More One-Stop Shopping

May 9, 2005
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GRAND RAPIDS — Nearly 30 years ago Frederik Meijer said, “We think company tradition is good, as long as one of the traditions is being an innovator.” During his lifetime he has seen his father’s Greenville grocery store turn into a 168-store retail and grocery giant across the Midwest. Over the past 71 years, Hendrik Meijer’s initial investment of $338.76 has blossomed into a business that produces in excess of $10 billion in annual sales. The company’s tradition of innovation continues into the new century as it hopes to more than double its current number of stores by 2020.

Last week Meijer Inc. celebrated the grand opening of its two newest locations, both in the Grand Rapids market. By the end of 2005, the company will have opened nine new stores, seven of them in Michigan. That reflects the growth philosophy that Meijer has taken on in recent years. The philosophy can be summed up as “get lean and stay local.”

Getting lean has manifested itself in technology, procedure and staffing changes. For example, in the past 10 years, the company has more than doubled its number of stores, but increased its work force by less than 20 percent. Revisiting and improving everyday procedures has helped to keep the work force efficient. For example, the new stores feature “bag-and-scan” checkout lanes, allowing each cashier to do the work of both checker and bagger. The stock rooms are dramatically smaller as well, with inventory being ordered on an as-needed basis. Those changes, said company co-chairman and co-CEO Hank Meijer, “make us very competitive with ‘the other big retailer’ that keeps invading our territory.”

He refers to Bentonville, Ark.-based Wal-Mart Inc. The world’s largest retailer has steadily spread into Meijer’s backyard over the past decade. Hank Meijer said that Wal-Mart is quite frank about its plans to move into locations that will provide direct competition to existing Meijer stores. The two retailers have around 40 percent market overlap today throughout Meijer’s five-state territory. Within a few years, Meijer expects to see 75 percent overlap.

“A lot of the changes we’ve made and a lot of the improvements we’ve made have often come in direct response to competition,” said Hank Meijer. “Right now we’re rediscovering how we can be a growth company. We’re planning to survive and grow in the face of a retail (environment) the business has never seen before.”

One way Meijer Inc. can grow is by cutting profits. Because it is privately held, Hank Meijer said, the company can strategically trim its profits without feeling the heat of Wall Street analysts. “For at least the next 50 years we won’t enjoy the same level of profits (as the competition).” Maintaining thinner margins allows Meijer to be “a more dynamic company.”

Knowing that it can’t beat Wal-Mart in the expansion game, the company plans to stay focused on its home territory, increasing its presence throughout Michigan, Ohio, Indiana, Illinois and Kentucky. “Our real estate department is off and running,” Hank Meijer said, referring to the company’s short-term expansion plans. The company hopes to add eight to 10 stores each year for at least five years. In 15 years, Meijer hopes to operate 400 stores.

The real estate department is quite diligent in finding ideal sites for new stores. “We look for areas that are growing and/or have potential for growth,” said Meijer spokesman John Zimmerman. “We look to see if the infrastructures are in place, look for the availability of land (about 25 acres are necessary for each store), and we look to see if the community needs the services of a Meijer.”

One community that the company is banking on to need many more stores is the Chicago area. Over the next several years Meijer hopes to win over the country’s third-largest metropolis as it has succeeded in doing in the Detroit area over the past two decades. Currently there are eight stores throughout Chicagoland; the Detroit area has 28. Because commercial real estate is more expensive and in shorter supply in the Chicago area, Zimmerman said he was unsure how many stores the company will build in coming years. He did say there were “a number of them” the company is working on.

Meijer also hopes to build a distribution center in northern Illinois in the not-too-distant future. That would streamline the supply process for the Chicago-area stores, as well as provide a jumping-off point for potential expansion into Wisconsin and Iowa

Meijer’s expansion does not come strictly in the form of new store construction. The company currently has approximately 50 remodeling projects going on throughout its stores. “All of our older stores will be remodeled to reflect the current format and layout,” said Zimmerman. That means Grand Rapids’ aging stores on

28th Street
and on Alpine and Plainfield avenues will get facelifts soon.

While the expansion plans move forward, the company continues to fight the competition on the home front. How does Meijer manage to keep up with the monolithic Wal-Mart? And, with the dramatic growth of Minneapolis-based Target Stores, what keeps customers coming back to comparatively small Meijer? Part of the answer (at least in West Michigan) is loyalty. But loyalty is based in sound business practice.

“The only way we’ve built that loyalty is by providing great values,” said Hank Meijer. “We have to have the right (product) at the right price.”

Being the “little guy” has its advantages, as well.

“It sounds fundamental, but being in our stores and talking to our customers (gives us an edge),” said Hank Meijer. “It’s a priority for us in a way that it isn’t for our global competition. If we can’t understand what your needs are as a customer better than Wal-Mart or Target do, we shouldn’t be in business.”

Not only do Meijer corporate officers visit the stores and talk to the customers, they act on what they hear. During the April 26 grand opening ceremony at the Gaines Township store, a Belding woman approached company co-chairman Doug Meijer.

“She wanted to know how come she had to drive all the way to Grand Rapids to go to Starbucks,” he said. The closest Meijer store, in Greenville, does not offer the in-store, high-end coffee shop found in many of the newer stores.

Based on the woman’s comments, Doug Meijer is contemplating adding a Starbucks branch at that location. “I bet that would be the only Starbucks in Montcalm County,” he said. Besides, he said, he’d be happy to accommodate customers who would “line up to pay three dollars for a cup of coffee.”    

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