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Innovation and Customer Service

at Grupo Supermercados Wong:
A Peruvian Success Story
Introduction
Efraín Wong, Managing Director of Grupo Supermercados Wong (GSW), took a break from his meet-
ing with bankers from Banco de Crédito del Perú. They were watching a promotional video tape of the
company when he stepped outside GSW headquarters in Miraflores, an affluent suburb of Lima. As he
breathed in the warm, humid air, he thought about ways to expand his family’s business. Efraín Wong
was one of the founding brothers of Grupo Supermercados Wong, the largest supermarket chain in
Peru. His brothers and he had grown the business and made it into one of Peru’s most respected compa-
nies.

Success was no stranger to the Wong family, second generation Chinese immigrants who settled in
Peru. The family-owned business grew from a small grocery store in the 1940s to the largest supermar-
ket chain in Peru with 70% market share in 2003. The company earned $576 million dollars in sales in
2003. (Salguero, 1999).

Totally Peruvian owned, Grupo Supermercados Wong is widely respected for its outstanding
customer service and innovation. How did the Wong family manage to succeed in such a difficult and
competitive industry? In the face of competition from foreign companies, can GSW continue to in-
crease sales?

Company Overview
Lisa Wing, a correspondent for Latin Trade, summed up Grupo Supermercado Wong’s leadership posi-
tion in the market and Peruvian society. “Wong is a company that truly strikes me as spectacular in
every sense of the word. They have a monopoly in the market in that they are on another level. They are
famous for the service that they give and innovation.” A Microsoft case about the company noted that
“E. Wong has long been know for initiating creative innovations to better serve its customers (Microsoft,
2003). Studies conducted by Apoyo Opinión y Mercado found that E. Wong was recognized as one of
the five best companies in Peru (ewong.com, 2004).

Carlos Wong (2004), manager of the E. Wong store that consistently won the “Best in Service”
award, considers the growth of the company to be “el sueño americano en el Perú” (the American dream
in Peru), since the company grew from practically nothing to around 8500 employees and 27 stores in
just over twenty years. The chain has three formats: E. Wong supermarkets for the upper middle class,
Metro supermarkets and Metro hypermarkets for the middle and lower middle classes. All of the stores
are located in and around Lima. The chain includes eleven E. Wong supermarkets, nine Metro

Copyright © 2004 Thunderbird, The Garvin School of International Management. All rights reserved. This case was
prepared by Professor Christine Uber Grosse for the purpose of classroom discussion only, and not to indicate either
effective or ineffective management.
hypermarkets, and seven Metro supermarkets. Each store employs about 300 people, including supplier
vendors. The stores have over 50,000 items for sale, with approximately 1000 cash registers (ewong.com,
2004).

The E. Wong supermarket brand serves the higher end market in Lima, while the Metro super-
market and hypermarket brand is geared toward the lower middle and middle classes. The slogans for
the two brands reflect their different orientations. E. Wong’s slogan “donde comprar es un placer”
(where shopping is a pleasure) contrasts with Metro’s slogan “precios más bajos siempre” (always lower
prices). However, even the lower priced Metro stores maintain “the hallmark Wong quality and courte-
ous service” (Salguero, 1999).

Company History
The family business got its start in 1942 when Erasmo Wong opened a small grocery store in Lima,
Peru. His wife Angela and their young children helped out in the store. The Wongs had five sons,
Erasmo, Edgardo, Eduardo, Efraín, and Eric, and a daughter named Elda. Forty years later, the sons
began to grow the small family store into the E. Wong supermarket chain.

In the early 1980s, the Wong family had one small neighborhood grocery store with three check-
outs. The brothers thought about expansion when the parking lot could no longer accommodate all of
the customers. Erasmo, the eldest brother, took the other brothers to an empty lot. “Why did you bring
us here?” they asked. Erasmo replied, “We’re going to open our second store here.” “What? Without any
money?” the others asked. Their brother reminded them that their father, who recently retired, had
impeccable credit with which they could expand. In 1983, the Wong brothers received funding to open
a second store.

