Saturday, February 19, 2011

Grocery Chains in General, Wegman's in Particular

I am constantly surprised by the lack of consolidation in the grocery business. Within my lifetime (45 years), I personally have witnessed consolidation in one retail segment after another: video stores (down to Blockbuster + online), department stores (Wal-Mart and Target), electronics (Best Buy, general discounters and online), bookstores (Borders and B-Dalton). But there are dozens of grocery chains across the country, and for the most part they seem to be very, very regionalized. As a general principle, I don't understand why consolidation hasn't occurred. And in particular, I don't understand why Wegman's isn't marching across the country, Wal-Mart-like, to own the business.

I have no idea how Wegman's does what it does, but they seem to be magically head-and-shoulders above the competition, analogous to how much stronger Wal-Mart was than its competitors. Their stores are very, very nice, huge, with great selection. Yet they have lower-than-average prices, including many great, knockoff store brands. Their employees are friendly and happy, and their customers LOVE them. That is no exaggeration. I can understand how a niche player like Trader Joe's can achieve these things, but it is simply amazing for a full-service grocery store to manage the feat.

The only explanation I can come up with is that Wegman's is privately owned, and they simply aren't ambitious enough to become the Wal-Mart (or, if you prefer, the Costco) of groceries. Because, as my son would say, they could "own" the market, if they wanted to.

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