August 6, 2013
Is WinCo ‘Walmart’s Worst Nightmare’?
Burt Flickinger III, the well-known retail industry analyst, thinks WinCo Foods may be "the best retailer in the Western U.S." He also thinks the supermarket operator may be "unstoppable" and "Walmart’s worst nightmare." Mr. Flickinger made all of these statements in a recent interview with The Idaho Statesman newspaper.
In an interview with Supermarket News in April, Neil Stern, senior partner at McMillanDoolittle, said, WinCo is able to sell goods at prices lower than Walmart "because of the efficiency of its model — high-volume stores with a very committed workforce from management down."
Messrs. Flickinger and Stern are far from alone in their praise of the employee-owned chain.
A rival supermarket chain executive who spoke with RetailWire under the condition of anonymity said, "When they first opened near our stores, we didn’t see a big, immediate hit like you do with supercenters. But six months, nine months go by and you look up and they have a 15 percent share of the market. They just keep chipping away. They are every bit as tough, maybe tougher, to compete with as Walmart."
Winco currently operates its no frills stores in Arizona, California, Idaho, Nevada, Oregon, Utah and Washington. It plans to enter the North Texas market next year. The chain requires customers to bag their own groceries and takes no credit cards, only cash, checks or debit cards.
"WinCo is really accelerating its growth significantly," Mr. Flickinger told the Statesman. "You can see WinCo doubling in size every five to seven years. … No one can compete against them effectively."
The company points to its thousands of employee owners for much of its success. Mr. Flickinger’s company, Strategic Resource Group, estimates the average hourly worker stays with WinCo for more than eight years. The company pays 20 percent of each worker’s annual income into a pension fund. Other benefits include medical, dental, paid days off, flexible spending accounts and more.
- WinCo model setting new grocery industry standard – The Idaho Statesman
- Pricing: WinCo Keeps Costs Down and Velocity High – Supermarket News (reg. required)
- Grocers eager to open up shop in North Texas – The Dallas Morning News/Denton Record-Chronicle
- About Our Employee-Owned Company – WinCo Foods
- WinCo Jobs – WinCo Foods
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Discussion Questions
Is WinCo Foods the disruptive grocery retailing force described in the Idaho Statesman report? What do you see as WinCo’s key advantages and how can it sustain those over time?
Poll
They certainly take way better care of their employees, and if they can keep procuring great deals, they will be successful. I wish them well.
I am certainly going to look for a Winco store to visit. From the article, the approach appears to be an advantage related to dedicated, well trained employees implementing a strong business model. The question will be, can it continue to scale to thousands of stores and hundreds of thousands of employees?
Unfortunately, have not had the opportunity to visit any of their stores, but based on their web site and articles I was able to find about them, they are a formidable competitor. The closest to them in my area would be Woodman’s who is also employee owned, builds very large stores, doesn’t accept credit cards, and carries a vast selection of items.
Their greatest advantage may be the lack of employee turnover and that should be sustainable over time as long as they continue to generate the type of profits that allows them to support their current benefit program. I think the bigger question is, as Camille pointed out, is it scalable?
Successful? Yes! Disruptive enough to displace Walmart? Not likely!
The workforce model is clearly an advantage, but then again, Walmart workers were also hyper dedicated once upon a time.
As to Burt’s idea that Winco is “unstoppable”—it might play well in the Idaho media, but it ignores tiny little facts like relative scale and depth of pockets.
WinCo seems like a formidable force, but time will tell if it’s going to beat out a giant like Walmart. One of the smartest things in Walmart’s history was its investment in technology. Technology is what is going to propel retailers through the 21st century and beyond. In today’s current market companies are competing on price. There will always be people purchasing at that metric alone. The cost of servicing those in higher markets will have to bring a greater value proposition. To sustain growth over time, WinCo needs to stay the course, remain diligent, and not try to expand too quickly.
Having visited a WinCo last year, I would agree that they are certainly a strong competitive force and seemingly take good care of their employees. And traditional retailers who compete with them acknowledge these things. At the same time, the real question is scalability and not losing their core strengths along the way. Unstoppable, no, but strong, yes.
