Posts Tagged ‘Costco’

At long last, I’m a tour guide!

Saturday, January 19th, 2013

I always wanted to be a tour guide and last week, I got my chance. As a favor to a group of French retailers visiting the US, I took them on a tour of Wegmans, WalMart and Costco. Not too many international visitors pile up on a bus to visit New Jersey in mid-January, but we did. I had set it up as a Compare and Contrast exercise – teachers can’t ever organize anything without some pedagogical purpose– but one of my visitors suggested the trip should have an entertainment theme instead. “Like in Club Med” he suggested.  We toyed with a Soprano or Bruce Springsteen motif, but agreed the trip should be called The Good, the Bad and the Efficient (sorry, WalMart!).

At Wegmans, the quality of the food display earned great respect from my French colleagues, although I sensed some contempt for a culture that would deem food so unimportant as to be consumed inside a grocery store. When I suggested we should have lunch at Wegmans’ restaurant upstairs, I was told we needed “a proper place” instead. That place turned out to be the Bahama Breeze in Woodside, New Jersey. I learned this choice had resulted from a close call with the Olive Garden next door. We went for the not-so-tropical hamburger and fries, which everybody ate with exquisite fork-and-knife manners.

One of the greatest joys of being a guide for professional retailers, I found out, is to learn how to reverse-engineer anything you see into the store’s profit model. After a few minutes at Wegmans’, they concluded Wegmans could not earn investor-grade returns with such a high-quality, low-turnover food, particularly when served by such knowledgeable employees (they correctly inferred employees had to be trained and well-paid to answer customer service questions as competently as they did). Interestingly, few of the visitors spoke English, but watching employees answer my questions was enough for them to assess their competency. “I’d love to be a customer there” one of the French visitors concluded (although apparently not to the point of wanting to have lunch there), “but I would not invest in this store.” When they discovered the chain is private and only opens two or three stores a year (officially to control quality), they looked at each other with a knowing smile.

WalMart was deemed uninspiring, but cheap. “We used to have stores like that 20 years ago”, was the most favorable comment I heard. They pointed out everything that could be improved, from cleanliness to the spacing between screws on the hanging racks. There was an Apple table with a few iPhones on it, trying its best to look like a mini-Apple store, but there seemed to be few geniuses around, and even fewer customers.  We asked a friendly-looking clerk how big the store was. Her response was emphatic: “I have no ideaaaaaa!” I guess we were not at Wegmans anymore. My visitors were back in the bus within 30 minutes (Wegmans kept them interested for close to an hour).

Costco turned out to be the hands-down winner. “They must have about 4000 SKUs in here, probably about one thirtieth the number of WalMart” one of them estimated. We later found out they were right on the money. They estimated total sales for the store, sales per square foot, average ticket price for the store by looking at a few cards at the cash register, average demographics of the crowd, and split of brands vs. store brand sales. They even assessed the frequency of visits by building a quick model of yogurt and cereal consumption by an average American family buying two giant packages of each at every trip.  Beyond that, they concluded, an average American woman would no longer be able to push her cart all the way to the parking lot.

I hope I never have to teach or consult for those guys. Being a tour guide is a much safer profession.