On Running a Customer Oriented Business That Makes You Famous by Stew Leonard (2006)


INTRODUCTION by John Leonard: For about three hours last night, it got to one point when Diane said, “Turn your brain off, shut up and go to sleep and stop talking in your sleep!” The reason was pretty simple, Stew took us to dinner last night and the conversation was actually stimulating enough to keep my brain going for hours afterwards. Ever since I had come to ASCA and stopped being purely a swimming coach, I’ve actually had to spend time thinking about business and reading business books. I have heard of Stew Leonard from Norwalk, Connecticut and it is an amazing thing. He is an icon in American business whenever customer service is mentioned. When it comes to running a retail business of an absolute top quality, this is the guy, this is the business, this is what everybody talks about. I never thought in my life that I would ever get to actually meet the man. I am absolutely thrilled that he is here with us today and I know you will be also, to be here for this talk on a Sunday morning. He is also heavily involved with kids learning to swim. One of the reasons he agreed to come here and talk to us is because he is a passionate believer in water safety and he is somebody who has a family foundation that is involved totally in water safety. We couldn’t ask for a better way to get our “Swim America” topic started than Stew Leonard and please give him a warm round of applause.

Stew Leonard: I appreciate coming down here to this and you know, first of all John, it is the first time I have heard you talk without the caveat that we are not related. Well, I am happy to be here, along with my nephew TJ as well as my brother Tommy who lives down in Richmond. I was just down at their store and we just drove up yesterday. John had asked me to come today and I didn’t know how many people would show up at this hour on Sunday morning so, I am happy to see everybody. We have food stores up in Connecticut. I grew up in the business my grandfather started. Our grandfather started the business and then my Dad took it over in the 50’s. Then we have taken it, you know, taken it a step further in the 90’s and today.

I would just like to share some of the philosophies that we use at our store. You know, I am going to tell a few stories of things that have happened, what our philosophy is, and I hope you can all relate it to what you are doing with swimming.

I guess with John, one of the things that really bound the two of us immediately was when I got involved with Swim America through Rob Foley of our town. I will tell you a little bit more about it. Rob introduced me to John. When I started talking to John, well, one of the reasons that I have gotten so involved in swimming was that we, my wife and I had a 2 year old son who drowned. It happened back in 1991. After that incident, we really tried to figure out what we could do to help children learn how to swim. One of the things we did was to come up with a couple of books that we have now written. These are the two books that we did. They are just, this one, this is one part of what our Foundation does. We wrote this little book “Stewie the Duck Learns to Swim” that’s a child’s guide to swimming. So we published this. It has sold about 35,000 copies right now. It was sold all over the country and then we just came out with this other one which gets a little more involved for kids. So, we have really devoted, my wife and I, our lives, as far as helping children, learn how to swim. We tried this to help us fill a void and to help us get better after our personal tragedy. Swim America has been a tremendous partner of ours since we began.

You know what I did? I am going to show some slides here today. You know, can you see all these from the back of the room? These are the couple of books that we have.

We have been lucky enough over the years. We had Janet Evans come and she helped out one day. She greeted people at a Water Safety Day up at the store. Here she is with our mascot, Stewie the Duck. And in this photo, you can see Rob Foley along with Bob Knopel who ran the Water Rats, a swimming program in Westport, Connecticut. I guess Bill is here now, right? Yeah, Bill is in the back of the room today. He’s now running the Water Rats. These are some of the things that we do. We have a big water safety concert in our town every year. We get a band that comes in and sings and we get a thousand or so people who attend. Rob gets up and gives a little talk, then I get up and give a little talk about water safety because in the spring season, it is so critical up in Connecticut, to promote that cause. Then we would go and read the book. This is at a little church that we went to and read to little kids about Stewie the Duck. We also just contributed some money locally to a library in one of our towns which has a reading room for Stewie the Duck. What we have done now is, Rob, how many kids a year are we? We basically are taking our Foundation, along with Swim America, we have partnered with Rob and we sponsor some of the kids. Rob pretty much cuts the price. You know, we pay for a part of it and then he sends it out to all of the kids who get free lunches in town. So they are under-privileged children who get the opportunity to learn how to swim. How many have we done so far? Thousands, (Rob: your contributions have now topped $100,000 worth of scholarships.) thousands of kids. So, really, it is just a great thing. I love Swim America and we are even going to do more. One of the reasons that I love being here is just to partner with all of you because I just think that something great is going to come out of this. By just being here, we had dinner with John and Omar, who is the coach of the Zeus team in Norwalk, Connecticut. I think something good is going to come out of it. I don’t know what it is yet. But you know, I have, I think it’s a bright future for Swim America and our Foundation.

Let me get down to the business part of it now. This is a big road sign that we have out in front of our store. It features milk at $.99 a half gallon and that is a big draw for us. I know a lot of you that have your own swim programs, you are always thinking of ways in which to promote yourselves. How do you do a promotion? This question is a big part of our business. You know what I mean; it’s about getting more customers, or in your case, getting more swimmers. One of the things that we do is we have this big road sign up in front of the store, milk $.99. So, I was kidding around, Rob knows so many people in our town, he’s a customer at the store; I was asking our managers, “What can we do that’s special for all of you down here in Washington, on this trip?” We had an idea. We changed the road sign. We took milk off the road sign and look what we put up instead. See that? (Photo of We Love ASCA road sign) This is one of the things that I just want to share with you. You know we sell, you know we are selling food. This big electronic road sign, I mean it was expensive, but you already know, we are selling food. We went out and we took a slide of this big road sign. But, I have to be candid with you, as soon as we took this slide, if you drove by the store a couple of minutes later, you would have seen milk $.99 again. You know, we don’t love you that much!

