Howard Stoeckel: Managing ‘The Wawa Way’

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Wawa, the convenience store beloved by many in Pennsylvania, New Jersey, Delaware, Maryland and Virginia, is celebrating its 50th anniversary this year. In conjunction with the anniversary, former CEO Howard Stoeckel has published a new book, The Wawa Way: How a Funny Name and Six Core Values Revolutionized Convenience, that explains where the business name came from (it’s the Ojibwe word for “Canada goose” and the name of the Pennsylvania town where the headquarters is located); the history of the chain, and plans for the future.

Knowledge@Wharton recently spoke with Stoeckel about how the business model has evolved over time, Wawa’s recent expansion to Florida, the role that Wawa plays in consumers’ lives and why Wawa associates own a significant portion of the private company.

An edited transcript of the conversation follows.

Knowledge@Wharton: Wawa began its life as a dairy company that delivered milk and other products in the Philadelphia area. As times changed, the business model was threatened. How did the owners decide to change the company strategy?

Howard Stoeckel: That’s never an easy decision. There wasn’t a strategic plan or anything of that nature in place…. The dairy business really started as a hobby around 1900, when George Wood moved to Wawa, Pennsylvania, and bought a dairy up the street. That was before pasteurization. And the dairy grew…. But because people didn’t want as much home delivery, the question was what do you do with this dairy?

The company believed in servant leadership, even though we didn’t call it servant leadership at the time. We had to take care of the people who made the company great. Grahame Wood, who was the leader of the family and the business at that point, said, how do I preserve these jobs? How do I keep this dairy going? The answer was, let’s open retail stores, rather than sell to other stores and not be certain whether you could sustain the business long term.

He went out to Ohio and worked in a store. He had a friend out there who had convenience stores. He came back and convinced the family to open the first Wawa store. It took some convincing to get a bank loan to support that first store. The rest is history. Here we are 50 years later, and the Wawa business has become an endearing and enduring business.

Knowledge@Wharton: In the book, you mention that some of Wawa’s chief competitors today are McDonald’s, Dunkin’ Donuts and ExxonMobil. Those are three very different companies with three really distinct markets. How is Wawa able to straddle all three of those successfully?

Stoeckel: Well, it’s interesting. I spent over 25 years active at Wawa on a full-time basis. When I think about Wawa, here’s this company with this funny name from Wawa, Pennsylvania, that has been able to compete with some of the biggest companies in the world. Here in Philadelphia, we have as much market share, if not more market share, than those companies that you mentioned. The interesting thing is we have stayed true to ourselves. We believe in private ownership. We never want to go public because we want to take a long-term point of view. We believe in sharing ownership with the people who deliver the Wawa brand, our associates. They own 38% of the company. As I mentioned, we believe in servant leadership. We want other people’s dreams to come true. We want to empower other people to achieve their objectives and to help the communities we serve.

We have been able to stay true to ourselves. We haven’t taken Wall Street money. Today we don’t really have private equity. We are owned by a trust fund, the Wood family, and we’re owned by our associates and some of the executives in the company. That’s a wonderful world when you work for yourself and you don’t have outside influences.

We’re able, as I mentioned, to take that long-term point of view. We don’t have quarterly reports that we have to send to Wall Street. We don’t have to worry about our stock price every day, every quarter. If we want to make a major investment in the business — for example, we’re opening stores in Florida — that is a long-term investment. You don’t make money for the first couple years. You have to make a major commitment when you go to a new market of that nature. As a privately held company, you can do it if you’re willing to withstand some short-term loss for long-term gain.

We stay true to ourselves, and that’s what I think this book is all about: that businesses can stay true to their belief system, yet compete with some of the biggest companies in the world. Now one of the things that we have always done is cluster stores. People will say, “There are Wawas everywhere here in Philadelphia.” “I can’t drive down route 30 in New Jersey and not see a Wawa every mile or two.” We cluster stores because it makes us bigger than we appear.

“Our success isn’t being on the bleeding edge; it is mainstreaming popular concepts. We have to wait for things to become popular before they work at Wawa.”

Even though McDonald’s, Starbucks and ExxonMobil are much bigger companies, we appear to be big like they are because we pick and choose where we go. We have never wanted to be a national company. We have never wanted to license. We have never wanted to franchise. We want to be important to the communities that we serve. So we serve the mid-Atlantic communities here in five states. We entered the Florida market last year, and we are happy to say that we are doing very well in Florida.

Knowledge@Wharton: You mentioned going into Florida, and one of the things you write about in the book is that Home Depot and cows played a really big part. Can you describe why?