How big are Winco Stores and how many SKUs do they carry? A lot of their practices (cash only, bag your own food) looks a lot like the Hard Discounter model successfully used by Aldi and Lidl.
The other panelists rightfully bring up the “scale” issue. Does WinCo have the ability to compete on more than a regional level, without combining with another “low price” player like Woodmans? We have seen stories before about retailers like Tesco who were ready to conquer the U.S., while companies like Aldi have been more successful. And we all know that Walmart isn’t afraid of a fight on price in an individual market.
I’ve had opportunities to visit many WinCo stores in several western states. Are they Walmart’s worst nightmare? No. In my opinion, they will be Walmart’s best friend. Walmart will use WinCo as muscle to drive out weak stores. WinCo will most likely be replacing stores operated by Albertsons, Basha’s, Safeway, and other poorly performing stores.
WinCo is using the new, 21st century business model of no debt, no rent, employee owned, no credit cards, no loyalty card gimmicks, and no BS. The old business model of union labor, high prices, loyalty cards, debt, and rent, just doesn’t work anymore, and over time, those types of stores will disappear. WinCo will prey on markets where these kinds of stores will be vulnerable. Walmart should benefit as the weak stores go away.
WinCo is not really disruptive as much as they are very successful. Their expansion strategy has been very good and they execute as well as any retailer, staying true to their core. To see them as a nightmare to Walmart is a bit of a stretch. They have carefully chosen markets and locations and are probably not focused on Walmart as much as they are looking to execute their plans.
WinCo is modeled after SuperValu’s original Cub stores. Cub at one time had two great advantages in Minneapolis/St. Paul. They could forward buy in a market of independents and they could receive produce bypassing the warehouse. When they tried to expand into new areas such as Denver and Indianapolis, they found themselves competing against chains who could forward buy and store the product at a warehouse cheaper than retail space. As Cub expanded in Minneapolis/St. Paul, their same store sales volumes decreased due to cannibalization, their variety had been edited, they had pared their in-store back stock and they are now vulnerable on both price and variety. Still number one but losing market share.
The WinCo’s size/back stock has been an advantage in the less dense areas of the west. It remains to be seen if it will hold as the enter denser areas with more expensive real estate. They will also have to avoid cannibalization or they will end up like Cub—declining.
It will also be interesting to see how they do against HEB, Kroger and Aldi.
Not to take anything away from WinCo—but I don’t think Walmart has nightmares.
I’ve never questioned either Mr. Flickinger nor the “Statesman”, but yes, the comments seem a little over-the-top and designed to get attention (at which of course they succeeded).
I’ll have to second — or maybe it’s fifteenth — the other comments here who note that comparing an 85-store chain to Walmart is premature. It’s extrapolating a grain of sand into a boulder (if not an asteroid). And I would also agree that some operator like Aldi seems a more valid point of comparison, since WM seems almost too upscale to be considered a (direct) competitor. (Never thought I’d be writing that.)
As for the future, one thing I think will have to change at some point: cash only. How many more years before a generation is born that never even knows what an actual dollar bill looks like?
WinCo Foods is certainly one to watch here in Arizona, but I doubt its larger competitors are losing much sleep. It operates just three stores, all in suburban Phoenix—a mere fraction of Walmart’s 112 or even Fry’s (Kroger) 119 statewide.
Even if Burt Flickinger has engaged in a bit of hyperbole, I still take his interpretation seriously. The WinCo business model substitutes operational discipline and alignment where many supermarket operators suffer from inertia and a broad gulf between front-line associates and top management.
WinCo may well be a nightmare competitor for the second tier operators who lack a crisp identity with shoppers. Here in Arizona, that might mean anxiety for Albertsons and Basha’s, but not so much for Sprouts or Trader Joe’s.
WinCo is employee-owned with an incredibly strong balance sheet. The stores do in fact look a lot like the old Cubs, with the Wall of Values. It has read its market well, and is grabbing a lot of share. It’s been adding stores and building DCs, and has terrific customer loyalty from my visits to their stores.