Here is the beginning of our store back in the 60’s. This is what Tommy and I remember growing up, mostly because we lived right next to this little dairy in Norwalk, Connecticut. Look, what happened was, my father had a little dairy and it was going along. He delivered milk like his dad did. Like all of us, he hit adversity at some times. Adversity hit him in the form of the State planning to put in a new highway that was going to go right through his dairy, so he had to decide what to do with his business. He tried everything that he could think of to build his business. As you can see, he even put cow heads on the front of all of the milk trucks. The slogan back then was “You wave – I’ll moo.” So, if you were getting milk delivered to your house, you would come rushing out on the front porch when the milkman came, you would wave to the truck, and the driver had a lever like one of these and which he would pull. Out of the grill would come a “Mooooooooo.” It was really funny. Tommy and I loved getting in the truck where we would pull the cord as much as we could. Our friends would come over to visit and we would say, “Let’s go and pull the horn in the milk truck!”

My father believed in incentives too. If one of the milk truck drivers did a great job, you know, they only delivered milk, but if they delivered through a snow storm or something like that, they could take the company car home. I brought a picture of what that looked like. (Photo of Camino truck with a huge cow in the back) So a couple of times, Tommy and I got driven to school in this thing because our Mom’s car was broken or something. We pleaded, “Please drop us off down the block! Please don’t pull into school with a cow!”

Now, here is the store in 1969. Dad opened up a small dairy store. It had 8 items. There was huge competition around us. There was a big A&P supermarket across the street which was just a monster chain at the time. There were food stores just up and down the street. And then, there was our little dairy store that my dad opened up. Tommy, my two sisters, and I all worked in it as kids. It started up and started going. My dad never studied business, but he had studied agricultural science at the University of Connecticut. He knew all about milk, ice cream and cheese, but, he didn’t know anything about business. So he opens up this store and he borrowed a lot of money. He took out this big loan from the Small Business Administration. Since he grew up as a milkman with his father, he was used to going into the people’s houses and putting milk into the refrigerator. This made it very easy to get to know them and treat them nice. You know, because of that, you really got to know the family. There was a personal touch to the delivery of milk, but he didn’t really know anything else. So, as I said, he opens up the store, the business and he just sort of stands around being friendly with customers while asking them, “How am I doing? What do you think?” And they started giving him different ideas. You know, he only sold milk, bread and eggs. They said, “How about getting some peppers and some fresh corn?” So he called a farmer up and started bringing in a little bit of produce. Then a customer asked, “How about some hamburger patties?” And so, he found a rancher and brought some fresh beef in and started selling hamburger patties. All of a sudden, we were in the meat business. He started putting all these additions onto the store, getting into meat, getting into produce, things which he didn’t really know that much about. Along the way, he started learning a little bit about how you have to really develop good people around you. You cannot do it all yourself. The interacting with people part about doing good business came into the philosophy. Here he was, talking to customers, being nice to them and then all of a sudden, he realized his business had grown. He knew the key was people. He went to the Dale Carnegie course to learn how to handle people. After this, more people started coming to shop.

One of the nice things is that he started out in agricultural science. Milk has to be handled with kid gloves because it is so perishable. You can’t just store it in the back room for two weeks. You have to process it, homogenize it. There are bacteria all around so that you really need excellence and cleanliness in the handling of milk and its products. The cleanliness in the operations has to be really good to make a good product. So he started putting excellence into his operation. He said, “It has to look real fresh, let’s make it really good!”

The family used to go down to Disney all the time, you know, we would take a trip to Disneyland. We went to Las Vegas on a family trip and we would see these big road signs. We would see the costumed characters, we would see the kids get so excited about just being at these places. We said, “Let’s add some fun to the business!” So over the years what happened was that we had the customer part of business, we had the people part of business, and we had the excellence part of business. Then we, at the end, came up with what we called the WOW! Those four things really are “S”,”T”,”E”, “W.” So that is one of the things that we, I don’t know what this thing is in here (refers to a slide on the screen), but we started with this STEW part of it. The “S” is for satisfied, the “T” is for teamwork, the “E” is for excellence, and the “W” is for wow.

And so, here is the fresh milk that we did. This is our whole family right here; my dad in the red shirt, the truck, my mom, and Tommy is up on the hood there. This was the picture that I was talking about last night, John. We have two sisters over here, Beth and Jill. My sister Beth is in the blue shirt. Anyway, Beth goes and finishes college. She decides to get her Masters in French. So, she goes over to France and works with a family, she lives with that family and learns to become a baker. When she came back to the store, she wanted to start a bakery. We figured this is going to last about a month or so. We hot-wired the pizza oven in a little section of the store and we put up a table. It was just like one of these here, with a tablecloth. She started baking these French butter croissants, just like in Paris. Customers were literally lining up for them. She is making them hot, putting them in bags right in the store. We didn’t even really know what a croissant was, you know, remember this was in the late 70’s. She started this thing and the bakery department has just grown. Now we have 3 stores and we have a big bakery in each one of them.

