Retail Transformation Drives Cost Reduction at Meijer
Meijer Inc. has long been a powerful force in the retail grocery and general merchandise business in the Midwestern region of the U.S., having pioneered the supercenter concept in the U.S. in the early 1960s. Its supercenters average more than 200,000 square feet. The stores feature expansive product selection and eye-catching promotions.
Meijer Inc. is a large retailer based in Grand Rapids, Michigan, operating more than 160 supercenters across the Midwestern region of the United States. The stores feature a full supermarket (covering health and beauty care and pharmacy) plus more than 40 hardline and softline departments, including fashion, automotive, home decor, electronics and pet. Facing increasing margin pressure due to an aggressive expansion of national discount retailers into its region, Meijer needed significant and sustained reduction in its cost of business to enable future growth.
Meijer and Capgemini implemented a wide-ranging Retail Transformation program that covered the entire enterprise. The program was organized around four broad areas: store operations, merchandising, supply chain and finance/administration. The objective was to achieve sustainable improvements in Meijer’s cost structure while maintaining its established quality and market appeal. The company set an aggressive goal of sustained Selling, General and Administrative (SG&A) cost reduction, to enable greater expansion and become more price competitive in the market.
At month 18, the company is approaching its goal of sustained SG&A reduction, and has validated this reduction in the P&Ls as directly linked to the Retail Transformation program. Additional significant value has been delivered under other financial value classifications such as SG&A avoidance, carrying costs and margin improvements, which have enabled more competitive pricing. The program is projected to deliver the full SG&A reduction by month 28, when all rollouts and follow-on improvement cycles are completed.
Our goal was to take costs out of the company. With Capgemini’s help we are succeeding in doing this. But the actual company benefits go beyond the results linked to the program. The transformation has created a ‘culture of thrift’ which affects day-to-day decision-making and prioritization around spending. Jim Postma, Senior Vice President, Meijer Inc.