If they stick to their knitting, they will become a stronger regional player and could become one of the big boys down the line. But to say they are Walmart’s biggest nightmare is just one of those overstatements any of us might have made when chatting with a local hometown-proud reporter. I’d certainly give Burt a break on this one.
I don’t know what frills WinCo stores are supposedly missing, but their stores here in the Sacramento area are beautiful, well appointed, and busy. Selection is adequate and prices are competitive. They’re hurting all local food formats and, as others have mentioned, their invested employees are simply friendlier and more helpful in my opinion. I wish there were one nearer my home.
WinCo sounds similar to Publix in many ways, from committed staff to being customer focused. Publix has been Walmart’s “target” in South Florida. I hope they are successful. One thing Walmart is not is customer focused, other than making the sales.
WinCo does remind me of Cub Foods,with a Publix attitude and a Woodman’s employee-owned business model. WinCo is not a chain that grows rapidly but builds stores one at a time so they can pay for them. Their expansion into Dallas is the one Texas metro area that HEB has yet to conquer. If HEB goes into Dallas like they did Houston, it will be World War III. As others have mentioned, 85 stores will not impact Walmart. A handful in big metro areas like Las Vegas, Phoenix, and Dallas are not going to be on the top market share list. But they will be just enough to push Albertsons, Basha’s, Safeway, Tom Thumb, and a few others over the edge. They already compete with Kroger and I think Kroger, like Walmart, doesn’t mind WinCo so long as its not them going out of business.
WinCo has been in my market since the Cub banner days. They really have not changed all that much with time. Perishables are decent quality, once in a while bargain priced, usually fair priced. Dry goods are mostly all bargain priced on groceries; so so on paper products, and pet, and terrible on drug/general merchandise.
I have found them to be a rather customer unfriendly store. The lack of credit card acceptance should not be much of an issue; they accept pin-debit and have a fee free ATM in store. They removed their express lanes long ago and quit offering hand baskets. Their corporate office told me, in so many words, they only wanted people coming in and buying cartfulls, not small transactions. They then went back on this a bit and after a few years started to allow “5 items or fewer” at customer service (but no weighable items) and more recently brought back hand baskets. I notice their new stores in Las Vegas and Phoenix have self checkout.
I do think WinCo beats Walmart’s grocery prices. But that is not saying much; Kroger comes within 5% of Walmart in a lot of markets (Ralphs/F4L and QFC Stores excluded) out west too.
One point not often made is how WinCo piggy backs off of competitors for various private label goods. Various dairy items are made by Safeway; they actually carry Lucerne brand yogurt and sour cream. Their private label bread is all made by Safeway or Fred Meyer.
To this point WinCo has relied on a lot of Oregon/Washington suppliers to supply it. As they expand into far away territories like Texas and New Mexico, this will not make sense from a cost standpoint, will cost them days in transport-hurting date codes, and will present brands to the southwestern region that the region has never seen before. WinCo is going to have some learning to do on merchandising, but if there is one thing Walmart has taught us, it is that price will cover up for many grocery missteps…so it may not be as big of a deal that they have some odd brands in the stores (these are good quality brands; Tillamook ice cream, Tillamook cheese, Nalley Chili, and Umpqua ice cream are great, don’t get me wrong).
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They certainly take way better care of their employees, and if they can keep procuring great deals, they will be successful. I wish them well.
I am certainly going to look for a Winco store to visit. From the article, the approach appears to be an advantage related to dedicated, well trained employees implementing a strong business model. The question will be, can it continue to scale to thousands of stores and hundreds of thousands of employees?
Unfortunately, have not had the opportunity to visit any of their stores, but based on their web site and articles I was able to find about them, they are a formidable competitor. The closest to them in my area would be Woodman’s who is also employee owned, builds very large stores, doesn’t accept credit cards, and carries a vast selection of items.
Their greatest advantage may be the lack of employee turnover and that should be sustainable over time as long as they continue to generate the type of profits that allows them to support their current benefit program. I think the bigger question is, as Camille pointed out, is it scalable?
Successful? Yes! Disruptive enough to displace Walmart? Not likely!