This is what that little Norwalk store looks like today. We have about 700 people who work in this one store. We put 23 additions on to that one building. Oh, by the way, that is why you will never hear me talk about stuff like strategic planning. It has just grown on its own. And you know, when we look at this picture, there is a tremendous amount of emotion involved because it’s really where I grew up, where Tommy grew up, and we have spent a good part of our lives in that building.

Here is the second store. Tommy opened this up in Danbury, Connecticut. It is about 135,000 square feet, is that right, Tommy? We have about 600 people working up in this building. Here again, you got things fresh, the meat, the fish, the produce, and the fresh dairy. If you look at Stew Leonard’s, the difference between us and a normal chain that you would typically shop at, we have things that are mainly fresh, rather than canned or grocers. We don’t have a lot of the cans. You would have to shop at another store to get a lot of your spices, canned, and frozen goods. We are mainly like a big fish market, big meat market, dairy, cheese, produce, bakery, things like that sold fresh.

This is the store we opened in 1999 up in Yonkers, New York. Now, Yonkers is just north of New York City. When we went and opened up this store, we considered ourselves a family business. But when I went into New York and started to have to deal with The Family in New York, I realized that they have a different definition of a family business than what I was used to. The funniest thing, when I first drove down there, we met the Mayor of Yonkers, Mayor Spencer. His assistant was like a 25 year New York City cop named Sal Saliano. Where do you find a place where everybody’s name ends in a vowel. So Sal says to me, “How are you doing? How are you? So you’re thinking of building a store up here, isn’t that nice.” He says, “You know, I have a son your age. You guys should meet each other. I say, “You know, that would be great.” I leave Yonkers thinking, “What a nice family atmosphere this is, you know.” So I came back down and met Sal’s son. He was this nice little guy. I walked over and I said, “Hey, I’m Stew Leonard, Jr. How’re you doing today?” He says, “I’m Gumba Johnny.” I said, “What?” He says, “Yeah, Gumba.” I go, “Gumba Johnny?” And he says, “Yeah, I am on WTKU, the radio station which is in New York.”

I don’t know if any of you know the Scores Nightclub with Gotti, Jr. and the mob. He was all part of that scene. He went to prison for like a couple of years. So anyway, I’m talking to him and he says, “You know Stew, you coming to Yonkers, you know what would be a good idea, how about advertising on my station? You know, the store is coming and everything.” I told him, “That is great Gumba, do you have a price list or anything like that?” And he says after looking around, “Don’t worry about a thing, things will work out.” And I said, “Okay.” Anyway, I started going along and I got a call from a guy named Ali. He has A&J produce at Hunt’s Point Market. There is a big terminal market in the Bronx, you know. I don’t think you know it, but trucks from all over the country come in there at night. The people would then buy produce there at about 3 in the morning. We go down there once in a while because all our produce people are down there. This guy, Ali says, “Come on down, you will have the best tomatoes of anybody at the market.” I met him up in Yonkers.

So I bring about four or five of our buyers who are all like, you know, football players with me because I am not going down there alone at night. I would go over to A&J produce and I go, “Hey, we are here to see Ali.” It is about 3:30 in the morning and they pointed to this concrete staircase with screw-in light bulbs. We walked upstairs and it opened into this mahogany paneled dining room. It was beautiful. I couldn’t believe it! There was a big long table there and at the end of it was this old guy sitting there with a cigar that looked like this microphone, you know. He had a yellow cashmere sweater on and he says, “Hey, you are Stew.” And I say, “Hey, yes.” He says, “I’m Ali Tomatoes.” I said, “Ali Tomatoes, how’re you doing?” “You want some breakfast?” He had a cook there and everything. We had some bacon and eggs in the morning. Then he goes, “You ever been to Ray O’s for dinner?” And I said, “No, I have never been to Ray O’s.” I don’t know if you have ever heard of Ray O’s.

It is a restaurant in Harlem where a lot of the mafia, I got used to going there, still go. But, you can’t get in because they sell the tables in advance, so there are no reservations. If you own a table every Wednesday night from 7 to 9, you have to fill it every Wednesday night from 7 to 9, otherwise, they will take the table away from you. Nobody can get into this place. He said he could get in, so I said, “Hey, I’d love to go!” So I get invited down to Ray O’s. I park my car in Harlem and I walk into this little restaurant. I am standing at the bar and the bartender had this big shiny vest on and I say, “Hey, I am here to see Ali Tomatoes.” So he says, “Hey, I am Nicky the Vest.” I says, “Hey, Nicky, how’d you do?” So I’m standing there, but before continuing, I just wanted to get in a little bit of background. One of the things that we did was, well, my Mom made a marinara sauce. It is her recipe but we bottled it and sold it in the store. It was called Mrs. Leonard’s Marinara. Another person in town is Paul Newman with his whole new wall gang Camp and everything. But he started his salad dressing and we were the first vendor to sell it at our store. Then he came up with a marinara and said, “Look, do you mind selling our marinara?”

