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By Michael F. Carmichael
July/August 2009
Meijer started 75 years ago, in the midst of the Depression, because Hendrik Meijer couldn’t find a tenant for the empty space he had next door to his barbershop.
Meijer, a 50-year-old immigrant barber from the Netherlands, had his own shop in Greenville, a small town northeast of Grand Rapids, Mich., mounting bills and a declining customer base.
He sold the barbershop and borrowed about $300 to set up a grocery store in the vacant space. Then he couldn’t afford to hire a plasterer to fix it up.
Now the 14th largest food retailer in the U.S., Meijer today operates in only five states. Yet its 185 stores sold an estimated $13.7 billion in 2008 and the company is considered the pioneer of the “supercenter” concept that features grocery items as well as general merchandise bundled under one roof.
It’s here that Hendrik’s son Fred, now 89 and the chairman emeritus of Meijer, picks up the story.
“The first store we owned was 21 x 70 and the retail part was 21 x 50. My dad would buy bundles of used lath, I think for a nickel, and somebody had to strip off the old plaster and straighten out the nails. I don’t know if I did it all (at age 14) but I did it,” says Fred Meijer. “The plasterer’s name was O’Dell-and I remember it because he said to remember his name just think of ‘oh hell’. If you’re 14 and an adult tells you to say ‘oh hell,’ it sticks. We didn’t have the $10 he wanted to charge us but we did have an old violin so we traded that for the plaster job.”
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Fred Meijer was no stranger to marketing, having had a horse-drawn milk route from age 8 to help the family make ends meet. “I knew how hard up we were,” he says. “Until I was 14, I was the one dealing with the customers on the route. If the cows got into fresh alfalfa the flavor changed, the customers gave you hell because they didn’t like the change. It was raw milk so the flavors were straight out of the cow.”
As Meijer celebrates its 75th anniversary, Corp! spoke with Fred as well as sons Doug and Hank Meijer, who co-chair the company, with Hank serving as CEO.
With many family owned businesses failing to last past a second generation, the second and third generation of Meijers work well together. They’re also a kind of living history lesson, with Fred familiar with the early years, including his father’s transition from barber to grocer.
“It was luck, I guess,” he says. “And stupidity. Not knowing the problems, you didn’t worry about them because you didn’t know you had them. And then on the job training all the way through.”
It also seemed to be an intuitive sense of what customers wanted, and what it took to improve what would eventually be called the customer experience. “He read Au Bonheur des Dames (Ladies’ Delight) the book by Emile Zola about Au Bon Marché, the first department store in Paris,” Fred Meijer continues. “His brothers-in-law were in the clothing and tailor business and he asked if they had read that book because they were in retail. ‘Yes, it was a great book,’ they replied. What did they remember about it, he asked. ‘It was a great love story’. They had looked at the love story, but not the business story.”
It was the idea of a department store, with separate sections for similar items, that appealed to Hendrik Meijer. Traditional grocery stores had long relied on customers standing on one side of a long counter and asking the clerk on the other side to get them what they wanted.
Fred Meijer explains: “We applied some of those things we learned from Zola as we went along, as we faced certain problems. My dad believed in the early supermarket approach, which in Grand Rapids was Food City. He told my uncles: ‘you ought to go see that store, and the meat market downtown. See what they’re doing. People from Greenville are coming to Grand Rapids just to shop at those two stores.'”
Doing what was necessary to retain customer loyalty-and to keep costs down-was an early lesson. “When we went into the grocery business - fell into it,” continues Meijer, “at first we couldn’t finance the customers’ credit because we didn’t have any credit. During the Depression we eventually took scrip, we took welfare orders, we took anything. I always had access to the money in the till and I never spent a nickel on a Coca Cola. My dad didn’t have to tell me we needed that money, I knew darn well we needed it. We were in the boat together.”
After 75 years, they’re still in the boat together, working with each other when many families aren’t even talking, much less working together. How do they manage it?
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Ask Doug Meijer and he laughs. “We could say it was luck again, or it was good parenting, or that dad always structured the business with a non-family president so we don’t have to work for each other. When we started working part-time in the stores, Hank and I were both 12 years old but we weren’t really working for our father.
