How Hy-Vee's Store Formats and Digital Strategies Have Positioned It as a Leader in Grocery Retail

Hy-Vee, a Midwestern grocer, began its journey in 1930 with a single store in Beaconsfield, Iowa. Over the next 40 years, the company expanded to 125 stores, generating billions in annual sales. By 2024, Hy-Vee has grown to nearly 590 business units across nine Midwestern states, raking in $13 billion annually. This remarkable growth is a testament to Hy-Vee’s commitment to evolving store formats, improving its digital infrastructure, and transforming itself into an innovator in grocery retail. These efforts have earned it the title of USA Today’s Best Grocer of the Year.

The Evolution of Hy-Vee's Store Formats

Hy-Vee’s ability to adapt to changing consumer needs is reflected in its diverse and innovative store formats:

1. Traditional Grocery Stores: Hy-Vee’s early years focused on establishing large-format grocery stores that provided a wide range of products, from fresh produce to bakery items, and specialty departments such as floral and gift shops.
2. Fast & Fresh: To cater to today’s on-the-go consumers, Hy-Vee introduced Fast & Fresh stores. These compact outlets offer quick meal solutions, fresh produce, and essentials, providing convenience without compromising quality. Since 2019, Hy-Vee has expanded its Fast & Fresh offerings, such as a 6,500-square-foot store in Lakeville, Minnesota, featuring a drive-thru Starbucks, Mia Pizza wood-oven pizza, and Hy-Vee Aisles Online Pickup for added convenience.
3. Community-Based Stores: In 2021, Hy-Vee opened a community-focused store in Eau Claire, Wisconsin, emphasizing engagement with local residents and tailored offerings. This demonstrates Hy-Vee’s strategy to build connections in communities it serves.
4. Wall-to-Wall Wine and Spirits: Hy-Vee’s specialized stores offer an extensive selection of wines, craft beers, and spirits, along with complementary items like charcuterie and specialty sodas. These stores are designed to meet the needs of customers planning events or seeking unique offerings.
5. Health Markets: Recognizing the growing demand for wellness-focused options, Hy-Vee launched stores that emphasize organic, gluten-free, and specialty health products, often featuring in-store dietitian services.
6. Large-Scale Stores: In 2024, Hy-Vee unveiled its largest store in Gretna, Nebraska. Spanning 135,000 square feet, the store features an expansive grocery section, a dedicated Fast & Fresh outlet, and a state-of-the-art Aisles Online grocery delivery and pickup service. This flagship location exemplifies Hy-Vee’s ability to combine size, service, and innovation. Additionally, the Gretna store integrates a dedicated curbside pickup aisle, underscoring Hy-Vee’s commitment to seamless omnichannel shopping experiences. According to Grocery Doppio, omnichannel integration is no longer a "nice-to-have" but a strategic imperative. Omnichannel shoppers spend an average of $1,043 per month, significantly more than digital-only ($857) or in-store-only ($839) shoppers. By addressing the complexities of integration and delivering consistent customer journeys, Hy-Vee ensures its customers enjoy flexibility and satisfaction across all channels.

This evolution in store formats highlights Hy-Vee’s commitment to improving customer experiences across different demographics, from building community-focused stores to enhancing checkout efficiency with large-scale innovations.
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Strategic Partnerships Driving Innovation

Hy-Vee’s success in blending physical and digital experiences is bolstered by strategic partnerships:

• Manhattan Associates: Hy-Vee uses advanced inventory management solutions to optimize supply chain execution and maintain product availability, ensuring seamless operations across all locations.
• Deliverect: This partnership enhances order processing for grab-and-go and curbside pickup services, eliminating manual entry and increasing efficiency.
• PayPal and Venmo: These collaborations enable secure and quick transactions for online grocery orders, meeting the expectations of modern digital shoppers.
• Simbe Robotics: The partnership with Simbe Robotics to deploy autonomous shelf-scanning robots ensures accurate inventory management and optimizes store operations, reducing stockouts and improving the shopping experience.

Digital Transformation: Enhancing the Customer Experience

Hy-Vee has embraced digital innovation to enhance its customer experience and streamline operations:

• Retail Media Integration: Thousands of in-store digital screens provide personalized advertisements, real-time product details, and promotions, engaging customers while driving revenue. Hy-Vee has also teamed up with Grocery TV to power in-store retail media, adding more than 10,000 screens across over 400 locations. This partnership simplifies digital advertising for brands and increases opportunities to engage with Hy-Vee’s customer base. According to Grocery Doppio’s State of Digital Grocery: In-Store Media Monetization, in-store media can lead to a 27% increase in impulse purchases for grocers that adopt these strategies. Marketing Dive further highlights that Hy-Vee’s in-store screens are key to delivering tailored experiences, enhancing shopper satisfaction, and fostering stronger supplier partnerships.
• Omnichannel Shopping: Through the Aisles Online platform, customers can seamlessly shop online with options for delivery or in-store pickup. This service caters to the growing demand for convenience and flexibility.
• Seamless Payments: Collaborations with PayPal and Venmo allow customers to make secure, quick transactions, improving the online shopping experience.
• Efficient Order Processing: Hy-Vee’s partnership with Deliverect simplifies grab-and-go delivery app ordering and curbside pickup. By automating order creation, staff can focus on delivering high-quality meals and ensuring customer satisfaction.
• Autonomous Shelf-Scanning Robots: Hy-Vee has partnered with Simbe Robotics to deploy autonomous “Tally” robots in stores across Iowa, Nebraska, and Missouri. These robots scan shelves up to three times daily to ensure products are in stock, correctly priced, and in the correct location. By reducing out-of-stocks by up to 30% and providing actionable insights, Tally robots allow associates to focus on engaging with customers and improving store operations. This move highlights Hy-Vee’s commitment to adopting automation to enhance efficiency and customer satisfaction.

These digital advancements align with Grocery Doppio’s prediction that digital grocery sales will grow by 9.7% in 2025, accounting for 13.6% of total grocery sales. Hy-Vee’s proactive investments ensure it remains ahead of the curve.

Retail Media: A Strategic Growth Driver

Retail media has become a cornerstone of Hy-Vee’s business strategy:

• Revenue Growth: By partnering with brands to display targeted advertisements on in-store screens, Hy-Vee creates new revenue streams.
• Personalized Engagement: Dynamic content ensures customers receive relevant promotions and product recommendations.
• Data-Driven Insights: Retail media platforms provide valuable analytics, enabling Hy-Vee to continually refine its strategies. According to Grocery Doppio’s insights, retail media networks also play a key role in building stronger relationships with suppliers, driving collaborative growth.
• Backlinking Opportunities: By leveraging its partnerships and integrating digital media efforts into content strategies, Hy-Vee has the opportunity to create strong anchors that guide traffic to related articles and further strengthen its digital presence.

A Vision for Leadership

Hy-Vee’s transformation from a single-store operation to a leading grocer with nearly 590 business units is a story of adaptability and innovation. By evolving its store formats, embracing digital transformation, and leveraging strategic partnerships, Hy-Vee has not only kept pace with industry trends but also set new standards for grocery retail.

As consumer expectations evolve, Hy-Vee’s commitment to innovation ensures it will continue to thrive. By blending cutting-edge technology, strategic partnerships, and customer-centric strategies, Hy-Vee is shaping the future of grocery retail and setting a benchmark for the industry.