With seven locations throughout Northwest Alabama, Gateway Foods, Inc. is a small supermarket chain that focuses on superb customer service. The company opened its first store in 1978 in Double Springs, Ala. and has gradually expanded over the past three decades.
After years of success in a relatively quiet market, a Walmart was constructed across the street from one of the Gateway Foods stores. “This happened in October 2007,” said Harold Garrett, president of Gateway Foods. “Initially, Walmart hit us for a pretty good margin, but we were able to recuperate. At that store, we’re back to within 20% of where we were before the Walmart opened, and I’m confident that by this time next year, we will be back to 100%.”
When small companies compete with larger chains, there are always pros and cons for both sides. Although a corporation like Walmart has more expendable cash than a smaller company, it’s easier for smaller companies like Gateway Foods to personalize their customer service.
The employees at Gateway Foods know their customers very well because the managers, who make executive decisions for the stores, live in the community where their store is located, unlike a Walmart, where people at the national headquarters make the majority of decisions.
“Where our stores are located, everyone knows everyone,” Garrett said. “Our managers know a lot of their customers by name. It’s a pretty rural area. If you walk up to an employee at any one of our stores, he’ll be able to name every player on the high school football team, for example.”
Of course, in rural Alabama, high school football is very important, and Garrett and his team use this knowledge to market their stores. “In this part of the country, everything centers around the high school—football in particular,” he said. “If you choose a random person, chances are they can tell you where and when the next game is and what the team’s record is.”
Garrett and his team are dedicated to building strong relationships with the school systems in their local communities. Because of the association, Gateway Foods does a lot less marketing than other grocery chains. Although it mails out weekly circulars, the company doesn’t do many TV or radio campaigns.
Shortly after he got married, William Waldrop moved to Double Springs and opened the first Gateway Foods. After a couple years, Waldrop brought in Herman Fields, who served as general manager up until two years ago, to help run the company. Today, the company houses 280 employees and continues to grow at a steady pace.
As president, Garrett delegates responsibilities to the managers, whom he wholly trusts. At Gateway Foods, the managers are given the freedom to customize their displays and decide which products go in each aisle.
“We give them a long rope,” Garrett said. “We don’t send plans like a lot of bigger chains do. We monitor the stores and make sure everything is up to par, but we allow our mangers to make a lot of their own decisions.”
This system allows changes to be made on the fly. If something important occurs, a manager can call Garrett and inform him of the situation, but most of the time that manager doesn’t have to wait for Garrett to get to the store before he acts.
The majority of managers at Gateway Foods work their way up the ranks, starting as baggers when they’re teenagers. The youngest tenured manger started at the company in 1991, and the rest have been there even longer.
Growing up within the company, employees gain a sense loyalty. In times of crisis, they band together. In June 2005, one of the Gateway Foods stores caught fire and was destroyed. With the help of contracted workers, the store’s employees came together and cleaned the mess in just 16 weeks. “When the fire caught, my biggest concern was that our employees might be out of a job,” Garrett said. “But we rebuilt the store quickly and reopened in October.”
As a leader, Garrett encourages managers to emphasize their stores’ strong points. When a Walmart was built across the street from one of his stores last year, Garrett noticed the least amount of sales decline in the store’s meat and produce departments.
After recognizing these two departments were the store’s strongest points of leverage, Garrett ran with it. The team emphasized meat and produce in its ad campaign and
inside its stores. Slowly but surely, Garrett saw an increase
in customer count.
“Our sales per customer was steady, so we knew that people who came to our stores weren’t here for just one specific item,” Garret said. “Customers don’t want to travel to one store for
a certain item and another store for a different item. It was encouraging to see our customer count rise and know that people are coming back.”
To stay competitive in its market, Gateway Foods recently made several IT upgrades and renovations. The team replaced the front-end systems and check stands and modified the lobby area in many of its stores.
“Upgrading the front-end systems was important because the new technology takes a lot of the responsibility off the cashier,” Garrett said. “Most of our cashiers are high school students who don’t have a great deal of experience, so we want to take the decisionmaking process out of their hands.”
Although the overhaul was expensive, Garrett said it will pay off in time. “Our efficiency has improved,” he said. “The scanners are quicker, so once our employees get used to the new machines, we’ll get customers through the lines faster.”
The team at Gateway plans to renovate the Double Springs store, as well as two others, in the next year or two. “The Double Springs store is 30 years old,” Garrett said. “It still looks great, but we want to do something special for our customers.”
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