“It could also be all the things that we were brainwashed with, instilled with, brought up with-value, price, dignity, respect-everything that our dad and our grandfather preached became habitual for us. You walk in a store and you see a piece of trash on the floor, you pick it up. That’s just something you did. And dad has always preached keeping the company private as far back as our memories would take us and that’s the way it was. We’re going to remain private as long as possible and that should be for a long time.”
Adds Hank Meijer: “I think we share the idea that we’ve been entrusted with something really precious here. Whatever our various interests may be, we come together around being involved with a team that’s pretty special.”
Doug Meijer interjects: “Besides the fact that dad never paid us much and he always kept us working.”
Fred corrects his son: “They got paid something. I never got paid anything. When my wife Lena and I got married (she was working as a cashier in one of the stores) we took her off the payroll to save money.”
In any business, whether you have one store or 185, decisions have to be made. That can be particularly difficult in a family business. What is the decision-making process at Meijer?
Fred Meijer: “You gather around a central objective. I always felt it was a pleasure, fun, to make the decisions we have to make rather than having someone hand it down from above.”
Doug Meijer: “We’ve talked periodically about selling out because we’ve had lots of offers, but it never goes anywhere. It wouldn’t be fun. We like it the way it is.”
Are decisions made unanimously or is someone allowed to dissent?
Hank Meijer: “We probably don’t make a lot of decisions. We have a team of very talented folks and there’s just so much happening every day. Obviously if there’s a major decision such as a new format or entering a new market or something like that, we’re all involved in that discussion.
“Part of our ability to grow is our ability to trust other people to make those kinds of leadership decisions. So with our president, Mark Murray, and our senior team, we really rely on them to take us in the right direction. We’re a sounding board for larger decisions, rather than making decisions beyond our ability to be close to it.”
Doug Meijer adds: “I don’t think there have ever been any votes or that anything has even come down to that. You talk things out, you work things out-and in the end, whatever dad says goes.”
They all laugh.
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Fred Meijer defends his position as patriarch: “I try to be very careful. Once in a while I get my way and sometimes I don’t like it. I wanted to have shades on the ceiling lights so that they throw the light down on the merchandise. The gang was against me, but I didn’t let up. ‘You’re the boss,’ they said. ‘We’ll do it but we don’t agree with you’. Well, they did it, even though they didn’t agree with me, and now I don’t like it.” He’s reminded that those modifications only occurred in a couple of stores. Doug adds: “There haven’t been many situations like that at all. It’s pretty much management by committee.”
The ethics of the people who work in the company are something they believe in, and appreciate it when their company’s ethics match theirs. It’s part of the DNA of Meijer. Says Fred: “We hire people to make these decisions and if we think they’ve made a wrong one, I hope we speak up. But once they know the rules of the game, so to speak, they know they don’t have to come to you. They can make a decision and feel comfortable that they’ve made the right one and that it’s welcomed.”
Does the geography and generally conservative culture of western Michigan influence the success of Meijer?
Fred Meijer: “My great-grandmother was Mennonite. The Mennonites say, ‘My yes is yes. My no is no.’ They don’t have to swear on a Bible when giving testimony in court in the Netherlands -or in America. I do think the customs of your ancestors have an influence.”
He recalls, “I think of how my dad treated me when I didn’t tie the horse down when I had the milk route. The horse ran away and wrecked the milk wagon, wrecked the harness, everything that got in his way home that might stop him. I felt very embarrassed because I had let the family down. We had lost money and we couldn’t afford it. My dad came running toward where I was and all he said was ‘are you okay?’ The rest didn’t count. And I get emotional now when I tell that.”
Fred has one word for describing the motivation behind the supercenter concept. “Fear.”
Hank elaborates: “You and our grandfather were operating a chain of a dozen or so grocery stores, supermarkets, and doing well on a local/regional basis. But, just as grandpa was telling people to go check on Food City, you were keeping an eye on retailing and there was that new phenomenon called the discount store. They started on the East Coast and they started undercutting manufacturer’s suggested retail prices. As they started to sprout in the Midwest you thought, ‘wow, that would be a pretty powerful combination - a supermarket and a discount store.’ Let’s see if we can go find one of those and get it to locate next to us.”