The workforce model is clearly an advantage, but then again, Walmart workers were also hyper dedicated once upon a time.
As to Burt’s idea that Winco is “unstoppable”—it might play well in the Idaho media, but it ignores tiny little facts like relative scale and depth of pockets.
WinCo seems like a formidable force, but time will tell if it’s going to beat out a giant like Walmart. One of the smartest things in Walmart’s history was its investment in technology. Technology is what is going to propel retailers through the 21st century and beyond. In today’s current market companies are competing on price. There will always be people purchasing at that metric alone. The cost of servicing those in higher markets will have to bring a greater value proposition. To sustain growth over time, WinCo needs to stay the course, remain diligent, and not try to expand too quickly.
Having visited a WinCo last year, I would agree that they are certainly a strong competitive force and seemingly take good care of their employees. And traditional retailers who compete with them acknowledge these things. At the same time, the real question is scalability and not losing their core strengths along the way. Unstoppable, no, but strong, yes.
How big are Winco Stores and how many SKUs do they carry? A lot of their practices (cash only, bag your own food) looks a lot like the Hard Discounter model successfully used by Aldi and Lidl.
The other panelists rightfully bring up the “scale” issue. Does WinCo have the ability to compete on more than a regional level, without combining with another “low price” player like Woodmans? We have seen stories before about retailers like Tesco who were ready to conquer the U.S., while companies like Aldi have been more successful. And we all know that Walmart isn’t afraid of a fight on price in an individual market.
I’ve had opportunities to visit many WinCo stores in several western states. Are they Walmart’s worst nightmare? No. In my opinion, they will be Walmart’s best friend. Walmart will use WinCo as muscle to drive out weak stores. WinCo will most likely be replacing stores operated by Albertsons, Basha’s, Safeway, and other poorly performing stores.
WinCo is using the new, 21st century business model of no debt, no rent, employee owned, no credit cards, no loyalty card gimmicks, and no BS. The old business model of union labor, high prices, loyalty cards, debt, and rent, just doesn’t work anymore, and over time, those types of stores will disappear. WinCo will prey on markets where these kinds of stores will be vulnerable. Walmart should benefit as the weak stores go away.
WinCo is not really disruptive as much as they are very successful. Their expansion strategy has been very good and they execute as well as any retailer, staying true to their core. To see them as a nightmare to Walmart is a bit of a stretch. They have carefully chosen markets and locations and are probably not focused on Walmart as much as they are looking to execute their plans.
WinCo is modeled after SuperValu’s original Cub stores. Cub at one time had two great advantages in Minneapolis/St. Paul. They could forward buy in a market of independents and they could receive produce bypassing the warehouse. When they tried to expand into new areas such as Denver and Indianapolis, they found themselves competing against chains who could forward buy and store the product at a warehouse cheaper than retail space. As Cub expanded in Minneapolis/St. Paul, their same store sales volumes decreased due to cannibalization, their variety had been edited, they had pared their in-store back stock and they are now vulnerable on both price and variety. Still number one but losing market share.
The WinCo’s size/back stock has been an advantage in the less dense areas of the west. It remains to be seen if it will hold as the enter denser areas with more expensive real estate. They will also have to avoid cannibalization or they will end up like Cub—declining.
It will also be interesting to see how they do against HEB, Kroger and Aldi.
Not to take anything away from WinCo—but I don’t think Walmart has nightmares.
I’ve never questioned either Mr. Flickinger nor the “Statesman”, but yes, the comments seem a little over-the-top and designed to get attention (at which of course they succeeded).
I’ll have to second — or maybe it’s fifteenth — the other comments here who note that comparing an 85-store chain to Walmart is premature. It’s extrapolating a grain of sand into a boulder (if not an asteroid). And I would also agree that some operator like Aldi seems a more valid point of comparison, since WM seems almost too upscale to be considered a (direct) competitor. (Never thought I’d be writing that.)
As for the future, one thing I think will have to change at some point: cash only. How many more years before a generation is born that never even knows what an actual dollar bill looks like?
