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Wegmans Fan Mail
My post below on Wegmans elicited fan mail--for the stores, that is--from all over. How many people do you know who get excited about their supermarket? Reader Greg Tetrault writes from Tennesee:
As a former Rochestarian who returns there annually, I can attest to the appeal of the Wegman's experience. The local nickname for Wegman's biggest store in the Rochester area is "Mega-Weg." The quality and variety of foods and goods are amazing. The stores are clean, have wide aisles, and have more sensible floor plans than most other big grocery stores. (Wegman's does not mimic its competitors that put simple, common staples at opposite ends of their stores hoping that you'll buy something extra from the 20 aisles you walk past.) As you noted, Wegman's prices are higher than the big bargain groceries, but Wegman's value is unsurpassed.
We now live near Memphis, and the large groceries here (Schnucks, Kroger, and Wal-Mart Super Stores) can't hold a candle to Wegman's. The former two deliberately understock popular brand-name items hoping that customers will buy their lower quality, higher margin, in-house goods. My wife and I both are annoyed by this inconsiderate policy.
Doug Rubin '81 writes that there's now a Wegmans in Princeton, which has come a long way since the two of us were in college there:
Whole Foods just opened as well (but I hear it's very expensive)
Meanwhile the local (relatively small) Wal-Mart is being transformed. Their stationery and housewares sections are being taken over by its grocery offerings which offer Cheerios, Pace Picante Sauce and Coca-Cola at "low prices every day". It's a pit and a pain the check out, but it's cheap. We've probably saved $400 or more on diapers there during the last 3 years!
Three things about Wegman's that my wife and I are thrilled by:
1) their store brands are of the highest quality/value I've ever seen.
2) they go out of their way to buy local produce, which must be a hassle, but engenders relationships and "stickiness"
3) their in-store cafeteria(s, yes I've been to others) offer quality that exceeds the specialty ethnic restaurants (Indian, Chinese) in the area.And, yes, they are always training and recognizing their employees.
And Reason's Jeff Taylor, who visited a Buffalo Wegmans in the summer, adds:
The produce was amazing, a result of what must be some serious attention to detail and a great quality-control system. It was there I encountered the Platonic form of peaches, the uber-peach, the one peach to rule them all. Almost as big as a grapefruit and positively erupting with that peachy smell of peachiness. We took pounds from the store and ate them raw with the abandon of zombies eating brains, grilled them for insane salads, pureed them for drinks. Then they were gone and, I think, we cried.
I find it hard to believe you can buy a decent peach, let alone a great one, outside the peach orchards and farmers markets of the South. But Jeff lives in North Carolina (not as good as South Carolina or Georgia for peach expertise but close), so I'll trust him.
Thanks to designer James Wondrack, president of the Upstate New York AIGA chapter, who took me to Wegmans when I was in Rochester last year speaking to the AIGA and a conference at RIT. One of the great things about all the traveling I do is that I don't have to wait for national press coverage to find out what's going on in the country.
More on Sarbanes-Oxley
Reader Eric Akawie writes with an interesting footnote to the Sarbanes-Oxley post below: "I'm a Technical Writer, and in various job hunts over the last six months, it looks like companies are desperate to hire TWs with financial experience to produce their S-O documentation. I don't have any financial experience, and it's documentation that would have me slitting my wrists by the second week of the job, so I never even interviewed for any of the positions, but it looks like right now an accountant with writing skill, or a Tech Writer who can add and subtract, can write their own check. (Maybe not. Folks writing their own checks is what got us into this mess in the first place...)"
"Zesty Styling"
This Dale Buss article from yesterday's WSJ could have come straight out of The Substance of Style:
DETROIT -- Automotive companies are caught in the tension between Americans' continuing thirst for speed and horsepower, and their nobler impulses toward better mileage and cleaner emissions. But there's no ambivalence about something else: Consumers relish vehicles that simply look sharp, making design itself the new rudder of the automotive marketplace.
The renewed preoccupation with design is understandable, given a little history. The '70s and '80s snuffed out the industry's bolder renderings, victims of safety and fuel-economy concerns. And auto makers spent the '90s essentially copying the unvariegated "jellybean" design of Ford's best-selling Taurus sedan. But global competition, the rise of the SUV and the digitization of the design process have combined to produce a profligate number of new vehicle types and models these days.
With quality and functional differences among products largely having narrowed over the past decade or so, eye-catching design can be decisive. "Both consumers and the car companies are ready to see more chances taken out there," says Chris Chapman, director of automotive design for DesignWorks USA, a unit of BMW. "People are kind of sick of the same old thing, and they're looking for something new."
Thanks to reader Lawrence Rhodes for sending this free link from the Opinion Journal site.
