Surviving Wal-Mart -- How a Burlington Pick 'n Save used ingenuity and hustle to avoid layoffs

By Michael Burke

Sunday, October 10, 2004 12:02 AM CDT

BURLINGTON - Well before gargantuan retailer Wal-Mart invaded this retail territory with a Supercenter in January, Pick 'n Save was at full battle alert.

As a result, the store has been winning back some of the turf it lost when Wal-Mart stormed the beaches.

Wal-Mart immediately snatched 20 percent to 22 percent of Pick 'n Save's business, said Dave Spiegelhoff, director of operations for Spiegelhoff's Pick 'n Save. But that loss now averages about 13 percent over every two-week period.

"Little by little, people keep drifting back."

The family-owned company has five Pick 'n Save stores including one in Waterford, one in Walworth and two in Portage. Each is competing with a Wal-Mart Supercenter nearby, so Spiegelhoff has plenty of experience in trying to fight off the smiley-faced retailer.

Everything about the Bentonville, Ark.-based Wal-Mart is huge. Its Burlington store has 155,078 square feet of space. It stays open around the clock. The company took in an astounding $250 billion in revenue in 2003.

"You've got to respect them, big as they are," Spiegelhoff said.

He also said that "I think we're a better retailer" because of Wal-Mart's entry. But he said Wal-Mart has eaten into Pick 'n Save's profits "a lot."

He predicted Wal-Mart would cause the death of one of Burlington's other three grocery stores, which also include Schmaling's Piggly Wiggly and Sentry Food Store.

Top executives from Schmaling's and Sentry would not talk for this story.

"Somebody will have to close, or the community has to grow," Spiegelhoff said. "There's just too much square footage for everyone to be profitable."

When there's a grizzly bear chasing three people, Spiegelhoff said, "you don't have to beat the bear; you just have to beat one of the other two."

David Livingston, who monitors the grocery industry as owner of DJL Research, agreed that Wal-Mart will kill one of the three grocers. And he predicted that Piggly Wiggly would be the one to close.

"The weak link is Piggly Wiggly," he said. The company has cut a lot of labor and is trying to get by splitting employees' time between its Burlington and Delavan stores.

Fresh Brands has had financial difficulties as well, Livingston noted. "If you're Schmaling's, you've got one problem, and now you have a wholesaler that's supposedly backing you, but they're having problems

themselves."

He said Pick 'n Save was already dominating the other two stores and is doing the best job in Burlington against Wal-Mart.

"They're really in tune with their consumer," Livingston said, through data they get from the Pick 'n Save loyalty card.

Survival plans "It's scary," Spiegelhoff said of the time when a Wal-Mart is on the way. "Your first instinct is you want to start cutting back on all your labor, laying people off, jumping on every price ..."

They did none of that at Pick 'n Save, he said. But they did start

planning and training well in advance of Wal-Mart's arrival.

"When the dirt starts to move is when you get your plan in place," Spiegelhoff said. "If you wait till they're putting walls up, it's too late ... you start a good 18 months before they open."

At that time, he said, Spiegelhoff's started a cross-training program. Employees had to be competent at stocking, bagging and staffing the checkout.

"(Employees) understand that our customers become guests," Spiegelhoff said. "And everyone helps everyone else out."

If check-out counter lines get too long, four or five different departments each send someone scuttling there to help.

"We cut back on hours, but not to the degree where we had to lay people off," said Spiegelhoff, one of three partners in the company with brother Steve Spiegelhoff and cousin Tim Spiegelhoff. Seventeen family members work for the company.

Another Pick 'n Save tactic was to start an aggressive demonstration program each Friday through Sunday. The items offered for a taste are things that are unique to Spiegelhoff's - such as their own sausages and their 16 or more types of homemade bratwurst.

"A, you keep people employed and give them their hours," Dave Spiegelhoff said.

"And B, you show things that differentiate you from not only the Supercenter, but your other competitors.

"You really have to stay the course and keep everyone focused on our initiatives."

Spiegelhoff knows a lot about his largest competitor, despite Wal-Mart's well-known corporate secrecy. For example, "a 20- to 25-minute drive is their normal market radius," he said.

His company also visits the competition every day.

"It's amazing what you find," Spiegelhoff said.

On price, he said, "we're not going to be the cheapest on every item, but we're very, very competitive with the Supercenter." Pick 'n Save's sale items usually beat Wal-Mart's prices, he said.

"We went to great lengths to expand our bakery, deli, produce, meat and floral (departments)," Spiegelhoff continued. "That can set you apart."

They gained the necessary square footage through a careful analysis of how much various items were selling. If they were not rapid movers, their shelf space was pared down or eliminated.

Pick 'n Save also changed its advertising cycle so they'd be preparing for each week's sale early in the week, when shopping is slower, and not on weekends. That was there was less inconvenience to their shoppers.

And Spiegelhoff said he personally answers every guest's comment card within 48 hours.

Considering the size of the foe, Spiegelhoff's goal sounds prodigious. One year after Wal-Mart came to town, he hopes his store's sales will be equal to where they started.

"That," he said, "would be a huge victory."

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