Publix: Every Floridians’ Favorite Supermarket
Publix employee satisfaction leads to superior customer service.
Every BuzzFeed listicle about being from Florida inevitably mentions Publix. Be it the delicious PubSub deli sandwiches or great bakery products, every true Floridian has an affinity to Publix. Publix Super Markets is the premiere grocery store in the South and is one of the most successful grocery stores in the United States. Publix currently has over 1,100 locations in six states in the Southeast United States, employees close to 180,000 people, and is still privately owned 85 years after its founding.
Business Model
Publix’s key to success is its devout focus on its core value of customer service. The company has been built around providing a great shopping experience to its customers, with quality and price as its secondary and tertiary objectives. The grocery store chain traces its roots back to 1930 when founder George W. Jenkins, Jr. opened a grocery in Winter Haven, FL. In 1940, he shut down his 2 existing stores to open a new, state-of-the-art grocery store featuring new technologies for the time such as fluorescent lighting and air conditioning. Publix has remained focused on investing heavily in its stores to make them an enjoyable place to shop. In 2014 alone, the company invested $1.6 billion to build, acquire, and remodel stores and expand its footprint including opening its first stores in North Caroline, the sixth state in its footprint. Over the years, Publix has been a leader in grocery store innovation by adding new departments (bakery, pharmacy, flower shops) and services to its stores. For example, Publix experimented with grocery delivery in 2001 but discontinued the service because it proved to be ahead of its time.
Operating Model
Publix has crafted its operating model to support the customer-centric business model. Publix stores on average staff more employees than competitors’ stores to allow employees to give increased attention and service to customer. For example, employees are trained to go find an item for a customer rather than tell him or her the aisle number where the product can be found.
Another unique part of its operating model is that Publix is employee owned, in fact it is the largest employee-owned company in the United States. Current and former employees own approximately 80% of the private shares, and Publix pays regular dividends. Once an employee has been with Publix for a year and worked 1,000 hours, he or she begins receiving 8.5% of additional income in Publix options. The company also contributes a portion of quarterly profits to a bonus pool that gets paid out to employees in the form of cash and stock. This model aligns really well with the customer service-focused business model. Publix founder, Jenkins, believed that if employees owned part of the company and benefitted from its success, they would be motivated to provide better customer service. Consequently, employee satisfaction is incredibly high at Publix, earning it a spot on the Fortune “100 Best Companies to Work For” list for 18 consecutive years.
Publix Super Market’s focus on customer service and quality is more important in 2015 than ever as Walmart has been aggressively expanding in Publix’s footprint. Walmart is advertising its Everyday Low Prices compared to Publix. Publix cannot compete directly on price, therefore the company has touted it superior customer service and higher quality compared to Walmart while instituting a new promotional pricing strategy with weekly loss leaders and buy-one, get-one free deals to retain customers.
The perfect alignment between business model and operating model has paid off for Publix. The company reported over $30 billion in revenue in 2014, making it the sixth largest grocer in the United States by revenue. Furthermore, analysts estimate that Publix is among the most profitable grocers in the country with profit margin of 5.6% in 2012, compared to 3.8% at Walmart, 3.9% at Whole Foods, and 1.6% at Kroger. Most importantly, Publix has amassed incredible customer loyalty that will help it fend off any and all competitors.
Sources:
(1) http://corporate.publix.com/about-publix
(2) http://www.buzzfeed.com/newu1085/reasons-why-publix-is-the-best-grocery-store-to-ev-654m
(3) http://www.miamiherald.com/news/business/biz-monday/article20621844.html
Interesting read! As a fellow Floridian, I share your passion for Publix. I think of Publix as a relatively small regional grocer, so I was surprised to see that Publix is employing 180,000 people and leading competitors on profit margin. It’s clear that Publix’s focus on its employees drives high levels of customer service. Even though quality isn’t their first priority, they seem to be doing well in that area, too: the Publix private label brand has quite a good reputation and it seems anecdotally that Publix has a higher quality perception compared to Albertsons or Walmart. I would be curious to know more about their supply chain side of the operating model, and if this quality aspect of their mission is reflected in the sourcing strategy.
Thanks for the comment, Maggie! You and I both know the Publix bakery and deli are second to none! It is true that while customer service is the main value proposition of Publix, it is also competing and winning on quality. Many of its ads challenging Walmart focus on the superior quality of its products. Publix makes its own bakery, deli, and dairy products but outsources its Publix-branded canned and packaged goods to national food processors. With a relatively small footprint, Publix is able to support its operations with only six manufacturing facilities and eight distribution centers in Florida and Georgia.
Wow – I’ve never visited a Publix, but now I want to!
This is a fascinating example of how companies can focus on innovation in service (over product) to differentiate themselves from peers – particularly interesting in the grocery segment, where there’s historically been limited differentiation. Do you know how they have manage to scale their model and ensure consistency of customer service as they’ve grown? They’ve clearly figured out how to do it right, it seems like a lot of other companies can learn from them!
It would also be interesting to see how Publix fares versus Walmart in a recession – I wonder if customers are willing to continue to pay the premium to support this higher cost operating model?