He said, “I know you have your Mother’s marinara, but with our marinara competing, it’s no problem. We brought in Newman’s marinara. So now we got two marinaras. I am down at Ray O’s that night. I am sitting there eating and Frank Pellegrini walks over who is the guy, there in the picture is Nicky the Vest, see in the middle, but on the right hand side is Frank Pellegrini who actually was one of the FBI guys on the Sopranos. They asked him to be in that. And then the old Beetles to the right of him and I say oh, but anyway Frank Pellegrini is sitting there and he says, “Hey Stew, I’m coming up with my own marinara sauce.” and he said, “You know, when are you opening up there?” And I said, “Well, you know, we are open.” We are going along and I said, “Do you have any samples of your marinara?” “Well, I haven’t finished everything up yet.” I said, “Well how much does it cost?” He says, “I don’t have it all worked out and all that stuff.” “So send me all the information when you get it.” He said to me, he said, “Stew, why don’t you just, just order some, everything will work out.” So now we have three marinara sauces. We have my Mom’s, we have Newman’s and we have Ray O’s. And then I get a call from Bodetil there, he’s the second from the right, and he wants me to meet this guy, Joey Pots and Pans. That’s the guy’s name, he really goes by the name Joey Pots and Pans, you know? So he wants us to bring in his marinara sauce.

So now I got four marinara sauces. I didn’t even ask him, I just said, “Drop it off, we’ll work it out.” Anyway I got all these marinara sauces and my dad comes walking in the store one day. He is walking through and he goes, “Oh gosh, I see we got mom’s marinara, Newman’s, Ray O’s, and this is Joey Pots and Pans here, why four marinara sauces?” Oh Dad, we’re in business in New York now, so we have to have a few extra marinaras. He tells me to cut one of them out because we didn’t need four of them. So I go to my buyer Andrew and I say, Andrew, you know, who’s the slowest selling marinara and he says, “Joey Pots and Pans.” I said, “Well, let’s cut him out.” He said, “Stew, I am not calling Joey, that’s your job.” So I get on the phone and I call Joey up and said, “Hey Joey, I got to cut out one of the marinaras.” He was totally reasonable and understanding and he understood, a good businessman, he realized we had to go from four marinaras down to three. That is why, if you come to Stew Leonard’s you will notice that they had to eliminate my Mother’s marinara. Actually, Joey’s marinara went down the tubes so we just have, well, we actually went with Lydia, we put Lydia’s marinara in.

Anyway, here is the new store we have opening up in February, which is a big move for us. We have about 2,000 people working at Stew Leonard’s right now and we have to hire about another 500 or so to open. The whole business is growing. I just want to talk a little, well I will talk about the philosophy at Stew Leonard’s. This is TJ right here in front of a Wal-Mart Super Center which is down in Richmond, Virginia. Even though we are growing there is huge competition around us all the time. I mean Wal-Mart is a tough competitor. We have Whole Foods opening up in the area, which is another big competitor. We have two Whole Foods opening up around our Norwalk store. Right now, we have a Trader Joe’s which is opening all over the place right now.

A lot of you are probably familiar with those names so not only are super market chains opening, Wal-Mart, Trader Joe’s, Whole Foods so I mean we are working hard, but we are also making a lot of headway out there. Hopefully, its just like for any one of your programs, you know? It is the same thing. It is not easy. We also have some independent retailers in the area. There is a great, fierce independent retailer down in New York City, at the Brooklyn Pier Way. As you can see by this picture, they just have tremendous displays and great prices. So, it comes back to the first principle that we really focus hard on and that is, how do you satisfy customers? I mean, just how do you do that? There are all sorts of situations that can come up. I’m sure you face the same situations in your programs every day. In our store every day, we are always aware that some customers are not happy. I mean, we can’t serve so many people and have everybody happy. There are a whole lot of moms and dads you got to deal with, kids you got to deal with, you know, how do you make them happy? I mean, how can you satisfy everybody?

Well, one of the things, the core lessons go back to this one story that my father, I wish he was here, he could tell you this story because it is something that has gone down in our history and in our training book at Stew Leonard’s. He just opens up the door to his new store and some of the items, he makes an eggnog. He’s made this forever, since he was a kid, it’s a family recipe. One day a customer walks up very rude and belligerent and says, “I bought some of this eggnog.” The customer hands it to my Dad and says, “I want my money back.” My father was a little offended by the way she approached him, but he didn’t get mad or anything. He just said, “You know Ma’am, we sold 1,000 of these eggnogs last week and you are the only person that complained.” He tried to talk her into that he was right and that just made her even more angry and so she said I want my money back and my father said, “Well, let me just taste some of that and see what its like.” And so he went over to get a cup and she yelled over and over saying, “I said I want my money back. My husband tried it and he doesn’t like it. I don’t like it. I want my money back.” So my father was a little taken aback by the whole thing and he just handed her a dollar. She says, “What does the eggnog cost?” She took three steps away from him, turned, and flailed the dollar at him and said something in our history book, “I am never coming back to this store again.” And she walked out.

My Father is a little stunned and he walks back into the store. He goes over to Barry who has been one of his right hand people for years and said, “Barry, we just spent all morning talking about how to get our sales up and I just lost a customer over eggnog, over a dollar.” So my father started thinking, “Boy, you know, she wasn’t right you know. I don’t know. The eggnog tasted fine to me, but in her mind the eggnog was bad.” Then my Father said, “You know in the future let’s just try to make everybody come in here right, let’s try to make the customer right.” So, it really became, there is a picture of my dad right here, our philosophy and we put it on the front of the store. We just engraved it right in stone, our two rules. Rule #1 is the customer is always right. Rule #2, if the customer is ever wrong re-read Rule #1. So we have had customers bring us back what we sell.

