SAFEWAY: HOW TO PIVOT DURING A PANDEMIC
Safeway stores had just survived their share of California crises last fall, from a series of wildfires—like the current one they’re confronting in Lassen County—to nerve-wracking rolling blackouts.
Then the coronavirus hit, along with orders to shelter-in-place, and it’s been a whole new ball game for the supermarket chain, says Elsie Wolfe ’95, vice president and sales manager of alcoholic beverages for Safeway’s Northern California Division.
“What makes this crisis so unique,” she says of COVID-19, “is that every day it seems like we get thrown a curveball.”
Early on, the Centers for Disease Control and Prevention initially told grocers its employees didn’t need to wear masks, then reversed itself, and said they did. But how would the 283-store Northern California Division, including Nevada and Hawaii, instantly access 36,000 masks—times two for each employee—when it knew healthcare and hospital systems needed masks first? At the same time, Wolfe notes, Safeway and other grocers are also considered essential businesses.
Keeping up with new state and federal requirements while ensuring Safeway's doors are open, shelves are stocked, and more products are on the way has been challenging, Wolfe says.
“When you’re dealing with a fire or power outage, once the fire is out, or the power is back on, the crisis is over. But right now,” she says, “it seems like there is no end in sight to the crisis we are currently in.”
Yet Safeway has managed to adapt and innovate during this unprecedented period, which has helped ease demand and maintain shoppers’ loyalty. Bolstering its ecommerce business has been key: From March 1 to June 30, online sales at Safeway jumped by 172.6 percent. “And I think that number is going to grow,” says Wolfe.
The first generation in her family to attend college, Wolfe paid for her SCU tuition with a few grants, but mostly by working full-time at Safeway—including the store across from campus on The Alameda. Since then, the wife and mother of SCU students Brianna ’22 and Bryan ’24 continued to advance up the company ladder.
“I started as an engineering major; I wasn’t thinking about a career in retail,” says Wolfe, who switched to business after engineering labs became impossible to attend with her work schedule.
“I began to enjoy what I was doing at Safeway. Sometimes you go into college for one thing and you come out doing something completely different. At the end of the day, just make sure it’s something you really enjoy doing.”
As they sheltered in place last quarter, SCU retail management students got a peek into Safeway’s COVID-19 world thanks to Kirthi Kalyanam—the L.J. Skaggs Distinguished Professor of Marketing and chair of SCU’s Retail Management Institute—who tapped an array of visiting experts this spring to talk to his classes, via Zoom, about retailing during a pandemic. Below is an edited version of how Safeway served customers during a crisis, and lessons learned along the way.
1) Safeway acted quickly.
“A lot of things changed really fast in mid-March after the Bay Area started to see multiple local cases and some deaths. There were spikes in our store visits, growing basket size and a lot of pantry stockpiling.
“At the same time, we had to focus on the broader health and safety aspects in our stores for our customers and our employees. We stopped all in-store food sampling and self-serve bars like hot soups and salad bars; we reduced hours in stores and immediately put limits on products like paper towels, toilet paper, hand sanitizers, hand soaps, rubbing alcohol—even regular alcohol as well, like vodka, because people started making their own hand sanitizer at home. We decided to make our in-store Starbucks operations on-the-go, and closed down our seating areas.”
2) The company immediately enforced social-distancing.
“At first, we literally had our store managers go to Home Depot and get some blue tape and put it on the floors to mark customer waiting lines—as old-school as you can get. But within a few days our marketing department was able to create some actual in-store signage and floor decals.
“We closed one store entrance to keep track of our customer counts and limit the number of people coming inside to ensure social distancing. Most stores have both entrances open now.
“Our drive up and go (DUG) service (order online, pick up at the store) also started escalating, so we increased employee hours to take care of those customers. In the beginning, we removed alcohol purchases from our Safeway.com site as well as the DUG orders because we needed to be contactless, and there’s a lot of rules and regulations that happen with alcohol, like ID verification, which is now done at the car window.”
3) It protected employees.
“We installed Plexiglas at our registers to protect our front line employees, and of course our customers. Face masks are mandatory for all 36,000 Safeway workers in Northern California, not just in counties with high rates of the virus. Gloves are required for employees who work in a food service department like meat, deli or the bakery.
“Behind the scenes, we have been helping out our employees and vendors who enter the stores by doing health and temperature screenings.”
4) It protected customers.
“We started sanitizing shopping carts and checkstands, and continue to do that, and customers have to wear masks. At the beginning, they were not allowed to bring in their own reusable shopping bags; in turn, the state forgave the bag taxes we charge customers. Around mid-June, they could start using their reusable bags, but if they do, they have to bag their own groceries.
“We also set up senior-only shopping days and hours on Tuesdays and Thursdays from 6 a.m. to 9 a.m. This offered them time to shop with the best social distancing and inventory conditions, and it’s still in place.”
5) It adhered to California pricing law.
“California’s anti-price gouging statute prohibits retailers from taking advantage of the emergency situation to raise prices during a crisis.
“Retailers are permitted to pass along vendor cost increases, but can add a margin increase only to the extent that they are not increasing gross margin dollars by more than 10 percent. So if the cost of milk goes up or the cost of eggs goes up, we’re allowed to pass on that cost on to the consumer. That injunction is through at least September, but likely to be extended with the on-going pandemic.”
6) It looked for creative and timely opportunities.
“When the flour and yeast shortage hit, and Safeway had to put limits on those sales, we went to our bakeries and asked them to open their 50 lb. bags and make 5 lb. bags to sell to our customers.
“During the time that hand sanitizer was running low, some local distilleries reached out and said, “We’re thinking about stopping making whiskey and making hand sanitizer instead. Can you use it?” We said absolutely! It was only sold for the back-end of businesses, but we have continued to buy gallons of this stuff for our distribution center and for employees to use.”
7) Safeway has embraced consumer desire for more e-commerce shopping and contactless retailing.
“We have a lot of brick and mortar stores, but at the same time we are building up our ecommerce space.
“As a retailer based in the Bay Area, near Silicon Valley, we are also trying to take advantage of a lot of that technology and a lot of that expertise as we make our online platform a lot more robust. We have an eye on what Amazon is doing—we recently saw they applied for a liquor license in one of their mini-grocery stores in San Francisco—but all retailers are keeping an eye on each other. Our new Executive Vice President and Chief Customer and Digital Officer recently joined us from Microsoft’s XBox engineering team and had spent time at Amazon prior to joining Microsoft.
“As much as we try to promote from within, if we have to go outside to recruit from our competitors to help us get to where we need to be, that’s what we’ll do.”
8) Product shortages may still surface.
“Toilet paper, hand sanitizer and sacks of flour are back on our shelves, but COVID-19 supply and demand issues are not over yet. The beer industry is battling an aluminum can shortage because six-packs have replaced so much of the tap beer Americans used to order at their favorite bars and restaurants. So we expect to see some brands of beer out of stock.”