What makes a grocery store popular: price, selection, service, product quality or atmosphere? Most likely it's a combination of factors, and the stores Retail Leader selected here all have some variation of these characteristics.
While financial types might equate revenue with popularity, we looked beyond it with the understanding that low prices can boost sales without enhancing the shopping experience. For example, 90 percent of Walmart's customers choose to shop there because of price, according to an August 2012 monthly consumer survey from BIGinsight, but the giant ranked 51 out of 52 grocery retailers in a Consumer Reports survey published in May 2012.
"In the age of discount big box retailing, traditional grocers have had to differentiate themselves from the competition and focus on more than just price to ensure that shoppers continue to patronize their stores," says Pamela Goodfellow, consumer insights director at BIGinsight.
As a result, Retail Leader considered criteria beyond dollars, such as innovation, customer interaction, operations management and overall shopping experience. The shopping experience includes product selection, price, atmosphere and service. We selected 10 companies by reviewing studies, surveys and media reports and by interviewing consultants. The stores follow in alphabetical order.
2011 sales: $88.9 billion
As with Walmart, more than 90 percent of Costco customers choose the bulk goods purveyor because of price, according to the BIGinsight survey. However, 68 percent of Costco customers named quality as a reason to shop there, compared with 34 percent of Walmart customers. "Based on merchandising and pricing, Costco is a winner," says Ken Morris, principal at Boston Retail Partners. But Costco also scores high in other areas: It ranked fifth among the 52 grocery retailers in the 2012 Consumer Reports survey with top marks in three of the four categories examined: cleanliness, price and perishables. The company also was one of six food retailers named to the World's Most Ethical Companies list by the Ethisphere Institute in 2012.
Fiscal 2011: $4.3 billion
A quick glance at Harris-Teeter's website hints at why the Mid-Atlantic regional chain is so popular. It outlines a vast range of community promotions, local involvements, health initiatives and cooking guides, in addition to information about its specials. Harris-Teeter is among those strong regional grocery retailers "that enjoy extremely high shopper satisfaction and loyalty based primarily on their outstanding service and customer relationships," says Raymond Jones, managing director at retail consultancy Dechert Hampe. Harris-Teeter ranked sixth in the 2011 Consumer Reports survey, with top marks for cleanliness and perishables. About 70 percent of customers participating in the BIGinsight survey cited food quality as the reason they shop at Harris-Teeter.
West Des Moines, Iowa
2011 sales: $7.3 billion
Customers like it when store employees are helpful and friendly, and Hy-Vee's motto states: "Where there's a helpful smile in every aisle." Hy-Vee tied for first place with Publix in the 2012 Temkin Customer Service Ratings, which is based on customer data. Hy-Vee also fared well in the 2011 Consumer Reports survey, where it ranked ninth out of 52 stores and received top marks for cleanliness and high marks for service and perishables. In recent years, the store has focused on health and wellness issues, with the addition of in-store dietitians and Nu-Val nutrition labels to help customers identify healthy products.
Lulu (Middle East)
Owned by Emke Group
Abu Dhabi, United Arab Emirates
Lulu is still relatively small in the global world of grocery retailing, but it is making an impact in 21 countries in the Middle East. Its stores are modern and feature spacious parking lots, play areas for children and a large selection of brands. The retailer, which is owned by the Abu Dhabi-based Emke Group, is known for sustainability initiatives, food safety programs and charitable works. For example, in June the company launched a program to reduce the use of plastic bags in its stores. That same month the Abu Dhabi Food Control Authority recognized the retailer for its advanced logistics procedures, including food safety practices, and earlier in 2012 the Dubai Municipality Food Control Department named it "The Best Supermarket" in the large category for food safety practices. The store also takes advantage of social media and has garnered 172,802 Facebook likes.
2011 retail sales: $27 billion
Publix touts itself as the largest employee-owned supermarket chain in the United States. More important than size, though, is the connection its employee-owners evidently feel to the store, as demonstrated through the high level of employee-customer engagement. According to the BIGinsight survey, 57 percent of Publix shoppers choose the store because of its service, more than any other store on our list and nearly double the average score of 29 percent. Publix emphasizes a strong private-label strategy, sponsors events such as cooking classes and maintains a Facebook page with more than 900,000 likes. Publix is "easily a top grocery retailer based on their operations and merchandising. It's easy to see why after about 10 seconds in the store," says Morris of Boston Retail Partners.
