Niche market

Piggly Wiggly takes community-oriented approach to competition Charleston grocery-store baron Joseph T. "Buzzy" Newton III doesn't mince words when he talks about Wal-Mart's food-and-merchandise-filled supercenters. "They are a threat to retailing as we know it today," he said. Newton's comments reflect the fear retailers long have had for the discounter. Now grocery-store operators are echoing the chant because of Wal-Mart's entry into the $800-billion-a-year food business. Wal-Mart sees it differently. "There are many businesses that are able to co-exist with Wal-Mart," said Karen Burk, a Wal-Mart spokeswoman. "Some choose to locate close to us because they offer services or products that are unique and can do things that we can't do. ... What's interesting is that through competition, it's a win-win situation for customers and causes us to stay on top of things that are important to our customers." Stay on top it has. Although Wal-Mart is relatively new in the grocery business -- it got into the market in 1988 -- it's the leader in terms of sales. The Arkansas-based company, the world's largest corporation in terms of revenue, also is the nation's top grocer. Wal-Mart often can buy and sell its groceries more cheaply than its competitors because of its massive buying power. A recent Wall Street Journal story said its prices were 8 percent lower than its competitors. In the 12 months that ended Jan. 31, Wal-Mart's grocery sales were $103.2 billion, almost double that of No. 2-ranked Kroger Co. of Cincinnati, which posted sales of $53.6 billion. Piggly Wiggly Carolina is not in that company. It is relatively small, with 80 corporate-owned stores in South Carolina and coastal Georgia. It ranks fourth among grocery chains in South Carolina, with an 8.56 percent market share, according to the Shelby Report, which tracks grocery-store sales in the Southeast. Wal-Mart is tops with 24.4 percent, followed by Bi-Lo with 20.45 percent and Food Lion with 12.9 percent. CHANGING TIMES The food industry nationwide is going through dramatic changes, according to the Food Marketing Institute, a trade group for supermarkets and wholesalers. The customer is now in the driver's seat. The institute said that because of all the vigorous competition, inflation on food has risen by no more than 2.5 percent annually from 1994 to 2003. It also said the cost of food has declined as a portion of family income -- from 50 percent in the 19th century to 10.1 percent today. Not only are there now supercenters and traditional food retailers selling food, but there are membership clubs, drugstores, convenience stores and even gasoline stations selling it. "There are lots of people selling food today," said Laura Brown, senior vice president at the Food Marketing Institute. "It's good for consumers, but it makes for a tough business environment." Because there is so much competition, the only way food retailers can grow is by taking away business from competitors. The best way to do that is to become familiar with your customers. "You have to know who your customers are, what they want and provide it for them," Brown said. That's what Newton had in mind last year when he came up with an intricate consumer survey to track customers' behavior. The company pays a Kansas City firm $8,000 a month to find out what its customers like and don't like. "If you don't find out what people are thinking, you're dead in the water," Newton said. "It's an investment in the future." Newton said the surveys allow Piggly Wiggly to stock the products that the local community wants. The company also spends more than $500,000 annually in donations to charities and local organizations that need financial assistance, groups such as the Charleston Stage Company, East Cooper Community Outreach and the Susan G. Komen Race for the Cure, which raises money to fight breast cancer. It also helps youth soccer teams by donating food so they can provide meals and raise money for tournaments. "We think it's important to help the community where you do business," Newton said. "Raising money in Charleston can be difficult." Why does this chain do this? Because it wants its shoppers -- and its competitors -- to know that it's as much a part of Charleston as pluff mud. Longtime shoppers repay it with their loyalty. Charleston tour guide Jane Thornhill, for example, swears by the Pig. She's a regular shopper at the Meeting Street Piggly Wiggly. She knows the employees there and they know her. She believes Piggly Wiggly cares about Charleston and, after 50 years, she won't shop anywhere else, discounts or not. "I love it. I know the people, I love the sales, and I know where to find everything," she said. "It's laid out like Charleston." Thornhill's endorsement aside, customer-preference surveys and