At that time, E. Wong still wasn’t a supermarket, and the brothers didn’t have a clear vision of the
future. The two Wong stores were modified private houses with atmosphere and distinct areas for a
delicatessen and liquor sales. The brothers believed that the store ambiance and setup had much to do
with their success.

In 1984, the family had an opportunity to purchase two locations of a supermarket chain that
went out of business. Both supermarkets were rectangular like other standard supermarkets. The Wong
brothers wondered whether their customers would keep coming to their stores if they were like all the
others, so they made a conscious decision not to be rectangular and exactly like the other supermarkets.
The important decision defined the new company. In addition, they made the stores self-service, but
resolved to continue giving customers highly personalized service. The brothers also agreed that all the
Wong stores would have ambiance and distinct areas with personality, so customers would feel as if they
were in a delicatessen or a liquor store as they walked through the store.

With the four stores, the brothers had more customers than they could take care of at the level of
quality that they wanted to deliver. The cash registers had long lines, and the parking lots didn’t have
enough spaces. So they added cash registers until each store had twelve to fifteen registers, and pur-
chased land to convert to parking lots. But the additional parking spaces created another problem. The
lines at the cash registers grew long again because of the extra parking. Finally, the brothers realized the
only solution was to open more stores.

In 1990, the Wong brothers opened a fifth store. Subsequently, they took advantage of an oppor-
tunity to buy a bankrupt supermarket chain of eight stores. As a result, they gradually opened the new
stores and established E. Wong as a leading supermarket chain in Lima.

Soon afterward, another opportunity came along. The Peruvian Armed Forces asked E. Wong to
privatize its store for military personnel. The huge location included a supermarket and department
store. Although the Wong brothers really wanted just the supermarket, the military convinced them to

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take over the entire installation of around 130,000 square meters. The company had purchased material
to build another store, but used it instead to combine the supermarket and department store into one
large supermarket.

Initially, the company didn’t fully understand the concept of hypermarket. It took several years for
the format to develop its own image and vision. As time went by, the company decided that the essence
of the hypermarket was price, low prices always. The first brand E. Wong represented service and
quality, while Metro stood for low prices. The two brands represented two distinct concepts.

Difficult Years in the 1980s and ‘90s

One of the most difficult times for the store was the era of terrorism in Peru in the 1980s and 1990s. In
the 1990s the threat of terrorism grew stronger. Car bombs were frequent occurrences in Lima, and
some were placed in E. Wong parking areas. Fortunately, no one was hurt at a company store. However,
many people went hungry. For ten years the company operated under tremendous stress worrying about
car bombs, terrorist attacks, and the possibility of being sacked by hungry mobs.

Efraín Wong attributes the company’s success to five key factors: 1) the family; 2) its background
in the supermarket business; 3) the bankruptcy of competitors; 4) the firm’s four corporate values; and
5) the company’s focus on customer service. The family consisted of Don Erasmo Wong, his wife
Angela, and their children, Erasmo, Edgardo, Eduardo, Efraín, Eric and Elda. The family members
soon discovered that they worked together well, which became a huge advantage in the tight margin
business. Second, the family had years of experience in the food business, which made them very famil-
iar with the Peruvian market. Third, several supermarket chains in Peru went bankrupt while GSW was
in a period of growth, thus cutting down on competition. And fourth, the Wongs defined corporate
values, such as a focus on the customer, that led the business to success and growth for years to come.
The fifth factor was the family’s key discovery that service was what their customers wanted most.

Family Values
Carlos Wong described how the store grew from “los chinitos de la esquina” to the largest supermarket
chain in Peru. “Los chinitos de la esquina,” a Peruvian expression, refers to the widespread presence of
neighborhood grocery stores in Lima that were run by Chinese immigrant families. Carlos worked as a
teenager in the original Wong family store, and participated in the astonishing growth of the family
business from one small store to 27 supermarkets. He now manages one of the most successful E. Wong
stores.

