wide range of demographics. Meeting the needs of both low-income and affluent customers at the same time requires a delicate balance of products and services. At the same time Kruse sells bulk paper products bought directly from the manufacturer, he offers top shelf liquor at the satellite Hy-Vee Wine & Liquor store.

Other differences are more subtle, as in the floral department. "We have satellite racks in our floral department which display greeting cards and plush gifts," Kruse says. "This way there's something for all of our customers. Our upscale customers prefer to include a gift or some plush along with their flowers, while other customers will just buy one or the other. I want them to have the option of both."

For the same reason Kruse offers both rental and sell-through video, and traditional and digital film processing.

As new trends develop Kruse will continue to chase after them—in his car, if necessary. "I've been in this business 28 years," he says. "It's moving much faster now than ever before."

First to market

GregG Hull, store director of Hy-Vee West Des Moines No. 3, has seen a lot happen since his supermarket opened six years ago. "There was nothing out here at the time, but we knew there was going to be," he says. "Now there's a ton of development, both commercial and residential."

The new businesses in the area mean that most of his customers come from all around Des Moines and cover broad demographics, including businesspeople, construction workers, and local residents.

It also means that more retail competition is on the way. "There will be a mall opening up very soon about three miles away, the largest mall in the state," Hull says. "That's going to attract all of the big box retailers."

Hull decided to target certain items to draw customers into different departments in his store, so that once they saw the huge assortment of products, they would remain with him despite the new competitors. "We weren't selling as many pet supplies as we wanted," he says. "Right now there are no Petcos in the area, so we wanted to get our customers used to coming to our store for their pet needs before one does open up."

Hull approached Nestlé Purina Petcare and told the supplier the prices he wanted to sell certain key items for. If he was allowed to do it, he said, he would take a truckload on the spot. Purina agreed, and Hull took the truckload.

He then took the same approach with Kimberly-Clark's Huggies for his baby care aisle, then again with 100-ounce Tide from Procter & Gamble. "We buy big and sell big," Hull says. "We have huge displays and endcaps, and plenty of space."

The extra space came from sacrificing a clothing section to widen each aisle from six feet to eight. "That was one of the best moves I made at the store," Hull says. "During the day the sunlight reaches from the front to the back of the store."

The buy-big/sell-big philosophy is especially evident in the HBC and greeting card sections, where Hull is experimenting with some new looks. HBC is divided both by function—such as therapeutic, complexion care, and hair color—and by brand.

Hull's 60-foot American Greetings aisle includes a new test set of candles that he agreed to pilot. "We're always looking for something new for our customers," he says. "We know the test set is doing well, because some of the candles are selling through and we haven't even advertised them yet."

The philosophy also extends to the wine and liquor section, for which Hull recently purchased 26 pallets from a liquor show to prepare for the holiday season. Some of it may never reach the shelves, however. The store's wine club allows its 500 members to go to tastings once a month, where they have the opportunity to try out new items—and buy them at a discount—before they're on the shelves. "Some of our members will buy cases at a time, and it doesn't make it to the store," Hull says.

That's okay, though; he can always pick up another 26 pallets any time he wants.
This ad will auto-close in 10 seconds