Stoeckel: You look for big box retailers. If you have open fields next to these big box retailers, it’s a great place to go because if you build it, they will come. The Home Depots and the other big box retailers do their homework. They know where the growth is. That’s where we want to be…. In our mid-Atlantic market, there is still room for growth, and we are opening 25 stores a year, but we had the capability financially of opening 50 stores a year. So we needed more dirt. We needed more real estate, and we needed more geography.

In Florida, we found open spaces next to big box retailers where we can grow our brand. The results are very good. We went to Orlando and opened the first store in Sea World. We figured if we went to Orlando and it created magic for Disney, that it would create magic for Wawa as well.

Knowledge@Wharton: You had some interesting things in the book on how people actually lined up around the block to get into Wawa when it opened in Orlando?

Stoeckel: I was there on that day, and I woke up early that morning and was so excited. I turned on TV, and there were the local TV stations at 3 a.m. and 4 a.m. doing remotes, and all these people were there. They had camped out a night before because they wanted to be there when that store opened. These were people who had relocated from the marketplace in Philadelphia to Orlando … and people who came from Philadelphia down to Orlando to be part of the experience as well. It was quite a happening. It was beyond what we ever expected. It was a tribute to our people. They transported the brand south, and we transported and relocated a lot of our leadership people to Florida because the most important part of our success in a new market is our culture. It’s our value system.

If you don’t have people who truly understand the value system and can hire people who embody that value system, the Wawa experience wouldn’t be the same there as it is here in Philadelphia. I’m happy to say that the Wawa experience in Florida is every bit what it is here in the mid-Atlantic market where it has been for 50 years.

Knowledge@Wharton: Those people lining up around the block are a good example of how people feel very strongly and very passionately about Wawa and many of its products. It’s not just a Wawa; it’s my Wawa. I have a friend who once said, “Wawa is my Graceland.” How does that figure into your decision to close a store, for example? It’s not just a Wawa; it’s somebody’s daily Wawa.

Stoeckel: Closing stores is always very difficult because we become part of our customers’ lives. We want to fulfill their daily lives by being there for them each and every day, even though it may only be for four or five minutes. When you come into Wawa for that cup of coffee in the morning or for that snack or for whatever purpose you come to Wawa for, it can be an uplifting experience.

I always refer to that as the Cheers of convenience stores, a place where you are known by name, a place where you have a good experience, and it helps you get through the day. We’re a habit-forming business. When we do vacate a community to relocate down the street because we have outgrown the store… it’s tough. Communities get very concerned when we do it. But they adjust to it because they find the other store is not too far down the street and the other store is bigger … has more to offer and has gasoline.

If you don’t constantly reinvent yourself, you don’t succeed. Had we not reinvented ourselves multiple times throughout our history, we wouldn’t be here today. When I joined the company back in 1987, we were building small stores — 3,000 square‒foot stores with 20 parking places. We didn’t have gas. We didn’t have a lot of food service to go. Yes, we had deli and produce. Many of our products made it home to the kitchen. But today, most of our products are consumed in the car. We fuel people, and we fuel cars. We fill people with cash because we have no-surcharge ATM machines as well.

We are there for customers on a daily basis, we become habit-forming and we become part of their daily routine and their lives. That’s what makes the Wawa brand so special.

Knowledge@Wharton: In the book, you also write about having gas and coffee is a big thing. Wawa was ahead of its time in introducing gas pumps and then also coffee, but initially it failed. It succeeded the second time around. What did you learn from those experiences?

Stoeckel: We always talk about our failures because we learn from [them]. Just because something doesn’t work the first time doesn’t mean it’s not going to work down the road. For example, 20 years ago, I went to Seattle when Starbucks was really taking Seattle by storm. I studied the espresso market. We came back, and in about 15 stores, opened espresso bars. It didn’t work. We were ahead of our time for Wawa. Our success isn’t being on the bleeding edge; it is mainstreaming popular concepts. We have to wait for things to become popular before they work at Wawa.

“We study how long it takes a customer to pour a cup of coffee, how many creamers, how many sugars, how we can make the layout more efficient, because speed is everything.”

We were in the gas business at one point way back when in the 1970s. But we had small lots with two or three gas pumps, and we got out of the gas business. But then we reentered the gas business in the 1990s. You just never know. You can never give up. Just because you failed once doesn’t mean you’re not going to succeed the second time around. So many of our greatest successes came out of disappointments and failures. You learn. You move on. We constantly talk about failures, what we can learn from failures, and that doesn’t stop us from doing it a second or a third time.

We have come back with specialty hot beverages, and now they are very successful in our stores. Gas we came back with, and now we have a 1.7% market share of all gas sold in the United States, and we only have stores in six states.

Knowledge@Wharton: In a 2011 Philadelphia Magazine storycalled, “It’s a Wawa World,” … they talked a lot about how the store is designed for maximum efficiency. You mentioned getting people in and out in four or five minutes. Can you explain how this is done, the research that goes into this and the changes that have been instituted as a result?