Cultural Artifact
It turns out that the Indian guy from the Village People--his name is Felipe Rose--really is half Lakota Sioux. Now he's given his gold record for "Y.M.C.A." to the National Museum of the American Indian. Hank Stuever's WaPost account starts out funny--the story sounds ridiculous, after all--but includes enough detail to subtly convey a serious point. Strange as it is, Rose's story is a great example of the unpredictable ways in which American culture actually evolves. Any true representation of that culture, including the lives of American Indians, has to include just such quirky stories, and the artifacts that represent them.
The High Cost of Political Posturing
Taxes and spending get most of the attention, but regulations can be just as expensive and far more wasteful. Take the Sarbanes-Oxley bill, passed in the post-Enron panic as a demonstration that Congress and the administration cared and were doing something. Compliance costs a fortune, siphoning funds from productive investments (including hiring); that the law took effect in the middle of a recession didn't help the economic recovery. More significant is the long-term effect. The law threatens to block smaller firms from going public, cutting them off from a major source of capital. That effect will filter backward, making venture capital funding more difficult by eliminating one way VCs get their money out. The Dallas Morning News reports on some of the local effects:
John Davis, chief executive of Pegasus Solutions Inc., figures Sarbanes-Oxley cost his Dallas-based technology services company nearly $1 million, or 2.5 cents a share in unrealized earnings. For a company with just under $200 million in 2004 revenue, that's a lot of dough.
"All of our controls were already in place," Mr. Davis says. "All we did was put them in writing."
Chief executive Jeff Rich says Dallas-based Affiliated Computer Services Inc. spent an extra $8.5 million on Sarbanes compliance without changing its operations one iota.
"Sarbox should be called the Accounting Industry Rehabilitation Act," he says. "The only people benefiting from Sox are lawyers and accountants. That's ironic since they were part of the problem to begin with....
Sarbanes is actually bolstering ACS' acquisition pursuits, Mr. Rich says, pointing to its tender offer for Superior Consulting Holdings Corp. in Dearborn, Mich.
"In all candor," says Mr. Rich, "Superior is $100 million in revenue and too small to be a public company today."
Even with twice that much revenue at Pegasus, Mr. Davis says he feels the pressure.
"Quite frankly, we may be too small to be a public company," he says. "You're going to have to look at revenues probably in excess of $500 million a year before going public makes sense."
Civil Society Flourishes in India
Reading posts on the South-East Asia Earthquake and Tsunami Blog, I've been struck by the tremendous vitality of both existing and spontaneous relief organizations in India. In Newsweek, Fareed Zakaria looks at the broader trend of newly flourishing civil society in India. His conclusion:
China is following the East Asian model, with a strong government promoting and regulating capitalist growth. Historically, this has been the most effective way out of poverty. But India might well be forging a new path, of necessity, with society making up for the deficiencies of the state. Actually, this is not entirely new. In some ways India's messy development resembles that of another large, energetic, chaotic country where society has tended to loom larger than the state--the United States of America. It is a parallel to keep in mind.
"Not Just Shopping"
The number one company on Fortune's new "best companies to work for" list is Wegmans Food Markets, which exemplifies the savvy use of aesthetics to create consumer value--and major profits--in a market where the alternative is intense price competition. Paradoxically, one of the major drivers behind today's aesthetic imperative is the power of Wal-Mart, a company not exacty known for its aesthetic edge. You may not be able to beat them on price, but you can surely beat them on experience, and, as the holiday shopping season indicates, consumers don't just care about price. They care about value. Here's an excerpt from Fortune's cover story.
Privately held Wegmans—which had 2004 sales of $3.4 billion from 67 stores in New York, Pennsylvania, New Jersey, and Virginia—has long been a step ahead. Its former flagship store in Rochester, opened in 1930 by brothers John and Walter Wegman, featured cafe-style seating for 300. Walter's brilliant and pugnacious son Robert, who became president in 1950, added a slew of employee-friendly benefits such as profit-sharing and fully funded medical coverage. When asked recently why he did this, 86-year-old Robert leans forward and replies bluntly, "I was no different from them."
Robert is chairman now; his son Danny, a sartorially challenged Harvard grad who came back to Rochester to cut meat for Wegmans, took the reins in 1976. Early on, Danny was keenly aware of the threat posed by nontraditional grocery outlets like club stores and discounters. (His 1969 senior thesis ended with these prophetic words: "The mass merchandiser is the most serious outside competitor to ever face the food industry.")
In 2003 those nontraditional grocers had 31.3% of the grocery market, and industry guru Bill Bishop projects that number will grow to 39.7% by 2008. That's because consumers think traditional grocers don't offer anything special; 84% believe all of them are alike, one survey has found. Most grocers responded to the competition by slashing prices, wreaking havoc on already razor-thin margins. From February 1999 through November 2004, the four largest U.S. grocery chains (Albertson's, Kroger, Safeway, and Ahold USA) posted shareholder returns ranging from -49% to -78%. Winn-Dixie Stores was booted out of the S&P 500 in December for its horrendous performance.
