 | | |  | (Continued)
Each
of the newer Wegmans stores is 130,000 square feet—three times the size of a typical supermarket. That means it can offer true one-stop-shopping for every taste. And unlike Whole Foods, which disdains products containing pesticides, preservatives, and other unhealthy stuff, Wegmans stocks both organic gourmet fare and Cocoa Puffs, at competitive prices. That vast selection helps explain why in places like Rochester, Syracuse, and Buffalo, the zeal for Wegmans often borders on kooky obsession. In 2004 the company received nearly 7,000 letters from around the country, about half of them from people pleading with Wegmans to come to their town. Ann Unruh, 52, an insurance manager in Sparks, Md., who has never set foot in a Wegmans, is so excited about a store opening in her area later this year that she plans to take the day off work to be there. She says there will be no need to visit Whole Foods anymore: "I will just shop at Wegmans."
Each
Wegmans store boasts a prodigious, pulchritudinous produce section, bountiful baked goods fresh from the oven, and a deftly displayed collection of some 500 cheeses. You'll also find a bookstore, child play centers, a dry cleaner, video rentals, a photo lab, international newspapers, a florist, a wine shop, a pharmacy, even an $850 espresso maker. "Going there is not just shopping, it's an event," says consultant Christopher Hoyt. In an annual survey of manufacturers conducted by consultancy Cannondale Associates, Wegmans bests all other retailers—even Wal-Mart and Target—in merchandising savvy. "Nobody does a better job," says Jeff Metzger, publisher of Food Trade News.
But
the biggest reason Wegmans is a shopping experience like no other is that it is an employer like no other. "You cannot separate their strategy as a retailer from their strategy as an employer," says Darrell Rigby, head of consultancy Bain & Co.'s global retail practice. Wegmans' hourly wages and annual salaries are at the high end of the market (the better to fend off unions). Consider the sous chef at Wegmans' store in the Rochester suburb of Pittsford, the chain's highest-grossing store at well over $2 million in sales per week. His name is Charles Saccardi, and his previous employer was Thomas Keller of the French Laundry, the famed Napa Valley restaurant. People like that don't come cheap.
But
salaries aren't the whole story. The company has shelled out $54 million for college scholarships to more than 17,500 full- and part-time employees over the past 20 years. It thinks nothing of sending, say, cheese manager Terri Zodarecky on a ten-day sojourn to cheesemakers in London, Paris, and Italy. (It's no doubt easier to pamper employees like this when you don't have Wall Street breathing down your neck; a third of FORTUNE's best companies to work for, like Wegmans, are private.) Even Wegmans is not immune to economic realities, however. Back in August 2003, the company—which previously covered 100% of employees' health insurance premiums—asked salaried employees earning more than $55,000 a year to contribute to the cost. This month Wegmans began asking all other employees to pony up too.
All
that means Wegmans' labor costs run between 15% and 17% of sales, Bishop estimates, compared with 12% for most supermarkets (the company declines to comment). But its annual turnover rate for full-time employees is just 6%, a fraction of the 19% figure for grocery chains with a similar number of stores, according to the Food Marketing Institute. Almost 6,000 Wegmans employees—about 20%—have ten or more years of service, and 806 have a quarter-century under their belts. The supermarket industry's annual turnover costs can exceed its entire profits by more than 40%, according to a study conducted by the Coca-Cola Retailing Research Council. When you understand that, you begin to see the truth in Robert Wegman's words: "I have never given away more than I got back."
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