Little things--and big things--matter to customers

THE BALTIMORE SUN

Nancy Hostetler knows the prices are higher at Giant than at the Valu Food closer to her home in Ellicott City. And as a mother of four, she doesn't have a lot of time to drive out of her way for grocery shopping. But it's the little things that keep her coming to Store 203 in Dorsey's Search, Columbia.

Such as when she opened a can of peaches at home to find it half-empty, made an off-hand commentto a clerk weeks later and left the store with a free replacement can. Or the time a staffer dug up some plastic cup lids in the employees' lounge to rescue a messy birthday party. "They gave them to me for free and got a customer for life," Ms. Hostetler says.

It's the little things.

Giant executives have a million of them: Store manager changes tire in the rain while customer waits inside store. Top official responds to minor complaint about lettuce, visiting the store to investigate the produce section with the customer. Chairman of the company personally wrestles with coffee machine that ripped off a consumer and gives her a cup on the house.

According to Ms. Hostetler, and to Giant officials, it's also the big things that keep people coming back: clean stores, wide variety, consistent quality and courteous employees.

"My father always referred to the consumer as Mrs. Murphy, and that she should be able to come into our stores and shop blind," says Chairman Israel Cohen, speaking of his father, Giant co-founder Nehemiah "N. M." Cohen. "If she went to tomatoes, she shouldn't be able to find a bad tomato."

That devotion to the customers, to treating them well and filling the stores with what they want, and to creating a positive public image, has helped make Giant Food Inc. the most popular and profitable supermarket company in the Baltimore-Washington market, with about 40 percent of the market. Even though some of Giant's most loyal customers say the prices are higher than average, they keep coming back.

The company's consumer orientation is grounded in economics as much as common sense. Tony Gochal, a 46-year-old Columbia resident, shops Store 203 two or three times a week, and buys his lunch most days from a Giant in Laurel near his office.

Mr. Gochal is an expert shopper: On a recent Saturday afternoon he whipped through the store in 10 minutes, buying $18 worth of food. He figures he spends $50 a week with Giant. At that rate, he could spend $75,000 with the company for the rest of his life. Assuming Ms. Hostetler's children leave the nest at a reasonable age, she may spend more than $100,000 at Giant for the rest of her life.

"We want the customer when she leaves the store to turn around and say, 'My, what a wonderful shopping experience,' " Mr. Cohen says. "It's a very simple business: Treat the customer like you want to be treated."

To be sure, Giant is not the leader in customer satisfaction. The legendary Stew Leonard of Norwalk, Conn., sold about $100 million of groceries in his one store last year (Store 203 does about $35 million in annual sales). Mr. Leonard's secret is a fanatical devotion to his shoppers: The store features a petting zoo, variety shows for the kids and employees who have been known to bake up a fresh batch of an out-of-stock goodie on request.

As friendly as Giant's employees are, even local stores, such as some of the Eddie's supermarkets, are known for providing personalized customer service far beyond what a large chain like Giant can provide.

In fact, much of the company's $30 million-plus annual advertising budget is aimed at softening its big corporate image, and most shoppers seem to find Giant friendlier -- at least more so than the other big supermarkets.

Giant says that's because its top officials set the standard: Store managers are allowed to satisfy one customer by ordering a single case of an item the company doesn't carry, a practice called "spoon-feeding," says M. Davis Herriman Jr., vice president for grocery operations. Senior Vice President Alvin Dobbin personally answers every customer compliment and complaint.

But when employee enthusiasm and friendliness lag, management systems are there as a safety net.

Bill Marriott, manager of Store 203, is reviewing the record of a cashier accused of treating a customer impolitely. Giant has a "mystery shopper" program that sends undercover shoppers through checkout lanes on the lookout for poor etiquette. "Abrupt manner," the cashier's record says. "Gave no eye contact and no smile, stared straight ahead and appeared very bored."

"The quickest way out the door, other than losing money, is to p--- off the customer," Mr. Marriott says.