You don't see such problems at Wegmans. While it has no publicly traded stock, its operating margins are about 7.5% (the company will not disclose net margins), double what the big four grocers earn and higher even than hot natural-foods purveyor Whole Foods. Its sales per square foot are 50% higher than the $9.29 industry average, FORTUNE estimates, thanks to a massive prepared-foods department featuring dishes that rival those of any top restaurant. (Wegmans asked famed Manhattan chef David Bouley for input.)
Each of the newer Wegmans stores is 130,000 square feet—three times the size of a typical supermarket. That means it can offer true one-stop-shopping for every taste. And unlike Whole Foods, which disdains products containing pesticides, preservatives, and other unhealthy stuff, Wegmans stocks both organic gourmet fare and Cocoa Puffs, at competitive prices. That vast selection helps explain why in places like Rochester, Syracuse, and Buffalo, the zeal for Wegmans often borders on kooky obsession. In 2004 the company received nearly 7,000 letters from around the country, about half of them from people pleading with Wegmans to come to their town. Ann Unruh, 52, an insurance manager in Sparks, Md., who has never set foot in a Wegmans, is so excited about a store opening in her area later this year that she plans to take the day off work to be there. She says there will be no need to visit Whole Foods anymore: "I will just shop at Wegmans."
Each Wegmans store boasts a prodigious, pulchritudinous produce section, bountiful baked goods fresh from the oven, and a deftly displayed collection of some 500 cheeses. You'll also find a bookstore, child play centers, a dry cleaner, video rentals, a photo lab, international newspapers, a florist, a wine shop, a pharmacy, even an $850 espresso maker. "Going there is not just shopping, it's an event," says consultant Christopher Hoyt. In an annual survey of manufacturers conducted by consultancy Cannondale Associates, Wegmans bests all other retailers—even Wal-Mart and Target—in merchandising savvy. "Nobody does a better job," says Jeff Metzger, publisher of Food Trade News.
Textile Industry vs. Furniture Industry
Import quotas don't just raise prices for consumers. They make planning complicated for businesses that need imported goods as inputs--even, it turns out, when the quotas are about to end. Furniture Today (I love trade magazines) reports on the end-of-the-year mess created by protectionists concerned that textile importers might jump the gun on the end of quotas:
Here at home, 2004 brought us politicians shamelessly plucking the broken heartstrings of unemployed textile workers. It would have made sense for politicians to help the industry get ready for this day – it was 10 years coming, after all – but the horse was out the barn before the election year began. If they could feel shame, they'd be feeling it now.
There are still issues with China, certainly, and no one can blame the domestic textile industry for trying to get some relief from the government. But we certainly cannot blame China for a directive issued Dec. 13 from the Committee for the Implementation of Textile Agreements calling for U.S. Customs to hold fabrics that entered U.S. ports near the end of the year in excess of quotas.
In years past, fabric that was over quota near the end of a year was counted against the next year's quota. But since the quota is now gone, the committee felt that some importers might deliberately ship goods in excess of quotas limits, expecting that the goods would be released on Jan. 1.
This decision has created trouble and expense for some upholstery fabric importers. Their goods, ordered in good faith in October from mills that held valid quotas, were declared to exceed quota limits when they arrived in December. Obeying the directive from CITA, Customs put the goods into bonded warehouses where they will stay until Feb. 1. At that time, they will be released in 5% per month increments of the amount over the base quota.
Textile lobby groups such as the American Manufacturing Trade Action Council applauded the decision. "It was the very least the government could do," said a spokesman, adding that that the embargo "should be a lesson to people about the risks of doing business with overseas companies."
A spokesperson at the United States Assn. of Importers of Textiles and Apparel countered that the action was action "pointless, without merit and just plain mean."
Since most imported textiles are apparel, a lot of upholstery fabric suppliers felt confident in late December that the embargo would not impact their business, stating that they typically have some goods held at the end of the year, which then are released on Jan. 1. Some of these companies were surprised to learn when they arrived back at work after the holiday last week that the goods had not been released on Jan. 1 but will be held till Feb. 1 and then trickled out incrementally over a period of months.
Here's a Reuters background article on the end of textile quotas. The NYT and WSJ have covered the story repeatedly, but they're hard to link to. One of the points made by Bill Lewis in The Power of Productivity, which I wrote about here, is that India's restrictions on the size of apparel factories have made the industry much less efficient than China's.
Michael Moore's Makeover
The incomparable Manolo's Shoe Blog comments. For the full effect, check out this post as well.