Stoeckel: Customers are time-starved. No one has excess time today. We are a convenience retailer with high quality food. We do need to get customers in and out quickly. We have an operations engineering function, and they study everything. They study the flow of the parking lot. They study the flow of traffic inside the store. They study the layout of coffee. Going back in time, we had one coffee location where coffee was brewed, where it was in canisters and coffee was poured into the customer’s cup. Now we have separated it into multiple locations because we needed the throughput.

We study how long it takes a customer to pour a cup of coffee, how many creamers, how many sugars, how we can make the layout more efficient, because speed is everything. We want to save our customers time, and we want to give them a quality experience.

On the other hand, our economic engine is getting more customers through the store. If we’re slow, we’re going to get fewer customers through the store. We love customers, four or five minutes at a time, because we like to spread our love to the next group of customers that comes in. We’re in a low-ticket business. It’s a $5-ticket business at best. If you don’t have a lot of customers, you can’t make money, and you can’t reinvest in the business and give back to the communities.

Knowledge@Wharton: One thing I noticed about some of the new designs of the stores is they have gotten rid of the circular cash wrap in favor of more of a grocery store–style one. Do you have any insight about why that was done?

Stoeckel: We’re upgrading our image. Our food is high quality food. It is really restaurant quality food to go. We want to showcase that food. When you walk into our newer stores today, you don’t see a big checkout counter or a service center. You see the kitchen, you see hot beverages, you see cold beverages, you see the Wawa express case with green salads and cup fruits and veggie snacks. That’s what we want to be known for. That’s what we want to stand for.

We have really changed the ambience of our stores to be more appealing from a quality and a food service standpoint…. Appetite appeal is very important when you walk into that store. We still sell many of the products we used to sell, but we have remerchandised the store to focus on what really is important to the business strategically, and that is food service.

Knowledge@Wharton: How do you figure out where there is a big demand, for example, for fresh cut mango in the fresh fruit area? How do you road test to see if things will catch on?

Stoeckel: We’re always testing new products. Again, we are not on the leading edge. We mainstream what customers want, so we do focus groups. We do quantitative research. We do qualitative research. We certainly look at what our competitors are doing. And we test. We’ll find out what the customers want and what the customers don’t want. Most of the products that we have are frequent, they are immediate, they are quick, they are easy and they are appetizing, so they have to fit that filter to find their way into a Wawa store. We want to simplify our customers’ lives, so we have to be able to deliver it quickly.

So some things we try. [If it] doesn’t work, we’ll discontinue. Other things we do on a small basis in a group of stores; then we expand it. If it succeeds, we take it out to the entire chain.

Knowledge@Wharton: What has been the most surprising success and then the most surprising failure?

Stoeckel: When I look back, we went through a difficult time in the late ’80s and early ’90s, called the dark days. The economy was tough. At that time, convenience retailers were charging a premium for convenience. Competitors were opening additional hours, supermarkets and drugstores. People didn’t want to pay a premium for convenience…. We rethought the business by, one, lowering prices on major commodities, which worked very well for us. But at the time, we didn’t have as much credibility in our own food service brand as we do today, so we thought we needed the brands of others.

“We hire for the values, and we train for the values.”

We co-branded with Dunkin’ Donuts, and we had Dunkin’ Donuts in all of our stores. We had Krispy Kreme in stores where we didn’t have Dunkin’ Donuts. We had Taco Bell in probably 150 stores, Pizza Hut in some stores. That failed miserably because customers said, “We want your product.” Our associates said, “We don’t want to make the products of others. We want to make Wawa products.” Even though we did some initial research, and it was a little bit hazy as to whether these concepts would work, there was a trend in the convenience store industry to co-brand. That was a miserable failure.

We took every Taco Bell out, we took every Pizza Hut out, we took every Dunkin’ Donut unit out. But what it taught us was to think like a major retailer and a national brand. Because if you have those brands in your stores, you have got to make your brand — whether it be coffee or hoagies or food service — come up to a higher level. Those failures, those disappointments put us on an entirely different journey to focus on the Wawa brand. I always said I wanted to be the Trader Joe’s of the convenience store industry and be known for Wawa-branded products. That’s the journey that we have been on.… It was a disappointment at the time, but it became a big success.

Gasoline, as I mentioned, was a failure the first time around. It did not work. But we came back, and now we have the number one market share in all those counties where we have stores for gasoline, because we thought big — big sites, big gas — and we priced it to save the customers money.

Knowledge@Wharton: Has there been a particular product where the level of public obsession has come as a surprise to you? Reading in the book about how people feel so passionately about the iced tea was a surprise to me.