On a larger scale, Giant was one of the first supermarket chains in the nation to establish a consumer affairs department in 1970. It was headed by Esther Peterson, a former consumer affairs adviser for President Lyndon B. Johnson and a former labor negotiator for a textile workers union. Invariably described as "grandmotherly," Ms. Peterson predictably was accused of selling out when she joined "big business."

But the head of Giant's meat and deli department couldn't have been thrilled with Ms. Peterson when she appeared in print ads in 1972 urging customers to avoid high-priced beef and opt for less-expensive protein alternatives such as chicken, turkey and eggs. Lately, Giant's nutrition-minded consumer advisories focus more on what you should eat than on what you shouldn't.

"We were the first supermarket to hire a consumer advocate to represent the consumer on the inside," says Odonna Mathews, Ms. Peterson's protege and successor.

Ms. Mathews' department handles the more than 20,000 letters and calls from consumers each year. It runs the Sensory Evaluation Department, basically a taste-testing kitchen at headquarters. (On a recent morning volunteers from the company were hunched over four paper plates, suspiciously eyeing little mounds of chutney.)

It publishes the company's annual "Eat for Health Food Guide," a nutritional-content book sold next to the tabloids, and it prints the various health and nutrition brochures found throughout the stores.

The Consumer Affairs Department also runs the Consumer Advisory Boards, 20-member panels -- one board each from the Baltimore and Washington areas -- that meet four times a year to discuss topics of interest to consumers. Recent topics included: no-candy checkout lanes, seat belts for shopping carts, new low-fat desserts and environmental issues such as recycling and pesticides. (Giant published full-page ads saying its apples had been free of the pesticide alar for years before the issue made the headlines a few years ago. Still, it no longer sells organic vegetables -- lack of consumer interest, the company said.)

Listening to the consumer is important to Giant, but the company is equally adept at getting its message to the public. That's Barry Scher's job. The 46-year-old Richmond native is vice president for public affairs, Giant's representative to the media and the legislatures. He makes sure that people know about the company's many civic and community activities: inner-city soap box derbies; back-to-school safety campaigns; the Bags-a-Plenty hunger drives; multiple sclerosis walkathons; anti-drunken driving programs; public safety projects; and environmental programs.

(Giant's 29-year sponsorship of the "It's Academic" television show and the recent Apples for the Students computer giveaway are the responsibility of Terry Gans, vice president for advertising and promotions.)

Mr. Scher also makes sure that lawmakers in two states, the District of Columbia and on Capitol Hill know how Giant feels about things such as blue laws (never bring them back) and triplicate prescriptions for pharmacies (costly and useless).

He's also the lightning rod for the occasional glitch, such as when a truckload of food for the flood victims of Shadyside, Ohio, ended up spoiled and maggot-infested when it arrived in July. The problem was that a volunteer driver failed to deliver the goods directly to Shadyside, Mr. Scher says, and it sat out in the July heat for two days. Giant ended up sending a $10,000 check to Shadyside's mayor.

Giant's biggest public relations challenge by far came with its trailblazing move into electronic scanning. When it first tested scanning of items in 1975, Giant touted the possible time and labor savings: No longer would clerks have to slap a price sticker on each of up to 20,000 items in a store. Instead, the prices would appear on labels stuck to the shelves, under a system called shelf pricing. And no longer would cashiers have to ring up each item -- the electronic scanner would read the price from the bar code on the product. But the company didn't anticipate the firestorm of protest from consumer groups.

Unfortunately for Giant, the move to scanning came too soon after a sharp rise in food prices at the end of 1972 and into the spring of 1973.

"The supermarket industry wasn't equipped or prepared for the attacks that came when food prices went up radically at that time," says Carol Tucker Foreman, a Washington public policy consultant who was executive director of the Consumer Federation of America at the time.

Giant tried shelf pricing again in 1981 -- two years after the entire chain was converted to electronic scanning. But this time it launched a pre-emptive media campaign explaining what the new system was about. As a spoonful of sugar, Giant reduced its prices by about 10 percent across the board, in what turned into the first of its recent price wars.

