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One on One: Joseph Sabbagh

By Steven Hedlund
June 01, 2007

Ask Joseph Sabbagh what it takes to turn a profit retailing seafood, a task most conventional supermarket chains can't pull off, and he'll give a surprisingly simple reply: labor.

The Danbury, Conn., native learned the art of customer service hocking seafood out of a van in Fairfield County 28 years ago and mastered the skill working as a consultant for Whole Foods Market in Austin, Texas, and Wild Oats Markets, in Boulder, Colo., for nine of the last 14 years.

Prior to Whole Foods and Wild Oats, Sabbagh worked in nearly every facet of the seafood trade, including ShopRite Supermarkets in Edison, N.J., Anthony's Pier 4 in Boston, Flying Goose Ltd. (now Lyons Seafoods Ltd.) in the United Kingdom and the Canadian government.

But Sabbagh's passion lies with retail seafood. As president of Sax Maritime Associates, a Los Angeles retail-seafood consulting firm, he's lending his expertise to an unnamed Midwestern supermarket chain. In late March, Sabbagh shared his knowledge with SeaFood Business , talking candidly about the importance of customer service, the fallacy of loss leaders and the principles behind the nation's largest natural-foods retailers.

HEDLUND: Why are most retail 
seafood departments loss leaders?

SABBAGH: [Most conventional supermarket chains] set their expectations too low, because for years it's been such a sore spot for them. I believe a seafood department can do 10 percent of your store's sales. I really do, if you do it properly. They want to see the return before the investment. I've never seen any type of financial agreement that works like that. I've never believed in loss leaders. You're basically telling the customer, "Wait till we put it on sale before you buy it." This year, 6/9 [count] king crab is a great deal. So a lot of retailers are selling it for $9.99. They sell a lot of it at $9.99. But when they raise it to $14.99, it sits in the case and they have got to shrink it out, and the customer waits for it to go back down to $9.99. You can make a lot of money in seafood, and it can be a real bright spot in your store. It's not too late to change.

 

Ahold is switching from full-service seafood to self-service at some 
of its Stop & Shop and Giant stores. 
Will more retailers follow?

I hope they do. Because why waste fish? Why lose money? That just sours [retailers] on the [seafood] category. The first thing [retailers] should do when they open a new store is look at the marketplace. If you're right next to a company like Santa Monica Seafood or in a state like Iowa, you have got to think about what you're doing. But unfortunately, they don't. [Ahold] realizes that theater doesn't work.

 

What sets Whole Foods apart from the competition?

Labor is the key to their business. They commit to labor, in terms of paying and training people. No national retailers are even close, except Wegmans. That's why [Whole Foods] is so successful. Unfortunately, seafood is an afterthought for most retailers. [Whole Foods] made seafood a priority. There's no substitute for having knowledgeable people behind the counter. [Whole Foods Chairman and CEO] John Mackey had the vision and dedication to do it.

 

What is Whole Foods' Achilles' heel?

Their seafood department is way too big. They talk about sustainability, then they build an 80-foot fresh case. When I walked into their Austin store late one evening, it was kind of run down. It looked like a luge course. You don't need that. They talk about reducing their carbon footprint, then they build an 80,000-square-foot store in London. I think they get a little carried away sometimes. When I see departments that big, I think shrink, I think excess labor. Anything over a 12-foot display of finfish and a 12-foot display of shellfish is too much. A 24-foot enclosed fresh case should just about do it, [in addition to] a frozen case. It's theater, and I think it's hurting their bottom line.

 

Whole Foods halted live lobster 
sales last year because it said the crustacean is handled inhumanely. 
Is that true?

Most retailers lose money on live lobsters because of [tank maintenance], mortality. That's really why they did it. [The move] was genius.

 

Is Whole Foods superior 
to Wild Oats in any way?

Whole Foods had the best marketing and public relations that I'd ever seen. Wild Oats had the worst. Wild Oats spent more time figuring out what to tell the customer about what they don't sell [than] what they do sell. They announced that they don't sell orange roughy. Why would you want to announce that? One of their biggest accomplishments, in their minds, was putting these ridiculous mercury warning signs [in seafood departments]. They thought that was a good thing. What's happening out there is confusing the daylights out of the customer, from astaxanthin and canthaxanthin to mercury. Why add to that?

 

Is Whole Foods inferior to Wild Oats in any way?

Wild Oats' buying system is better than Whole Foods' - 100 percent better. There's no comparison. [Wild Oats] is getting product to their stores as fresh as, or fresher than, [Whole Foods] and at much lower prices, because [Wild Oats] has a system that utilizes local vendors and isn't locked into its own bad investments. Whole Foods runs a lot of [product] through their Seattle and Gloucester [Mass.] processing facilities to justify them, and that hurts them a lot. [Whole Foods] pays a lot [for seafood] at the door, and they have all this extra labor and all this extra shrink. So what do you do? You have got to raise your prices, and there you go with the "whole paycheck" thing.

 

What does the proposed Whole Foods-Wild Oats merger mean for the seafood industry and consumers?

It's very good, because any time Whole Foods opens a fish counter it means more seafood sales. It raises the bar in the area. There are some local [vendors] that may wind up losing business. Wild Oats has some great category managers and field merchandisers, and unfortunately a lot of these people may go by the wayside.

 

Associate Editor Steven Hedlund can be e-mailed at shedlund@divcom.com

 

 

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