Hy-Vee: PG's 2017 Retailer of the Year
(Above photo: Hy-Vee CEO Randy Edeker flanked by associates at the retailer's Savage, Minn., store)
Life for traditional grocery retailers seems to get more challenging by the minute. Changing shopper habits, the rise of ecommerce and an increasingly splintered marketplace threaten to make “my grocery store” an outdated expression.
And the commitment of etailing giant Amazon to the grocery channel with its purchase of Whole Foods Market – arguably the year’s biggest industry story – has observers in a tizzy, with worst-case scenarios tolling the bell for supermarket shopping as we know it.
The Amazon-Whole Foods deal is certainly a game-changer, but it certainly doesn’t mean the demise of the traditional grocer. Quite the contrary –Progressive Grocer believes it to be a wake-up call for grocery operators who’ve been up to now resisting innovation and change. To be sure, the industry’s leaders were making great strides in many key areas even before Jeff Bezos decided to don a white apron and direct folks down his endless aisle.
“I think you have to focus on experience and service, and not try to be Amazon,” says Randy Edeker, chairman of the board, president and CEO of West Des Moines, Iowa-based Hy-Vee Inc. “I tell all our folks this: We don't have to be Amazon to the world. We have to be Amazon to Dubuque and to Iowa City. What we own is the relationship right now.”
Hy-Vee, with 245 stores across eight Midwestern states, has proved itself to be an innovator and leader in key areas of importance: different store formats to better serve diverse markets, investment in click-and-collect services, chef-inspired prepared foods, in-store dining, health and wellness, and diversification in products and services – all toward the overarching goal of serving consumers at the highest level by delivering customized solutions for every need state.
These are among the reasons PG has selected Hy-Vee as its 2017 Retailer of the Year.
Hy-Vee last received this honor in 2003. Much has changed over the intervening years, and Hy-Vee has demonstrated its ability to become what changing times need it to be.
“We know these people: They want to shop different, and I think that you have to go into it and be willing to learn, and not just play off your assumptions, because a lot of our assumptions have not played out to be true,” Edeker told me during a recent interview with members of the Hy-Vee management team. “People will tell you that people don’t want to buy perishables online. That is not true – our top 10 items are perishables. I think you’re going to see a continued growth in ecommerce. I think it’ll be very strong in certain markets, and that’s what we're seeing. Certain markets with certain demographics, we see that is the right spot to build a fulfillment center, and that’s what you’ll see us do."
Hy-Vee’s business philosophy, handed down through several generations of senior management, is to follow the lifestyles of its customers.
“Just pay attention to the direction they’re heading, and try and get there at the exact right time when they want us to be there,” Edeker says. “That’s easier said than done, and sometimes hard to predict, but I think it just takes a lot of time studying the industry, studying life’s trends and life stages. For all retailers, that’s challenging. We’re obviously in an evolutionary time.”
Hy-Vee is driven by three platforms that grow and sustain the business: service and experience, health and wellness, and culinary excellence and expertise.
“Customer service has to be very customized,” says Donna Tweeten, EVP, chief marketing officer and chief customer officer, offering an example of its evolution. “We have always had this policy that if a customer couldn't find something, and they approached you in the store and said, say, ‘Where is the Velveeta?’ we didn’t just tell them ‘Aisle 4,’ we walked them there. It didn’t matter if you were in the produce section and you had to walk all the way across – you took them to where it was.”
Younger consumers, however, “don't want to speak to anybody,” Tweeten notes. ‘But they still want to know where the Velveeta is. So we have to create new technology – call it ‘Hy-Vee Siri,’ for lack of a better term ... and the database will pull it up and answer back. That kind of customer service has to be layered on top of still walking the customer to the product. You have to do both. An 85-year-old isn’t going to want to talk into their phone. And in towns where everybody knows everyone, they’re going to want a different personal and customized experience.”
Similarly, the concept of health and wellness has evolved. “It's not just pharmacy anymore – it's the dietitians, it's the clinics, it's Amber Pharmaceutical, our specialty pharmacy,” Edeker says. “All play into that whole cycle of health and wellness, then tied back with our chefs to create food that's not only good for you, but tastes good.”
Kristin Williams, SVP and chief health officer, says that Hy-Vee’s customers “see us as a one-stop location where they can not only get their groceries, but they can meet with a dietitian, visit a health clinic, eat a healthy meal and enjoy many other convenient services.”
To achieve these goals, Williams explains, Hy-Vee uses a multipronged approach that includes its retail pharmacy staffs, individualized care, retail dietitians to encourage lifestyle changes, and health clinics at more than 60 stores to provide convenient, affordable access to medical services.
The third pillar, culinary excellence and expertise, is perhaps most visible in Hy-Vee’s latest store launches, which have expanded the chef-driven selections of its full-service Market Grille restaurants into an enhanced perimeter food court that’s setting the bar higher for quality, selection and customization of tastes.
