The perfect store
One area Tom Heinen exerted influence over was store design. Working with a 90-something-year-old architect — a friend of his grandfather who provided invaluable feedback on how his grandfather viewed different aspects of the business — he came up with a new concept for Heinen’s store design.
The concept was aimed at being more appealing to Heinen’s target customer, someone in the middle to upper income bracket. By focusing on this small slice of a demographic, the company is able to keep its products very targeted to its market.
"We want to be able to streamline what we do and leverage what we do wherever we can," says Heinen. "If you have to have a highly different format and product mix (for each store), it adds to the complexity of our business. Just like the big guys like to streamline their business, we like to streamline ours, too. The ability for us to learn about these different pockets and demographics is important for us to do a better job.
"Supermarkets have different customers. Wal-Mart sells those little tiny oranges, and somebody is buying them — they are not throwing them out. Look, that’s fine, and that may be all that their customers care about, but that’s not our customers.
"We are all about fine foods and quality foods. We need to be in a market that is educated and understands the difference."
In 1989, the new store concept was put into practice with the construction of the present day Pepper Pike store.
"We went out there with a radically different upscale store than anything else we had ever built before," says Heinen. "It had a different decor, it was organized differently, and it worked. It had a huge restaurant-style kitchen in it and European-style display fixtures.
"We looked at it and said, ‘Instead of this being a one-time only store, let’s make it the prototype.’"
By 1995, when the Aurora store was built, a cafe had been added to the concept.
"Now there was not only a full restaurant kitchen in the back, but a cook line in the front," says Heinen. "It allowed us to prepare food that could compare and compete with any family-style restaurant."
As the Heinens further refined their niche, they added and enhanced products and services to meet the demands of the targeted demographic. A health division featuring vitamins and food supplements, coffee roasters with whole-bean coffee and an enhanced wine section with its own wine consultant became part of each store. The size of the average Heinen’s store increased from 35,000 square feet to between 50,000 and 55,000 square feet.
"It’s all about variety and services," says Heinen, but everything is always targeted at the company’s niche customer.
The growth of the chain is entirely dependent on finding the pockets of upper income demographics that will support the company’s focus on quality and understand the difference between price and value.
When the right demographic emerges, Heinen’s considers building a store there. There isn’t a goal of X amount of stores by a certain date.
"Our growth is dependent on being aware of where these pockets are," says Heinen. "We never thought we needed to be the biggest. We are really focused on our target market."
For example, the Avon store was opened when Heinen’s saw that people from Westlake were moving across the county line to take advantage of lower taxes. A suitable space was available in Avon Commons, a shopping center that featured stores that were attractive to the same demographic Heinen’s targets, making it a solid opportunity for expansion.
Being focused also means realizing when the demographics of a location have changed and no longer match the target market or there are other issues that threaten the profitability of a store.
"We have closed some stores because of real estate or size issues," says Heinen. "We had 11 stores in 1981. In 1997, we still had 11 because of closing some and opening others. Now we’ve built four stores since 1998. That’s high growth for a company like ours, but the opportunities presented themselves."
Being careful about growth is vital to the survival of a small company; a few bad investments can threaten the entire organization.
"We never build a store until we have a management team that is ready to take over," says Heinen. "The demand on them is way higher than it was in the past. We are asking them to make many more decisions than they used to. The whole idea is that it is their store and that they are autonomous.
"We are building market share one department at a time and one store at a time. The payout for a new store is not immediate, so it is difficult to build new ones. Years ago, you could make money the first year a store was open. That doesn’t happen for anybody anymore."
Heinen declined to say how many years it takes for a Heinen’s store to become profitable, but said the industry average is three to five years. Targeting a high-end demographic has helped propel the company’s growth from about $150 million in 1981 to $300 million today. He estimates its marketshare is about 10 percent.
"From a real estate perspective, I think we are more attractive (to a developer) today. If you want a Heinen’s style store, there isn’t anybody else. Giant Eagle believes they are a suitable replacement for Heinen’s, but I don’t think that’s the public perception.
"If you want local service and quality, we are the only one left, literally."
