When the customer is the owner — Mercadona
“We must eliminate anything that does not add value and that the customer will not pay for.” — Juan Roig Alfonso, CEO of Mercadona
Mercadona is a Spanish family-owned supermarket chain founded in 1977 by Francisco Roig Ballester and his wife, Trinidad Alfonso Mocholi as a small butcher shop in Valencia. Juan Roig assumed the role of CEO in 1981 and drove the worldwide expansion.
Mercadona was nearly bankrupt in the early 1990s but, after an intense lifting by the CEO, Mercadona is now a giant with $31 billion in revenues.
From 1999 to 2011, profits rose by 23% and market share from 8% to 23%.
While most of the supermarket chains are cutting prices and costs, Mercadona is doing another thing: the company is focusing on customers’ willing privileging fresh food, meat, bread, fruits and vegetables.
The strategy that helped Mercadona to avoid bankruptcy was an understanding of the equation price times quality equals value: the company launched new products trying to keep low prices and without compromising quality.
The first solution was to work with a restricted and selected group of suppliers to produce home-brand and private-label products, offering something different from the competition: even if private-labels products are often seen as cheap imitations of branded products, Juan Roig could make it work differently.
The second and most important one was to listen to its customers and act consequently.
All the companies say that they are customer-centered but most of them don’t act in this way: even if they listen, collect feedbacks, suggestions and information, they don’t react or try to anticipate their needs.
On the contrary, for Mercadona the customer is the owner, the boss, ‘el jefe’.
For long time and before the big analytics ‘explosion’ (now the companies uses the more complex data analytics tools), Mercadona conducted in-depth research groups with customers (usually 12 to 14 people) who were invited to the store for a 90-minute meeting with employees to discuss new product launches or the creation of new categories.
At the end, the customer received a goodie-bag with the product to take home and share with friends and family.
This customer-centric approach allows Mercadona to be profitable as much as it can and helped in avoiding the darkest failure.
An average supermarket carriers 15000 to 25000 items: Mercadona only 8000.
The typical Carrefour hypermarket carries 120 SKUs of detergents, Mercadona only 45, but Mercadona’s 45 SKUs cover more needs than 120 Carrefour’s SKUs.
In simple terms, Mercadona’s customers have what they want easily, quickly and without getting confused.
Mercadona’s customers are the real company’s owners, driving the Spanish supermarket chain’s innovation, experimentation and success.