DAVENPORT, Iowa (AP) - With more than 245 stores in eight Midwestern states, Hy-Vee grocery stores are a weekly destination for thousands of people and part of the fabric of hundreds of communities.
But Hy-Vee CEO, president and chairman of the board Randy Edeker doesn’t take that for granted.
The Iowa native is ever on the lookout for ways to stay competitive, anticipate and meet changing consumer preferences and to make the company he joined 37 years ago, “the best place to work in America.”
With the COVID-19 pandemic, the past month has brought challenges the chain never experienced before, from massive supply runs on toilet paper and sanitizing products to a need to implement new procedures to keep customers and employees safe.
But that’s not all that’s on Edeker’s mind.
Last week Edeker spoke with the Quad-City Times about other issues, from the company’s recent restructuring and trimming of staff to its booming e-commerce, competition from Amazon and Aldi and its commitment to small towns.
While sticking to its goals of delivering great service, value and “helpful smiles,” Edeker also knows the $10 billion company based in West Des Moines has to change with the times.
Hy-Vee operates 11 stores in the Quad-Cities - six in Iowa and five in Illinois - employing about 3,400 people.
- Restructuring, job loss, remaining competitive.
In mid-February, Hy-Vee announced a consolidation of its upper-level store management model. The restructuring also included the elimination of being open 24-hours.
Some positions in the “work path” were eliminated. Some store directors became district directors, overseeing two or three stores, for example.
In total, about 700 people lost their jobs out of 85,000 total, Edeker said.
He knows that caused pain and hardship. But, he said: “My job is to take care of the 85,000. People said ‘Hy-Vee has never done anything like that before.’ Everything was done for the greater good of Hy-Vee, everything was done for the great good of the 85,000,” he said.
“My end game is that I absolutely want Hy-Vee to be the best place to work in America.”
The drive to greater efficiency is to remain competitive price-wise. Other stores, such as Aldi, with its bare-bones staff, and Walmart with its huge economy of scale, can undercut Hy-Vee in price. “We’re facing competition from all sides,” Edeker said.
In addition to saving money, the restructuring organized stores in a way that they can keep up and stock better, he said. And by eliminating the “open 24 hours” option, Hy-Vee can stock shelves when customers are not around. - E-commerce
This is another area where Hy-Vee is feeling pressure. While its “Aisles Online” business is booming - and has skyrocketed during the COVID-19 pandemic as people stay home - other retailers are trying to get a piece of the action too.
Amazon, the multi-national technology company based in Seattle that focuses on e-commerce, is building a 750,000-square-foot warehouse not far from Hy-Vee’s own headquarters in West Des Moines, Edeker said. By the end of the year, it will have 1.5 million square feet of space in the state, he said.
Customer preference is changing from having ordered goods delivered to their home to having them packed up for pick-up by the customer at the store.
Nationwide, the pickup option is up 64% but “we are up way more than that,” Edeker said.
“E-commerce is here to stay.”
- Distribution Centers
One strategy Hy-Vee tried that didn’t work was the opening within the past five years four distribution centers that were designed to fulfill online orders in its hot spot areas of Kansas City; Eagan, Minnesota (south of St. Paul); Omaha, Nebraska; and Urbandale.
Instead of individual stores in those communities fulfilling orders, employees at these four big fulfillment centers did the work.
But customers didn’t like it, Edeker said. The centers couldn’t provide “the full assortment of products, personalized shoppers and same-day pickup” that individuals stores could, according to a statement the company issued at the time of their recent closure.
“The reality of e-commerce is that nothing changes faster,” he said. “Everyone has strategies that were developed two or three years ago. So the idea developed two years ago doesn’t work today. It’s so fluid.”
While some media estimated the job loss from the closures at around 1,000, Edeker said it was less than that, as many employees were moved to other jobs within the company.
As for the buildings themselves, all but the Urbandale location will be turned into florist distribution centers, Edeker said. Urbandale, the smallest, will be repurposed as something else.
- Market Grilles
Upscale Market Grilles with table waiters did not catch on with customers.
Plans are in the works to transition the company’s 21 full-service Market Grilles into Wahlburger restaurants, hamburger restaurants started by actor Mark Wahlberg and his family.
In areas where Wahlburgers already operate, the volume is much greater, they are more popular and profitable, Edeker said.
The Quad-City area has no full-service Market Grilles, so won’t be getting a Wahlburger, he said.
- Dollar Fresh
The Quad-Cities doesn’t have any of these stores, either. They are smaller, scaled-down stores intended to compete with “dollar” stores, but with an emphasis on fresh, such as fresh meat and fresh produce, Edeker said.
Regular dollar stores carry food but not fresh food.
“It’s a very low labor model, and it has worked well in small towns,” Edeker said.
Three existing Hy-Vees in small Iowa towns - those of around 2,000 people - have been converted, and Edeker said that six additional will be built from scratch and opened this year.
With populations declining, “most chains have walked away from small towns,” he said.
The dollar model allows Hy-Vee to continue to offer options. Edeker is proud of that. Hy-Vee started in a small town, and it wants to keep serving those areas that are “under-stored,” he said.
- Seasons magazine and spokesman Patrick Mahomes.
Some customers have questioned the publication of the free Seasons magazine, a robust, eye-catching publication full of food preparation ideas, recipes, articles on wellness and promotions of store specials. Why not devote that money to lowering prices?
But Edeker said the magazine had been a success for Hy-Vee, promoting its products and giving cooks creative ideas they wouldn’t have thought of otherwise.
“If you’re going to be a special brand, you have to do special things,” he said.
The same goes for hiring Mahomes, quarterback for the Super Bowl champion Kansas City Chiefs NFL football team.
The millennial and Gen Y generation follows celebrities very closely, he said.
Having Mahomes as a spokesman allows Hy-Vee to tap into that demographic market, he said.
- Supply chain picking up.
Although there was a run on some products because of COVID-19 concerns, Edeker said his supplies are getting back to normal.
In addition to demand for toilet paper and cleaning supplies, the store saw a 1,400% increase in demand for yeast in one week, apparently because people stuck at home began baking, he said.
Flour was in short supply, too.
“You’re just not going to have that amount on hand,” he said.
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