2011 revenue: 48 billion euros (about $60 billion)
More than 325,000 employees
Rewe is a diverse grocery retailer based in Cologne, Germany, with full-scale supermarkets to penny discount stores throughout Europe as well as a travel agency. While Rewe's reach is unsurpassed in Germany, its popularity is based on innovation and corporate responsibility. The company won the 2012 German Corporate Social Responsibility in the Supply Chain Prize for its procedures encouraging sustainability throughout the grocery supply chain. On the innovation front, it opened drive-in stores in seven markets this spring, allowing customers to order products online for pick up at the store without leaving their cars. And in 2011 the company developed its own network to handle "Girocard" payments (the European equivalent of debit cards), the first food company in Germany to do so.
Fiscal 2012: 72 billion pounds (about $114 billion)
Tesco is the largest grocery retailer in the U.K., thanks to a long list of innovations. The chain, which generated about 72 billion pounds (about $114 billion) in the fiscal year ending February 2012, has 6,234 stores in 14 countries, ranging from Europe to Korea to the United States, where it owns the Fresh & Easy chain. It is credited as the first store in the U.K. to develop a loyalty card program for its customer base, which is now 10 million strong. It regularly sends targeted coupons to club members based on previous purchases. "The takeup on those coupons is 20 to 30 percent," says John Ibbotson, co-founder of Retail Vision, a U.K.-based retail consultancy. "If anyone else sends a coupon the takeup is 1 to 2 percent." Tesco also has led the way in Internet grocery retailing. In 2011, it opened a virtual grocery store in a subway station in Seoul, South Korea, where shoppers use their smartphones to purchase food items for home delivery. Underlying all the innovation is a close customer focus, Ibbotson says. "They were the first real supermarket that had that big idea," he says.
Owned by Aldi
2011 revenue: $8.5 billion (est.)
Like parent Aldi, Trader Joe's features low prices, but the specialty market's cheerful service, tropical-themed decor and quality products contribute to its popularity. The small-format stores stock about 4,000 items (80 percent are store brands), compared with 50,000 in a typical grocery, but the manageable number of SKUs helps to keep prices low. "Based on merchandising and pricing it is easy to see why Trader Joe's is popular," Morris says. "People are willing to drive farther to get to a Trader Joe's than a typical grocery store [for its] exciting merchandise at a good price."
2011: $6.2 billion
Wegmans, a regional chain with 80 stores in six Eastern U.S. states, received 4,400 requests from people asking for stores in their communities, according to the company's website. "While Wegmans is a regional grocer, their service-oriented organization and the cleanliness of their stores are legendary," says Morris. "They are always rated one of the best places to work, and happy employees run a great store. Plus their prepared foods are great." The company's service wins over customers, says Goodfellow. "Double coupons, frequent shopper cards and store appearance and layout play key roles in customer loyalty for this retailer," he says. The company was among a small number of food retailers named to the World's Most Ethical Companies list by the Ethisphere Institute in 2012.
Whole Foods Market
2011 revenue: $10.1 billion
More than 65,000 employees
Whole Foods Market might be best known for its organic products, with 76 percent of shoppers surveyed naming organics as the reason they shop there, according to the BIGinsight survey. But the store also is praised for the quality of its food, its ethical operations (it joined Costco and Wegmans on the World's Most Ethical Companies list in 2012), and its innovative design. In 2011 VSMD magazine named Whole Foods the Retailer of the Year for its design. Jones of Dechert Hampe praises Whole Foods for serving the specific needs of a particular class of shoppers. "They offer the consumer innovative products, unusual service and a unique shopping experience," Jones says.
Retail Leader's picks for World's Most Popular Retailers are a disparate lot, but they have in common loyal customers. Whether it's because of price, innovation, product selection, customer service or some combination of factors, these stores know how to make, and keep, their customers happy.