November 6, 2004
BY TOM WALSH
FREE PRESS COLUMNIST
ROCKFORD -- Hank Meijer, cochairman, CEO and grandson of the founder of Meijer Inc. , gets the question a lot.
How do you compete with Wal-Mart, which will open more supercenter stores this year alone (220 to 230) than Meijer has put up altogether (163) in the 42 years since Meijer created the concept?
Hank Meijer ponders the question a moment and nods, as if considering it anew.
Then he waves his arm down the international foods aisle stocked with soy sauces and curries and salsas galore -- plus antacids positioned conveniently nearby.
Then he points with pride to the 80-foot-long cooler of cold beer, and boasts that Meijer also sells more wine than any retailer in Michigan, including its exclusive Cedars Crest store brand made in Napa Valley. Oh, and there's the big bakery and the health foods selection.
"Food for them," Meijer says of Wal-Mart Stores Inc. , "is a tool to get people into the general merchandise part of their store and increase the frequency of visits.
"For us, food is our reason for being.
"The whole idea here is abundance, assortment. There's not much selection at a Wal-Mart," Meijer says, leading a small group on a tour of the new store that opened three months ago in Rockford, a few miles north of Grand Rapids. The 70-year-old retailing firm is headquartered in suburban Walker.
What Wal-Mart, the world's largest company , does have is low prices. Very low prices. Plus a fierce competitive streak and so much financial muscle that Wal-Mart shook Meijer to its roots when the giant finally arrived in 2000 with a supercenter to do battle on Meijer's home turf in Michigan.
Two years later, Wal-Mart had 14 supercenters -- combined food and discount stores under one huge roof -- in Michigan. Soon afterward Hank Meijer was named CEO and Paul Boyer president and chief operating officer of Meijer. They set about modernizing stories, reducing staff levels by 10 percent and shrinking the size of the store backrooms by reducing inventory with just-in-time delivery methods.
"We won't be ever the lowest in price," Meijer says. "We're not ready to move to Bentonville (Ark., Wal-Mart's home base) or to have a completely nonunion workforce."
But keeping prices down is still important. "We're a place where you can find what you need in terms of convenience and low prices. That combination of price and assortment is key. You can't have the best shopping experience and not feel like you're getting the best value."
After pausing to regroup during Wal-Mart's initial Michigan onslaught, Meijer is back on a growth track, opening five stores this year and planning to open eight or nine more each year for the foreseeable future.
The strategy on the food side of a Meijer is abundant selection at prices lower than average grocery stores, if not quite as low as Wal-Mart. Across the divide on the general merchandise side of a Meijer store, the thrust is convenience. It's a place to pick up a hammer but not all the stuff necessary for an addition to your house. A place for casual clothes, not formal evening wear.
About half the stores are in Michigan, the rest in Ohio, Illinois, Indiana and Kentucky. Look for a big push during the next few years in the Chicago area, where Meijer now has seven stores and "ought to have 27 or 37," Hank Meijer says. When Chicago penetration gets that high, Meijer could justify a new distribution center near the Illinois-Wisconsin border and then move into markets in Wisconsin and eastern Iowa.
Eventually the idea is to have 300, 400, maybe 500 Meijer supercenters stretching across mid-America from the Alleghenies in the east to the Rockies in the west, no matter what Wal-Mart is doing to make life difficult.
Hank Meijer acknowledges that competing against Wal-Mart is challenging but not impossible.
"Being a private company does have advantages," he says. "No stock price to worry about, no dividends to pay."