We do fresh cut Christmas trees at the holidays. We got a customer who brings us back a dead, dried out tree in February and we still refunded his money. It’s like $30 bucks, but the idea is we are selling tens of thousands of trees and we might get maybe 15 back. The customers would say it wasn’t perfectly shaped or something similar to that. So what we train all our people to do at the store is don’t get mad at the customer, just smile and give the money back to them, try to get the customer to come back again. All the statistics you read on customer service will always tell you that one angry customer does more damage to your business than anything else. So if you really get someone angry and they storm off, they are going to tell so many people bad things about your business. Whatever the cost was at that time, it doesn’t pay. So, we are trying keep our customers satisfied so that customer will keep coming back time and again. But, what happens a lot of times, an angry customer will hit your hot button, you will just have to keep thinking of the big picture, all the time.

One story I like to relate to everybody because we get some New Yorkers coming into our store. We get some rough people coming in and they get your hair up right away by the way they approach you. My daughter just started working catering this summer and a lady called up and my daughter answered, “Good afternoon, Stew Leonard’s?” This lady then says, “I want to talk to someone with a brain!” So you know, you get all sorts of customers.

I remember I ran in on a Mother’s Day about a year ago. And as I was just walking out, this lady comes up to me and she just starts shouting at me. I just went in to get some flowers on Sunday morning for my wife and that lady starts shouting. She says, “You know what? One of your dumb cart boys out there has me blocked in with a row of carts and I can’t get out. This store is terrible, it’s gone downhill, the quality is no good, the people are no good. I hate it here.” I tried to calm her down and said, “Maam, let me get somebody to go over there. I will get someone right out there to move the carts so you can back out.” So I started talking to her and it turned out that this was the first Mother’s Day she was going through since her son had died of cancer. So she wasn’t really mad at us, she was just mad. She just had a lot of anxiety inside of her. It was not directed at us so much, so we try to tell all our people at the store, when you have that really angry person that comes in, I am sure you get them, you have got plenty of your own share , don’t take it personally. Give them the money back and smile. Try to make them happy so that when they walk out the door, maybe they will think about it a little and they will tell their friends to come.

Now Tom Peters comes to the store. He’s the author who wrote the books, In Search of Excellence and Passion for Excellence. We invited him to come and tour the store. We gave him this grand tour through Stew Leonard’s. He’s pretty much a professor and so he didn’t say much about any of our merchandising. There wasn’t a word about the big displays or anything like that, or even the prices, he just walked through the store with us. When we got to the front entrance I asked him, I said “Tom, what is the one thing at Stew Leonard’s that impressed you the most?” because our managers worked really hard and I wanted to go back to tell them what you thought of the store. He says, “Do you know what I loved more than anything?” “The Rock!” I said, “The rock?” And he says, “Yeah, I love that rock which said the customer is always right.” I walked back into the store and I am taking to the managers. They asked me, “What did Tom think about the store?” I said he loved the rock and they said, “The Rock? The customer is always right?” So Mike Daravan, one of our meat managers said something, you know, that was, amazing. He said, “You know Stew, that is the one item in the store that we don’t even sell.” I quickly thought, “So like wow!” Rocks! Remember, this was about the time that the pet rock was popular, remember the pet rock? So anyway we got an idea to come up with these little miniature replicas of our Rock.

We figured this was going to be, well, here is a national best selling author who loves our rock. We got a little prototype done of our rock and we did a little test marketing first. We send one to Tom Peters and said, “Hey, what do you think? We are thinking of getting these little rocks done to sell.” I get a note back from him which says, “Send me a hundred of them as soon as possible, loved the rock, signed, Tom and at the bottom it said PS – I don’t care what they cost.” In our business, that’s a big statement. What should we sell it for? Could it sell for $.89 or $.92? You know we had to find out, you know, here’s this guy, rocks! So I get the rock guy in and I say, “How much for the rocks?” And he goes, look, how many do you want?” And I said, “Well, why don’t I order something like 500 rocks.” It is the first order and I will run it up the flag pole, we’ll see if they sell in the store. He says, “Stew you know, if you only order 500, I have got to do a custom mold for this thing. I got custom materials, but it is such a low run for me, I am going to have to charge you all my setup costs, production cost, etc. and it is going to cost you almost $20 bucks a rock.”

I said, “$20. a rock? I could never sell $20 rocks in the store.” I said, “I have to have a better price.” So he said, “Well look, I could get them to you for a little under $10 if you order 5,000 of them.” So I am thinking 500, 5,000, that is only ten times more! I am all excited! I got mail order ideas! I got everything! Anyway, I signed the purchase order and one day I got a call from receiving, the rocks have arrived. There is a truck driver from down south with a truck load of rocks. I am excited, I know what they are. I go back to help unload them. We filled this nice big display full of rocks in the store. We’re really excited! We started selling them at $9.95. We have a replica of the big rock out front. Now, how many of you here think if you were shopping in a food store, you’d get excited about buying a rock? (No response) You know, I wish I had spoken to you before I ordered them. It was just about how our customers responded too. They didn’t sell slow, they sold like NO! So, now I’m really nervous. What do I do with the rocks? What do I do with the rocks! But Tommy and I, TJ, we have always bought items that are heavy, like TJ just bought a trailer load of ice tea for the store that is still sitting there, you know. But, we don’t panic. We bought too much Halloween candy, but everyone has always ordered too much stuff.

