When Cleveland-based Heinen’s Fine Foods opened a store in an old bank building three years ago it wasn’t the type of move a larger company could or would have made. However, the small family owned Heinen’s chain is able to move faster and do things differently and faster than larger companies, as Tom and Jeff Heinen, brothers and co-owners of the 23 unit chain explain in the second episode of dunnhumby’s online reality series, The Prophets of Aisle Six. The series was created to explore how food retailers are using data and innovation to reshape their businesses and the customer experience.
In the latest episode, Jose Gomes, Managing Director of North America for dunnhumby, visited the downtown Cleveland Heinen’s store located in the historic Cleveland Trust Building, to find out how they are keeping their grandfather’s mission of delivering excellence in customer service and in food quality to a millennial generation that values experience. Against the backdrop of the spectacular, multilevel store’s rotunda with a stained glass ceiling the pair explain how Heinen’s has long used data to inform assortment decision-making but now the company is entering a new era of leveraging data to drive personalization and pricing decisions. Heinen’s, like many smaller retailers, is part of the “democratization of data,” movement that gives the company the type of decision-making abilities once reserved for larger organizations with big IT budgets.
“Being small when you deal with big data is actually an advantage,” explained Tom Heinen, Co-President of the retailer. “Big companies are like driving a cruise ship. We are in a speedboat and can change very quickly. What has really leveled the playing field for smaller companies is good data driven decisions.”
Leveraging data is especially important at Heinen’s downtown Cleveland store because it is such a unique format. The store is small at 27,000-sq.-ft. compared to the typical 42,000-sq.-ft. Heinen’s location and being in an urban area also means serving a higher concentration of Millennials who are buying different types of products and pack sizes. One of the early insights based on purchase behavior was the need to add a hot bar to accommodate the demand for prepared meals and meal solutions.
“We are not really headed to creating Blue Apron style meal kits as much as we are looking to create meal solutions for customers where they have choices of entrees and side dishes to choose from and we are going to pair them more effectively than we do now,” Tom Heinen said.
While the Heinens make extensive use of data to operate and optimize decision-making, that wasn’t the case when the brothers decided to convert the historic bank into a supermarket. That was a total, from-the-gut move, inspired by a near century long connection to the community. They recognized that a supermarket could serve as a catalyst for continued residential growth of Cleveland’s urban core and converting the bank represented an opportunistic real estate move and a way so salvage a magnificent piece of architecture.
“There were many, many people who believed downtown Cleveland could not continue the growth pattern of increased residential living without a food store option,” said Jeff Heinen, who characterized the store as an investment in downtown Cleveland.
There were about 12,000 people living in downtown Cleveland when the Heinens made the decision to open the store, well below the 20,000 residents need to support a profitable grocery operation. Today, downtown Cleveland has about 16,000 residents and continues to grow.
“As lifelong Clevelanders, we understood (a grocery store) was important to continue the momentum of people living downtown. It was our give back to the city of Cleveland because Cleveland has been good to Heinen’s,” Jeff Heinen said. “As a small, family run business we can make decisions like that. This isn’t a great business decision. This is a great decision for the city of Cleveland.”
It could ultimately be a great decision for the company as well. As Tom Heinen pointed out, the retailer now operates four of its 23 stores in Chicago, a market where a small format could create new growth opportunities. The store in downtown Cleveland gives the company, “a way to experience urban markets so if and when we decide to go into downtown Chicago we have a lot better idea about designing and operating stores there based on our learnings in Cleveland,” Tom Heinen said.
For example, in downtown Cleveland the company had to adjust to numerous operational quirks. To deliver goods trucks use a narrow one way alley and drop merchandise on one of two loading docks shared with tenants in adjacent buildings. From there, a freight elevator moves two pallets at a time to a basement where most of the food preparation is done. Products then have to be brought back upstairs to either the first or second level. The entire process is much more labor intensive that in a typical suburban location.
One area that wasn’t a challenge was persuading employees to work downtown. The store is staffed by 90 people and 55 of those positions were filled by employees who volunteered from other stores.
“As a company we believe we invest way more time, energy and money into developing the knowledge and skills of our people than the average retailer, food retailers for sure,” Jeff Heinen said. “We see people as one of the ways we truly create a differentiated shopping experience so it is very important strategically that our people have the knowledge and skills to do that.”
Tom Heinen added, “we view people as an asset to be leveraged, not a cost to be minimized.”