Stoeckel: College students love iced tea. They ask for the iced tea the first thing they come home. Or parents in some cases ship them iced tea. One of the smaller ones that people have an affinity to is the Turkey Gobbler hoagie [or] bowl during the fall season: turkey, mashed potatoes, stuffing and gravy. Where else do you get that? You don’t go to McDonald’s or Burger King or Starbucks or Dunkin’ and get something of that nature. Comfort food that makes you feel good. That one has always surprised me in terms of how customers have such a strong affinity to the Turkey Gobbler.

Knowledge@Wharton: I recently heard a vice president at Walgreens talking about their efforts to redesign some of the Duane Reade pharmacies in New York City. One of the things that he said that really struck me was that it doesn’t matter how much you redesign something if your employees aren’t on board, if the customer service doesn’t match the visual experience that someone’s getting. How do you think that translates at Wawa?

Stoeckel: Our associates are our brand ambassadors. Our associates make us a living brand. Customers come in, [and] yes, they want a cup of coffee, they want a hoagie, they want the necessities to get through the day. But they come in for that Wawa experience. That cup of coffee is more than a cup of coffee. It’s the interaction with the coffee host or hostess. It’s that good morning from the person behind the register. It’s the acknowledgement from the store manager. It’s when you come into a Wawa, people always hold the door for you. People say, “Well, who designed that system?” Well, we didn’t design the system. It’s just the frame of mind that people are in when they come into a Wawa store. It’s really our people who make that experience so unique.

Knowledge@Wharton: You have a training area at your headquarters. How does that figure into it as well?

Stoeckel: Well, number one, we hire for our values. When I look at the people who work at Wawa, they come from all walks of life. They have very different backgrounds. But the one thing they have in common is they share our value system. When I ask people why they applied for a job at Wawa, [they respond,] “It’s your values, we read about them on your website. We talked to your associates about it.” The six values are the glue that keep the company together. We hire for the values, and we train for the values. We have Wawa University. We have orientation programs. We have a servant leadership program that all leaders of the business must go through if they are going to run a store.

The most important people in the company are the people in the stores. They deliver the living brand. Those 650 store managers are the essence of Wawa. Their people are what make this company so special, and it’s focusing on them.

Harvard Business Review did a study about 10 years ago, and they talked about how the convenience store industry is not an exciting industry, not like department stores or Nordstrom. In Nordstrom, you expect great service, but you don’t expect it when you go into a convenience retailer. They said there were a few companies — like QuikTrip out of Tulsa and Wawa — where you get that unique customer experience. They said it all comes down to the people and their investment in training and their investment and belief in the people who deliver that Wawa brand experience.

Knowledge@Wharton: It seems like there are never too few employees at a Wawa. There are always a lot of people working either behind the cash wrap or behind the sandwich preparation area. Is that part of [the experience] too?

Stoeckel: We have automated scheduling systems. We project what demand is going to be. In our business, if we are going to simplify your life, we have to get people in and out of the store as customers very quickly. You have to have the right number of people servicing the store, behind the food service area, at the checkout core, maintaining the gas island, replenishing the shelves. Because if we don’t, if things slow down, then we haven’t fulfilled our obligation to you.

Unlike a lot of convenience retailers, we do high volume. We can support a much larger staff in the store. You go into some convenience stores, and there are one or two people on duty. At Wawa, you go into a store during the day, and you will see 12, 15, 18 people on duty. The store on the campus here, at 38th and Spruce, is a beehive of activity. You will go in there at noon, and there will be 15, 20-plus people delighting their customers.

Knowledge@Wharton: In the next few years, what do you see as the biggest opportunities and then also the biggest threats for Wawa?

Stoeckel: In terms of the biggest threats, some of the commodities are not growing. We have always sold a lot of tobacco. Tobacco’s a declining category. That’s going to be far less important than what it has been in the past. Even gas today is declining. People are driving less. People are using [fewer] gallons. Cars are becoming much more fuel efficient. You hear about electric cars and alternative energies, so gas isn’t necessarily going to be a driving business the way it has been in the past.

The biggest challenge is to replace these commodities. Our action is to grow the food service business. That’s why when you walk into the new Wawas today, you look at our stores in Florida, they look like restaurants. They are restaurants to go with gasoline. Normally you don’t think of a gasoline retailer having great quality food, nor do you think of a restaurant selling gasoline. That’s what makes Wawa so unique. It’s like a blue ocean strategy. It’s what others don’t do, combining daily necessities like fuel with quality food that you would find in a fast casual restaurant.

Growing that food service business and competing with big global companies like McDonald’s and those emerging companies like Panera and Starbucks and others in the fast casual space, that’s our challenge. Our business never sleeps. It’s 365, 7 by 24. We’re a convenience retailer. We’re a fuel retailer. We’re a food service retailer. We’re high volume in all three. Keeping that momentum going is always a challenge.

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