supporting the community through big contributions aren't going to be enough to keep Wal-Mart at bay. Wal-Mart Supercenters are fast becoming the premier retail format in the United States. In 2004, 63 percent of American women responding to company surveys said they had shopped at a supercenter within the last 90 days, up from 32 percent in 2000, according to Wal-Mart. Newton said that while Wal-Mart has cut into his bottom line, it hasn't hurt that much. While he wouldn't disclose revenues, he said the company's all-important same-store sales figures, or sales from stores that have been open a year or more, are up several percentage points. Chuck Gilmer, editor of the Southeast edition of the Shelby Report, a grocery industry trade magazine, said Piggly Wiggly has carved out a corner for itself. "The battle cry of the industry today is to find your niche, and Piggly Wiggly does that by stressing its community-oriented" structure, he said. "Its stores are convenient ... and they're tied to the town in which they operate. Piggly Wiggly has done a good job of staying modern and building stores that can compete with the conventional grocers and using that niche to compete with Wal-Mart and Costco." Newton, who learned the business from the ground up by stocking shelves and loading trucks, has put some of his 40-plus years of retail knowledge into modernizing his stores. In 1996, Piggly Wiggly opened its flagship store in Mount Pleasant near the Isle of Palms connector. The store has a pitched red roof, 40-foot ceilings and wide aisles. He also added gourmet meals for grab-and-go customers, a delicatessen, a bakery and floral services. The Pig also makes sure its managers know what's going on before they take over. They have to go through an extensive nine-month training course, which includes formalized training and on-the-job experience. They go to the Daniel Management Center at the University of South Carolina for one year, where they bone up on certain skills such as managing people and customer relations. There are currently 12 trainees in the program. "The store manager makes all operational decisions," said Robert Masche, vice president of retail operations. That allows the managers to stay more responsive to customers." Then there's the customer-survey program that the company started in 2003. The company pays customers a small incentive to call a toll-free number and answer a survey that has questions ranging from the pricing of groceries to the cleanliness of the bathroom. The company averages 3,000 to 4,000 responses each month. Piggly Wiggly reacts to the calls by making changes at the store level. It allows its employees to deal with any customer complaints concerning anything in the store, rather than waiting for the store operator to deal with them. It was an area where the company had not fared well in previous surveys. Piggly Wiggly also encourages its employees to own stock in the company. (The stock doesn't trade publicly, as the company is privately held.) Newton said that policy has paid big dividends. "If you have a stake in how the company is run, you feel a part of the decision-making process," he said. Aiming to stay responsive to changing demographics, Newton is helping to serve the region's growing Hispanic community in select areas, such as Saluda, Clover and Johns Island. "We hired people who are bilingual to help us solve the communication gap," he said. It also rewards its customers' loyalty by giving out Greenbax trading stamps, a program that was devised in the 1950s. The stamps can be used to buy items such as grills or to go to sporting events or movies. "Greenbax stamps differentiate us from our competition and reward our customers for shopping in our store. They create great customer loyalty," Newton said. More recently, Piggly Wiggly has gotten into the restaurant business. It runs McCrady's Tavern downtown. Newton said that deal started out as a real estate investment that turned into a fine restaurant. "It wasn't planned, we just did it," he said. It is also planning to open a new concept store, Newton Farms, at Freshfields Retail Village, a 60-acre development proposed at the entrance to Kiawah and Seabrook islands. The high-end gourmet store is still in the planning stages, Newton said. "The folks wanted a different store," Newton said. "It's a brand-new concept." Piggly Wiggly Carolina and Newton have come a long way since Newton's father started the business in 1947 with a grocery store at Nassau and Columbus streets. Most of the original stores then were independents. Now about 70 percent are owned by Piggly Wiggly Carolina. Despite all his years in the business, Newton said he has no plans for retirement, and says there is no succession plan in place.

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