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Fred recalls: “E. J. Korvette, the merchandiser, did it the other way round and found a grocery chain-Chatham-to put in a supermarket next to them. What broke both of them was that they went beyond their supply lines. We decided that if we did that we’d have to pay a wholesaler and a trucker and then we couldn’t be competitive. When we went into this we were fearful that we wouldn’t know how to run this type of operation. Then we found out that the companies who were doing it didn’t run them, either. They ran what they were good at and the other departments were franchised or leased. We found out that practice didn’t work.”
Meijer now owns all of its departments except perhaps for a bank branch, shoe repair or hair salon.
Says Doug: “It didn’t take long for the company to learn that franchising didn’t work. Each franchisee had different return policies, different pricing strategies, uneven product quality policies-and it was a mess. So in the mid-1960s the company started buying up leases and figuring out on their own how to buy and merchandise in all of these categories that they previously knew nothing about. Our dad would come home to us and tell us how close we were to the edge of financial disaster-we think it was just to keep our allowance down.”
Hank expands on the idea of learning from others: “Dad’s been fanatical about visiting other stores, learning different formats anywhere in the country, or world. Anything that we might incorporate into our business to make it better. As long as I can remember we were visiting stores on family vacations. One time when we were little kids we were flying to California to go to Disneyland but stopped in Las Vegas to visit a store. We rented a Corvair without air conditioning to save $5, even though it was in the middle of summer and only for a couple of hours. The idea was to learn what other stores were doing that was different or better so that our competition couldn’t surprise us in our area.”
The formula has worked well so far. Meijer’s is surviving and growing in a world that is shrinking because of pressure from the 800-pound gorilla named Wal-Mart. They’re opening a new store in Niles, Ill., a northern suburb of Chicago with a very diverse population. And, it will be much smaller than a typical Meijer.
Says Hank Meijer: “You’re always trying to figure out what one-stop shopping means. It used to be that there were department stores and specialty stores. Then along came the discount stores. Then us-creating this new category of ‘supercenters.’ Since then there’s been an explosion of big-box stores in every one of these categories we’ve talked about-from Bed Bath and Beyond to Lowe’s and Home Depot to Kohl’s and TJ Maxx. We recognized that the huge store may not always be the answer in markets where there is a universe of general merchandise choices.
“In our own case we know that our core attraction is food. The food customer has a different shopping pattern than the general merchandise customer. We hope you’re in our stores at least once a week doing your grocery shopping. But if you’re buying toys or clothing, that’s not on the list that you’re making every week. So, in trying to reach more food shoppers in a tight, densely populated geography like Chicago the answer isn’t to keep building 200,000-square-foot stores within three miles of each other. We think we’ve got more opportunity to reach more people with our food offering plus some additional general merchandise more effectively.”
New formats are not Meijer’s only innovations. One example is Meijer.com, which was named one of the “Hot 100” best retail Web sites for 2009 by Internet Retailer, a publication which covers all forms of electronic commerce, not just food and general merchandise companies. One of the reasons is a Web-based tool called a “widget” that thousands of Meijer customers have downloaded and use to plan meals for a week, get coupons for many of the ingredients, and receive relevant nutritional information.
Still in the testing phase is an online ordering system that lets shoppers select their grocery needs-from individual fruits and veggies to baby food to a certified-Angus steak-online and then pick it up, bagged and ready to go, from a drive-in location at a local store. Initially offered at one store near Meijer’s headquarters on the north side of Grand Rapids, the concept is being expanded to select stores in Illinois and Ohio.
Long a proponent of the rural lifestyle where he grew up, Fred Meijer has been actively involved in a walking/biking trails network in western Michigan. In 1994 he contributed close to $300,000 to help purchase an abandoned rail line in Greenville that created 41 miles of trail.
The idea of “green”-perhaps also inspired by Meijer’s beginnings in using recycled lath and nails for the first store-has resulted in the company’s transportation network being recognized by the federal Environmental Protection Agency as a SmartWay award winner. Roof-mounted wind turbines produced by nearby Cascade Engineering are sprouting up on store rooftops. And all new stores as well as major remodeling projects will be consistent with the program and guidelines behind the U.S. Green Building Council’s Leadership in Energy and Environmental Design.
What’s ahead for Meijer? While an acquisition by an outside company isn’t out of the question, it’s unlikely. The criteria would include being what’s best for the family. “Dad has done some really good estate planning,” say Doug and Hank Meijer, the current co-chairs, so what’s best for the family seems to be running the family store for another 75 years.