So anyway, when an item doesn’t sell in the store, a secret to getting people to buy it is the promotion of if you buy one and you get one free okay? So we put this big sign in front of the rocks and one under the lights. Okay? Now here is something you could write down as far as business promotions are concerned, because I learned this in sales and marketing, I learned that when I put this sign up. If customers don’t want one, they don’t want 3. I am sweating bullets on this problem now! I don’t know what to do. All of a sudden, I didn’t realize how Peter’s books would get translated into Japanese, it becomes popular and goes around the world. It’s a best selling book. So we start getting bus loads of Japanese visitors to Stew Leonard’s and guess what they loved to buy, they loved our rocks. We got to be such good friends with all the professors and different groups, they would come to the big trade shows and they would come to Stew Leonard’s. Before they came, we filled a big display of rocks like a souvenir stand. But we learned; don’t bring the display of rocks in the store until we got our friends from Japan arriving soon.

Here is another example we had. You know, we really try to look at the long term value of a customer all the time. There are many examples of this. If we looked at one customer who comes into our store and spends $100 every week, that is $5,000. a year! And if you can keep them coming back, say, as they are raising a family, if they could come for 10 years, that is $50,000 dollars, that one customer has spent at your store. Now, it probably happens a lot in your business, you get one person into a Swim America program. You might then get their siblings, you know, that one swimmer is really worth more than what they are paying. You have a pipeline of funds to come. So, the idea is to try to look at the long term value of that customer.

This chef, Chef George at Stew Leonard’s, is in charge of our catering department at Stew Leonard’s. We have taken and promoted the catering at the store. You can have, well we will sell you a tray of food such as lasagna, a chicken dish, salads, or whatever, if you are catering a party. You could take the whole thing home and just open it up. You have an instant party made by a great chef. So, we get this lady who calls us up, she’s having a group of women over to her house for Sunday brunch. She wants two trays of food. She talks to Chef George and Chef George recommends that maybe she should get three trays of food instead of two. She says, “No, some women for brunch, they’ll eat light, two trays would be fine.” Chef George prepares everything. She comes in and picks everything up on Sunday at about noontime. Our kitchen at Stew Leonard’s gets a frantic phone call from this lady who says, “I am running out of food, more people showed up than I expected, Chef George, why didn’t you insist that I get 3 trays of food instead of 2 trays of food. She was frustrated and mad at us. She is taking her anger out on us. George wasn’t working at the time, but one of his assistants was there.

It was Jackie over there on the left side of the screen. Jackie says, remember she is thinking about the rock, you know, just make the customer happy, she says, “Maam, give me your address and I will drive over right now with another tray of food. I will be there within 20 minutes.” The lady says, “Oh boy, thank you.” Well, Jackie goes over to that house, walks in and lays the tray of food down. Jackie doesn’t know why this lady is mad, she doesn’t know what happened with Chef George. But the lady says, “How much do I owe you?” And you know what Jackie says? “It’s on the house, I am awful sorry. It’s on the house.” I wouldn’t have done that! We don’t want them that happy, you know? Well, Jackie was just thinking about making her happy. Make them happy, do what you can, know that you can’t have a lot of policies for this, you just have to say to everybody, you’re right. All you can do is just try to make them happy. So Jackie comes back and we recognized her for her effort. She stands up at one of our hoe down meetings and tells the story. She tells us everything about how she created a happy customer and about three days later a note comes to me in the mail from this lady. She thanked Jackie for everything, for bringing the food over.

She also wrote, well, she said, “You may not have known it, but the twenty women that showed up at my house that day were new real estate agents. It was an orientation for new real estate agents.” She said, “When we were done, we all went shopping and I was telling them all about Stew Leonard’s, we all went shopping at Stew Leonard’s after the meeting.” And she said, “Don’t be surprised if, when they go to sell a house, they also recommend Stew Leonard’s too, as a place to buy their produce. What was the value of that tray of food? It was huge! If I had known that, I might have donated the tray of food, you know? But, it just goes to show, a lot of times, the positive word of mouth advertising you get helps your business so much, and the negative one that gets you hurts even more. This is according to studies that have been done.

We are always asked, how can we do better with customer service? They are always trying to work on it so it is a good thing to have continual dissatisfaction with our service. There is a suggestion box that we have in the store where we’ll ask customers for their opinions and suggestions. We also do focus groups where we’ll pull customers right in the store what they think about shopping at Stew Leonard’s. These are not formal, they are very informal meetings. Of course, we’ll look for certain types of customer to poll because we don’t want shy ones, we want talkative ones. We get them around the table and we just sit and talk to them about what they think of shopping at Stew’s. What they don’t like is really what we try to focus on. They all shop at our competitors and then I love this saying here you know, the big don’t eat fast, I mean, the big eat the small, the fast eat the slow. A lot of times you hear these digs and you don’t do anything about it. It is so important just to get some traction, even if you hear an idea or you need to make a change, just start the change, it doesn’t have to be 100% perfect with a bow around it. Just try to get something going.