“I think personalization and customization of food is the biggest trend,” Edeker says. “The restaurant culture, the Food Network culture, has driven this knowledge base, and the accessibility of great food in unexpected places is an amazing thing. The expectation here is we’re going to be knowledgeable and we’re going to customize food to exactly the way that I want to eat my food today.”
This trend is further evident in recent statistics showing that, for the first time ever, food purchased away from home has surpassed food consumed at home, leading Hy-Vee as well as other retailers to invest more resources in fresh prepared foods, as well as solutions such as meal kits aimed at making “What’s for dinner?” a simple question for consumers to answer.
“We’re going to continue to work on foodservice,” says Jeremy Gosch, EVP of strategy and chief merchandising officer. “We’re going to continue to dive into food away from home with our restaurants, and expand and open restaurants and get them into stores that they’re not in today. We’ll continue to work on meal solutions for customers, to make it easy to cook and to solve your nighttime meal.”
Hy-Vee has been a leader in experimenting with store formats. Beyond its standard 95,000-square-foot supermarket, the retailer has convenience-size markets and a smaller urban-format store in downtown Des Moines, and is working on other formats, including a wellness concept store that would include a fitness center, and a click-and-collect pickup store that would include groceries and prepared foods. All of these ideas address personalization of need.
“I was just in our downtown Des Moines store, and people were surprised – ‘This seems like way more restaurant than it does [a] store,’” Edeker recounts. “That’s what the people that live there gravitate towards. The groceries still get shopped, but people are shopping for meals. We’re really trying to make sure we’re not just building a one-size-fits-all, that we’re focused on where the right format fits.”
That’s a challenge, considering the diversity of Hy-Vee’s marketing area. “We’ve servicing towns from small-town Iowa to big stores up here in Minneapolis,” notes Gosch. “That gives us some opportunities to really approach the customer completely differently across the breadth of our company.”
Marshall takes up the theme next: “When you set that big 95,000-square-foot building down, you can only put so many of them in a town. We’ve realized there’s pockets that you can't serve. The customer of today can’t go to that big store every time they need groceries, and they’re telling us they’re willing to pick it up. So we put a smaller-footprint store here, and we put a meal store there, or we put a health-focused store there because we might not have a pharmacy close to that area. Those are the things that are creating niche marketing in those areas where they still come to the big store maybe on weekends or twice a month, but they stop at that small store seven times a month for a quick pickup and do click-and-collect. So each one of those has a different way to look at it and a different marketing tool to reach those customers.”
Referring to Hy-Vee’s Savage store, Marshall explains that “[w]e brought a group of Millennials up here to tour this store to tell us what they think. And they said, ‘Absolutely love it, [but] I don’t know that I’d come here more than once a month.’ They said the transaction time is too long here. They want to come and experience Basin, they want to do all of those things, But they want the experience to be quicker. They don’t want to give up all that time.”
Online shopping is helping to expedite shopping for consumers who don’t have time for the experiential every time they need to stock their cupboards.
“Ecommerce is solving a convenient need for the customer. A lot of our customers are doing both,” Gosch says of Hy-Vee's Aisles Online service. “They’ll continue to complement each other well. We have very few shoppers that are just solely relying on ecommerce right now; they’re really shopping at our stores and online. There’s things people want to shop for and enjoy doing the shopping, and there are some things they just want to have come to their house. We’ll make it easy to get the things that aren’t necessarily fun to shop for, and when you want to come to the store for a treasure hunt or a fresh experience, we have that for them as well.”
Edeker adds, “The growth cycle was a lot faster than we thought at first. It’s kind of plateaued a little bit, so ... I think it’s going to take a fulfillment center to really drive that business forward. It’s too cumbersome and costly to do it in a traditional grocery store. I think if that’s the end game for retailers, they’re going to struggle with it. It has to be much more efficient, and that’s why Amazon is the machine that they are. They have the efficiencies of their program that are there.”
How can traditional retailers best compete against digital upstarts?
“You have be willing to change and adapt yourself, because the same leadership skills five years ago aren’t the same as they are even today,” Edeker counsels. “It is about the show and theater. People want to see the fire of the oven and the flame – it’s what makes it special and different. And just think about when you walk through that first aisle, the diversity you see around that food court – that’s awesome. Those are the things that get me excited.”
Engaging Consumers and Communities
Hy-Vee takes corporate responsibility seriously and has led initiatives ranging from responsible procurement to sustainability to charitable giving.
In particular, the company has been at the forefront among grocers in promoting physical fitness and healthier living – beyond employing retail dietitians in each of its stores to promoting good health and exercise on a grand scale
Among these programs is the youth-focused KidsFit, for which Iowa native and NBA player Harrison Barnes is spokesman. Edeker says that KidsFit “isn’t for the great athlete that stands in the front row, it’s for the little kid ... that stands in the back and never gets picked. I want them to have access to this positive influence that says, look, you can change how you eat, you can change how you exercise, you can change how you get fit, and that will help them forever. I’ve always believed, with a lot of our programs, if you inspire little kids today, they’ll love you tomorrow. You make them better, and I’m proud of that.”