WinCo Foods is certainly one to watch here in Arizona, but I doubt its larger competitors are losing much sleep. It operates just three stores, all in suburban Phoenix—a mere fraction of Walmart’s 112 or even Fry’s (Kroger) 119 statewide.
Even if Burt Flickinger has engaged in a bit of hyperbole, I still take his interpretation seriously. The WinCo business model substitutes operational discipline and alignment where many supermarket operators suffer from inertia and a broad gulf between front-line associates and top management.
WinCo may well be a nightmare competitor for the second tier operators who lack a crisp identity with shoppers. Here in Arizona, that might mean anxiety for Albertsons and Basha’s, but not so much for Sprouts or Trader Joe’s.
WinCo is employee-owned with an incredibly strong balance sheet. The stores do in fact look a lot like the old Cubs, with the Wall of Values. It has read its market well, and is grabbing a lot of share. It’s been adding stores and building DCs, and has terrific customer loyalty from my visits to their stores.
If they stick to their knitting, they will become a stronger regional player and could become one of the big boys down the line. But to say they are Walmart’s biggest nightmare is just one of those overstatements any of us might have made when chatting with a local hometown-proud reporter. I’d certainly give Burt a break on this one.
I don’t know what frills WinCo stores are supposedly missing, but their stores here in the Sacramento area are beautiful, well appointed, and busy. Selection is adequate and prices are competitive. They’re hurting all local food formats and, as others have mentioned, their invested employees are simply friendlier and more helpful in my opinion. I wish there were one nearer my home.
WinCo sounds similar to Publix in many ways, from committed staff to being customer focused. Publix has been Walmart’s “target” in South Florida. I hope they are successful. One thing Walmart is not is customer focused, other than making the sales.
WinCo does remind me of Cub Foods,with a Publix attitude and a Woodman’s employee-owned business model. WinCo is not a chain that grows rapidly but builds stores one at a time so they can pay for them. Their expansion into Dallas is the one Texas metro area that HEB has yet to conquer. If HEB goes into Dallas like they did Houston, it will be World War III. As others have mentioned, 85 stores will not impact Walmart. A handful in big metro areas like Las Vegas, Phoenix, and Dallas are not going to be on the top market share list. But they will be just enough to push Albertsons, Basha’s, Safeway, Tom Thumb, and a few others over the edge. They already compete with Kroger and I think Kroger, like Walmart, doesn’t mind WinCo so long as its not them going out of business.
WinCo has been in my market since the Cub banner days. They really have not changed all that much with time. Perishables are decent quality, once in a while bargain priced, usually fair priced. Dry goods are mostly all bargain priced on groceries; so so on paper products, and pet, and terrible on drug/general merchandise.
I have found them to be a rather customer unfriendly store. The lack of credit card acceptance should not be much of an issue; they accept pin-debit and have a fee free ATM in store. They removed their express lanes long ago and quit offering hand baskets. Their corporate office told me, in so many words, they only wanted people coming in and buying cartfulls, not small transactions. They then went back on this a bit and after a few years started to allow “5 items or fewer” at customer service (but no weighable items) and more recently brought back hand baskets. I notice their new stores in Las Vegas and Phoenix have self checkout.
I do think WinCo beats Walmart’s grocery prices. But that is not saying much; Kroger comes within 5% of Walmart in a lot of markets (Ralphs/F4L and QFC Stores excluded) out west too.
One point not often made is how WinCo piggy backs off of competitors for various private label goods. Various dairy items are made by Safeway; they actually carry Lucerne brand yogurt and sour cream. Their private label bread is all made by Safeway or Fred Meyer.
To this point WinCo has relied on a lot of Oregon/Washington suppliers to supply it. As they expand into far away territories like Texas and New Mexico, this will not make sense from a cost standpoint, will cost them days in transport-hurting date codes, and will present brands to the southwestern region that the region has never seen before. WinCo is going to have some learning to do on merchandising, but if there is one thing Walmart has taught us, it is that price will cover up for many grocery missteps…so it may not be as big of a deal that they have some odd brands in the stores (these are good quality brands; Tillamook ice cream, Tillamook cheese, Nalley Chili, and Umpqua ice cream are great, don’t get me wrong).