One customer of the focus group said to us, “I hate your fish, I never buy my fish in Stew Leonard’s.” So our fish buyer stood up and asked, “Why is that?” She said she didn’t buy fish from Stew’s because it’s packaged. “I don’t buy packaged fish.” It’s just like in the supermarket, so the fish buyer tried to convince her that he goes to the fish market in the morning and has really fresh fish. She said, “Well it doesn’t look fresh to me.” So he asked, “How do you buy it?” And she said, “I buy it right off the ice, I go right into a little fish market and I get it off the ice.” And he asked, “Just because it’s on ice, you think it’s fresher?” And she said, “Yes.” So, we just tried, you know, we took some plywood, mocked up a display, and put some ice in it. We took some packaged fish and we put some loose fish on ice. We were amazed when we did the loose fish in the store, our sales of fish over doubled because the perception was, packaged fish wasn’t as fresh as seeing the fish laid out unwrapped on the ice. Tom Peters says this in one of his books, “Customer’s perception is all that matters.” You know, sometimes they talk about perception at a hotel like this, if you are waiting for an elevator, if the hotel has put a mirror up in waiting area, people don’t feel like they are waiting as long. The perception of waiting isn’t as long. You put TV’s up at the registers as people are in line to check out, they do not feel like they are waiting as long because they might catch a little CNN or some news item. So that was a great lesson we learned.

Another thing we learned was that we took our strawberries; they said the same thing about our strawberries. What do you package them for? We tried to tell them that it is so much easier for us when they are packaged. One of the ladies at the focus group said, “I don’t care what’s easiest for you, I would like to buy them loose.” So we went to Les, our produce manager and asked, “How about loose strawberries?” He responds, “Oh my God, loose strawberries are going to fall on the floor and make the floor slippery, people could slip, people are going to eat them, you know, before they buy them. We are going to lose money and this and that.” “Hey, let’s just try it for a little while.” So we put loose strawberries out and our strawberry sales went off the charts! It really just showed us that customers like to pick their own whenever they can. Sometimes they get a little soft and we can’t let them pick them because they’ll bruise them or handle them too much. but customers loved it.

Well, one day Jules, our head of security, comes up to me really mad. I said, “Jules, calm down, what happened?” He said, “I was just walking through the store, I was over by the strawberries, well, this lady walked up and picked up two big handfuls of strawberries. She walked over to her shopping cart which was full of kids and just started handing these strawberries out to all of her kids.” And, I said, “Jules, what are you so mad about?” And he said, “Well I just walked over and I told her Maam, you know you can’t eat those strawberries like that.” He said, “I don’t mind if you taste one or two, but you can’t eat them.” And you know I said, “Jules, it sounds like you handled that fine, what are you so mad about?” “Do you know where she told me to go?” he asked. And I asked, “Like where?” “She told me to go and read the rock!” So, the customer sometimes takes over from you at the store.

The second thing is this people part of it, in which you are trying to develop and build good people around you. We have been lucky enough now for the last five years in that we have been considered one of the Fortune 100 best companies to work for. And it is getting more competitive every year. and you have conventions like this, the best places to work institute. The first year that we went to the convention when we won there was like 250 people or something. Then there was like 500 the next time, and then there was like 750 and 1,000. Pretty soon we were seeing CEO’s from FedEx and all those people showing up. So this past year, it was like, you know, 1500 people or something. There is still only 100 who are recognized, so you know it is a real competitive environment. What we did is, we have done these little surveys every year at our store for years. It wasn’t any high tech survey, but we just confidentially gave these out to our people. We asked them to fill them out and hand them back in.

It surveyed about what they thought of working in their specific department, we have meat, fish, produce, and all these different departments. So what we did when we were preparing to go into the Fortune 100 application was, we hired a consultant to take these 20,000 surveys and to sort through them all, over the years. We would then try to find out are there any variables that equate to successful departments based on how well people like working there. Well, they went through all of these things and we found a few things that were really important for the success of a department. But the one overriding idea is that you cannot have a great place to shop unless you first make it a great place to work. You have to create a great work environment for your people at the store because if you want happy customers and you have grumpy people it is not going to happen. One thing that we have is a lot of communication, you know, within the company. There are weekly, we call them hoe-down meetings that we have. But the first main thing we found with a successful department at Stew’s is that they all rated trust and respect of their manager very high. So they trust, you know, I am sure that it happens with you, there are a lot of situations that come up, you have to have people work a little extra, do this, do that, if they trust you, they know you will maybe give them some time off with their family at a later date or something like that. You have a nice balance between each person in the store. Trust and respect was rated very high in that department and you know what happened? The sales and the profits were high in that department too. There was a high correlation between success financially and the trust and respect in that department.

The second thing that was rated high was that my manager empowers me. My manager lets me make decisions. I don’t have to, for every little thing, knock on the door. I make mistakes, but I feel that if they trust me and they let me do my job, they will let me try things. You can’t go wild and let everybody run around like Indians, but there is a feeling of endorsement by the manager if they do try some things on their own. Successful departments feature high ratings on their feeling of empowerment.

The third thing was appreciation. My manager appreciates me. He really thinks I am special. You know, I am really valuable packaging cookies for this bakery. The manager makes them feel appreciated for what they do. This is a word I was telling John about and Rob and Omar last night. I give this out every year. I call it the Sweaty Palm Award because I just appreciate people who sort of step out of their comfort zone a little bit. You know, we might have a person who is doing a great job and we might ask him to take on some management responsibilities. They might think, “Oh, I could never do that.” But some people end up trying it and I know that they have sweaty palms. You know, it’s like you are ready at the beginning of a race, you are standing on the blocks there, but anyway, so I give these sweaty palms out. I give about six of them out to people that really did something out of their comfort zone.

