Monday, January 22nd 2018

A Grocery CEO Talks Growth and New Consumer Habits

December 17th, 2014 in Business by


Robert “Bob” Mariano is Chairman and CEO of Roundy’s, a $4 billion grocery retailer with more than 165 stores throughout the Midwest – including brands such as Pick ’n Save, Copps, and most recently, Mariano’s.  The Mariano’s brand, a compelling hybrid that is part Euro Café and part specialty foods grocer, has been taking the Chicago market by storm. It’s a big bet, intended to add a much needed spark to a struggling Roundy’s group of stores. While big-box grocers such as Safeway’s Dominick’s have exited Chicago’s ultra competitive market, Mariano has been growing his new concept at a swift pace. The plan is to defy the odds and grow Mariano’s stores beyond Chicago to other states across the nation.

Over the summer, the straight-talking native Chicagoan paused from his busy rounds to share some impressively candid answers to questions about his growth plan, his approach to customer service and technology. Here are excerpts from our conversation at the Metropolitan Club of Chicago:

1. You are pursuing a rather aggressive growth plan with Mariano’s at a time when a lot of food retailers aren’t growing. So why are you being so aggressive?

Mariano: Well, carpe diem, you have to seize the day. There’s an opportunity in the Chicago market now, and we are working very hard to accomplish all that we want to accomplish. We added 13 stores this year, it’s about 6,000 employees. You have to turn your hearing aid off to Wall Street. The Street wants results in 13 weeks. But you build a business over a long period of time. I submit that if somebody came up with the idea of the 3M Corporation today, it would never be what it is today. Corporations from years ago took time, they had patience, they even made mistakes. You have to have a level of understanding of what the Street is looking for, but at the same time you have to keep your eye on the long-term value. I’ll admit, it does take a bullet-proof vest sometimes.

2. As a leader you have to be able to look out into the horizon. What is your vision for your stores?

Mariano: We’ve got to be totally differentiated from other retailers. I don’t want to look like Walmart, taste like Walmart, feel like Walmart.  Do I want to be aware of what they do? Yes. But I don’t want to do anything like them. I don’t want that perception that everything is cheap, cheap, and cheap.  I don’t want “self-service” because that causes no service. I teach, develop, train, and coach and mentor my people to be salespeople, not just clerks, but salespeople to sell more, so that every hour that they’re there at the store, they’re more productive. That’s leadership, that’s management.

You have to strike this balance between your workers, your hours, how much you’re going to spend, what is truly productive, and what is not productive. How do I make my store and its people more productive over time? That is something you cannot do in any one week. You work on it every single day, and you do your best to get better and better at it. If you look at Starbucks and the availability of people working at their shops, they’re pretty good at having the right amount of people when they’re busy and the right amount when it’s not so busy. That’s not by accident. You have to work at that so you’re ready for the customer when they are there.

3. What’s the formula for great customer service? How do you identify and hire and train your employees so that they are good at providing service to the customer?

Mariano: Well, our selection process is pretty strict, pretty rigid, and it’s a very disciplined process. It takes about 45 minutes online to fill out the application.  Typically, you go through two or three interviews before you’re hired. We work hard in the interviews to really see what we have in the applicant because it’s not always obvious. Sometimes it’s hidden but they have the potential to shine like a beautiful diamond. We acknowledge that in some parts of the city people avoid eye contact for a reason.  So we want to draw them out. You’ve got to look at people as individuals and see what’s there. We also do a fair amount of training, on-going training and development. People know that if they do better, they can get promoted, get more hours, so it’s a motivation to do better.

Q: This is an era of growing cultural diversity. So, good customer service means embracing various types of customers. What is your approach?

Mariano: I tell all of my employees, we embrace diversity. We want to be reflective of the community shopping in our store, because otherwise, how do you make good decisions? For example, we serve a fair amount of Chinatown. We clearly have some Chinese-American employees, and we ask them to go take a picture of your mother and grandmother’s pantry. What do they have in their pantry that we don’t have in the store? Because, surely, there are things in there that we don’t have.

And we speak to our people directly about this: if you have a particular bias, leave it outside. We all have them, but we treat all of our customers equally. It’s unacceptable and not tolerated to treat any one individual based on how they look or how they speak.

4. Consumer buying habits are shifting. Millennials are on the rise, becoming a larger segment of the shopping community. Their tastes are different.  So how do you address changes in consumer habits?

Mariano: I think for us it’s something we do all the time. I mean that’s how we were taught in retail. You adjust with customers as they change. Where Millennials are different is in brand loyalty. Their tradeoffs are much different.  They’ll scrap on something in order to buy a good bottle of wine. They see higher value buying a good bottle of wine than certain other things.  So what is really more important to customers really goes back to an article I read many years ago in Harvard Business Review, called the Plurality of Consumerism. Some customers would buy generic paper towels, but they would buy Ben and Jerry’s ice cream for the premium ice cream. They don’t want to spend more money on paper towels that they are going to throw away, but when it came to ice cream, they are going to get the top of the line. It’s the same way today.

Now, I think we forgot what happened in 2008 and 2009, because we are a community of forgetfulness. People lost 25% to 50% of their net worth, depending on who does the calculations.  Almost overnight, millions of people were out of work and many of them continue to be out of work. There was a discussion at that time: Once we came out of that period would the behavioral changes that occurred wear off or would they be permanent?  I came down saying there would be permanent shifts in consumer behavior. In my judgment, there were structural changes in consumer behavior. The consumer is not back to where they were, and they’re not going to get back.

I think this is the new normal, and so as we go forward in retail, we can’t expect them to be spending freely.  I think the customer is spending very carefully, and their mindful of what they spend and deliberate on what they spend on. You’re going to have to earn your dollars, and not just assume you can do as you always have done and be ok.

5. We have to talk a little about technology. The internet is not only a new source of competition, but it’s also technology to be leveraged to upgrade your store services. How are you implementing technology?

Mariano: Since our store is so much about experience within the store, when we think about technology it’s, how does it enhance the experience of the store? Most people ask about technology and they’re referring to shopping online.  In my mind, I am not there yet, I want to know how can we use technology to make the shopping experience much more enjoyable and easier for the customer when they come into the store.

One of the biggest pain points in retailing is the checkout. People hate the checkout. They don’t want to wait. We work real hard on not making people wait. We’ve done it by adding people, clerks. Because that’s a time when customers want to get their shopping done and move on with their lives.

But you think technology can be used to improve the shopping experience in the store by making it faster or easier?

Mariano: Yes. You could buy store maps on your cell phone that tell you where every item is.  So, if you’re looking for a specific item, you can not only ask an employee, but you can find where the item is using the map. Here’s how I look at it: What questions am I getting from customers that I can use technology to deliver an answer more easily or faster for them.