Today electronic scanning and shelf pricing is standard at most major chains. But the bad feelings still linger among those who believe individually marked products are a consumer's right.

"Item pricing is a mechanism that gives the consumer an additional tool to verify the working of the marketing system," says D.C. Councilman Jim Nathanson. He says he has files full of consumer complaints about cash register mistakes at Giant and Safeway. Partly thanks to Mr. Scher's lobbying, Mr. Nathanson's attempts to require item pricing have been defeated in the past few years.

But the sharpest arrows fly not from opponents of shelf pricing but from critics of Giant's food prices.

Giant officials insist their prices are fair, no higher on average than most those of supermarket chains in the area and lower for many items discounted for sales and promotions. But independent surveys, and even some loyal customers interviewed for this story, say Giant tends to be higher-priced than most of its competitors.

In its annual supermarket price survey, Washington Consumers' CHECKBOOK, a non-profit publication modeled after Consumer Reports, asserted that Giant and Safeway customers spending $125 a week on groceries could save up to $750 a year shopping at the lowest-priced competitors.

The survey, based on a 125-item market basket, covers stores only in the Washington area. This year it found that Giant's and Safeway's prices were on average 12 percent higher than those at Shoppers Food Warehouse, whose parent is Jumbo Food Stores Inc. Giant's and Safeway's prices came in 7 percent and 9 percent higher, respectively, than those of Magruder's Inc. of Rockville, according to CHECKBOOK.

Barry Scher dismisses the survey year after year as worthless and misleading. The market basket improperly compares items that differ in quality from store to store, such as meat and produce, he says. The survey doesn't adequately reflect price discounts from sales and coupons; important distinctions in service and variety are ignored; and the market basket is too small to reflect actual prices at a place like Store 203 that offers 40,000 items, according to Mr. Scher.

But CHECKBOOK's market basket virtually matches the one used for the federal consumer price index, counters Robert Krughoff, the magazine's publisher. Further, quality comparisons of perishable items are best left to the consumer -- "We assume you will make your own judgments," Mr. Krughoff told his readers -- and besides, the survey includes separate sections comparing only perishables (Giant and Safeway were 29 percent higher than Shoppers for produce alone, according to the 1990 survey.).

The poll does account for sales and coupons in effect at the time, although a shopper could save more by stocking up on a dozen sale items, he acknowledged. Finally, in an interview, Mr. Krughoff accused Mr. Scher of hypocrisy for criticizing a 125-item market basket when the company's own comparison ads in 1986 and 1987 used market baskets of only 100 and 43 items, respectively.

Mr. Krughoff raises the question of the effect Giant's unsurpassed market share has on prices. And Ms. Foreman, the former Consumer Federation of America director, says Washington in general suffers from "extraordinarily high food prices here, ones that couldn't be explained by extra costs for transportation or extra high costs for labor, but that appeared to be explained by the limited number of competitors in the market."

"People say that if there was more competition Giant would be more competitive in prices," says Alvin Dobbin, Giant's senior vice president for operations. "I think it's bull----. I think that we are competitively priced based on the marketplace we're in and the cost of doing business."

And Mr. Cohen says that Giant's profits do not necessarily reflect higher prices. "Better than 1 percent of our [3.34 percent] profits comes from things that no other chain does," things such as real estate development and construction.

Ultimately, he and Mr. Dobbin point out, if Giant were priced too high the consumers would vote with their checkbooks. "Again, we do the business because I think we deserve to do the business," Mr. Dobbin says. "We give the kind of service and the kind of atmosphere that the customer wants to shop in."

Or, as one supplier puts it, "They'll complain if they feel they have to pay more. . . . Giant is massaging them while they're complaining."

Tomorrow morning: THE PRODUCT. Ingredients for a profitable chain: a clean back room, slick store design, and "smart" cash registers.

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