The fourth thing that they talk about is movement, training, and growth. It’s that my manager gives me opportunities to get better, my manager lets me learn how to be a team leader or an assistant leader or a manager. Or, they give me new projects so I’m not stuck in this rut. They are just doing the same thing day in and day out, so they rated movement within the company highly.

You get all those four things, along with it being bundled around communication, you’ve got a good company to work for. So, we feel we have a strong group of people that like working at Stew Leonard’s. Because of this, they can deliver this good customer service to our customers. I think those things: trust and respect, empowerment, appreciation, and that movement in training is important in any business.

The third thing is the excellence of, you know we are constantly, like I said, here is Jim Sinaville on the right. They wrote an article in Business Week about him and one of the things they asked him was where do you like to window shop. One of the stores that he loves to come into to get ideas is to Leonard’s. Here is a jumbo giant chain out there, all the time, he comes in our store. He probably, you know a couple of times a year, comes in just looking around and looking for ideas. I mean we are in his store looking for ideas, too. We are in a lot of stores looking for ideas. You have to keep looking for new ideas on how to get better and improve any business that you have. You know we always have a check the age on of our produce, how many people go into a supermarket and the customers who want “the” fresh one, you know. Our challenge is that we don’t have to try, you know if you’re at Stew Leonard’s, you get that fresh one. So our whole production schedule at the store has to be, we are cutting it fresh all the time and putting it out there to sell. That is part of, a key point in the excellence we strive for. This is my dad and I. We did a cookbook this past year. This is my sister with the bread here, you know. She is baking fresh breads in the morning, but you know, we are under pressure, in the food business you have to follow the recipes and they have to be done right on track.

The last thing is the WOW factor which is all about making it fun. You can see we have these costumed characters walking around the store. We have lots of demos that we do, people love to eat when they shop. We found that out. A lot of show and sell is great, with the fun right in front of the customer. We have a little animal farm out in front of Stew’s. We have all these little baby animals outside where the moms and their kids can come and see baby goats, some baby calves, sheep, ducks, and so forth. We will put little educational messages up for them there and there you can see the result. Here are a couple of characters walking in the store and you see how happy the kids are. We try to create a lot of this animation in the store like buttons you push and a cow’s head lifts up and goes, “Mooo.” The kids love that. Here is the Farm Fresh Five, one of our animation shows. We have this song you know; we are the Farm Fresh Five, how do you do? This thing sings all day long with the butter sticks and the milk cartons. You know, the kids love this stuff.

One of the things that made us, well this is our shopping baggers. This is our Stew Leonard’s bag here and we hand a lots of these out at the store. We had one customer, Colleen Blanchard who took a trip to Red Square Russia probably 30 years ago, came back and said, “You know, I brought a shopping bag over to Russia and my husband took this picture of me with the bag.” She said, “We thought you would like it for the store.” So my dad just took the picture, you know, to show to a few friends, and he just thumb-tacked it up on the wall in the store. He wrote, “A great customer, Colleen Blanchard visits Russia.” And then all of a sudden the Mulhollands come up to him about a month later and say, “Guess what, we were just at the Great Wall of China.” So now he thumb-tacked that up on the wall and he said, “Wow! That is pretty neat!” Then Carol Ficerro went over to Egypt and she said, “I got the best picture for you to put on the wall!” Look what she brought. So now we are getting this whole wall of bags, you know, customers are taking pictures of these bags. So we figured, you know, here is a friend of ours who has, as a joke, transposed a picture of Neil Armstrong on the moon. We hung that up on the wall. We thought that was sort of funny. We had a fellow, I was in the store then, well, there was an older man with a cane standing there. He was waiting for his wife who had been shopping and he is looking at this picture. He says, “This is funny, come on over here, you know I waited all my life to watch a man walk on the moon.” He said, “I only had to go to the bathroom once.” He said, “Is that what Armstrong pulled out to (Loud laughter). I said, yup, you are right. Now we had that whole wall of “bags around the world”. It’s like a wall of bags and we send everybody $3.00. You know it just makes it a lot of fun.

Those principles that I talked about are things that we live by; to satisfy the customer, have good team work, have excellence as a standard, and don’t forget the WOW. That is something Tom, TJ and I look for every day when we go to the stores. We try to really focus on and work on those things and we feel we can do to keep our customers coming back by keeping them happy. We train all our people at the store to be focused on getting that customer to walk out, maybe not right, but happy. They are going to come back again. The second thing is the people, if we keep trying to really build a great team of people we will succeed. We are not looking to expand really fast or anything, but we just want to have some nice growth in the future. We feel we could keep building our company on the shoulders of the young people that we are hiring today. Then there is the excellence part which is just trying to always have the feeling of doing something better. We strive to prove all our products have quality and freshness all the time. And the last one is the WOW, which is making it fun. We feel that if we can do these four things, hopefully there will be some profit at the end of the day and the financials will fall into line. So we feel that if we can do those four things we don’t have to think about the long strategy.

Since I was down here, this one of, these are our chefs, they did a little thing for Hillary and Bill Clinton over in Chappaqua a few months ago so I figured since I was down in Washington, I thought I would show you this photo.

Anyway, here are really the four principles that we work on and at the store, they spell STEW, easy to remember.

Here is our last one, I just want to thank you all for inviting me down here. I am very proud to be here and proud to be associated with Rob and Omar, with the whole swim program up in our area, and I hope in the future, we will do more things together with Swim America. Thank you for inviting me down here. Thank you.

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