The Wong family transmitted traditional Chinese values to the family business, blending them
skillfully with Peruvian culture and values. The work ethic of the Chinese was always very important to
the family. Traditionally, the family members saw that their first obligation when young was to study.
But when they weren’t studying, they felt obliged to help out with the family business. The training they
received when young gave them an in-depth knowledge of the business. While growing up, the Wong
brothers often heard their mother repeat “none of you alone is more capable than all of you together.”
Early on, they learned the value of working together.

Leadership and Communication

The family’s cultural background also taught the brothers the value of discipline. Following Chinese
tradition, the word of the eldest brother was law. For that reason, eldest brother Erasmo made the key
decisions and served as the company leader and executive President. He worked many hours to set an
example for the employees and managers. On occasion he was known to sweep the floor in a store if he
saw that it was dirty.

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 Edgardo Wong, one of the five brothers, managed Paramonga, the family’s sugar cane plantation
company. He participated in the supermarket business as a member of the board and helped the family
with key decisions and innovation.

The organizational structure of the family business could be compared to the army. When the
General gave an order, everyone had to obey even if the Colonel and soldiers were not in agreement.
However, that rarely happened in the business because the family had excellent communication. Almost
every day, the family got together and talked over what needed to be done. Whenever the family had
conflicts, the eldest brother had the last word, which helped things to function smoothly. The family
realized that if all the brothers had the same ranking in the hierarchy, there might be fights.

Training for Succession

The successor who will run the business in the future doesn’t necessarily have to be the oldest brother,
according to Efraín Wong (2004). The company has opened up some management positions to profes-
sionals since it has outgrown what the five Wong brothers could do by themselves. For example, the
present General Manager of the company isn’t a family member.

Even though the children of the Wong family chose the profession they wanted, they were taught
that they must know the business. Efraín told his children, “even if you don’t work in the business, some
day you will have to join with the stockholders and know what you are managing.” The stockholders of
E. Wong are all family members as of 2004.

The Wong brothers wanted their children to prepare themselves for management the same way
that they did, including mopping floors and cleaning windows and bathrooms. “If one day the children
want to manage the company, they have to learn how to manage it in all its aspects, from the very
bottom to the top,” comments Efraín Wong.

The Supermarket Industry in Peru and Competition

Peru had almost 28 million people, with approximately eight million residing in and around Lima.
Approximately two thirds of Lima’s population lived in three cones, suburbs that stretched out into the
coastal desert beyond the capital city. About 2.3 million lived in the more prosperous northern cone
called Lima North (The Economist, 2004). The Apoyo consultancy estimated the average monthly in-
come in the northern cone area of Lima at around US $533 per month (Economist Intelligence Unit,
March 2003). About 20% of Lima’s middle class lived in Lima North.

According to economic figures, half of the population lived in poverty with a per capita income
below the 1973 level. However, these figures may be wrong because of three factors: the informal economy,
drug money, and money sent home from Peruvians living abroad. Only one third of Peruvians had a job
that was legally registered. The Inter-American Development Bank found that Peruvians abroad sent
$1.3 million home. These factors could explain the growing purchasing power of the Limeños (The
Economist, 2004).

In 2002, the economy grew at the unexpectedly high rate 4.8%. A year later, Peru’s retail food
sector had more than $4 billion in annual sales. Supermarket sales experienced rapid growth up from
US $645 million in 1997 to almost US $1 billion in 2002, (Economist Intelligence Unit, Aug. 2003).
Maximize, a Lima consultancy, estimated that Peruvian supermarket sales would exceed US $1 billion
by the end of 2003. The number of supermarkets also was expected to rise by 10 units to 70 by year’s
end of 2003. In part, the increase in supermarket sales was caused by the spread of bank and store credit
cards (The Economist, 2004.)

However, supermarkets accounted for only 22% of the country’s food commerce (Latin American
News Service, 2003). The rest of the population preferred small grocery stores, traditional open-air

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markets, and curbside vendors. Food sales through modern supermarkets were expected to reach 25%
by 2004. The major chains operated only in metropolitan Lima. GSW and its competitors had plans to
expand to other cities such as Arequipa, Trujillo and Chiclayo by late 2004 (Gutierrez, 2003).

The two main major supermarket chains were Grupo Supermercados Wong (about 70% market
share) and Santa Isabel (about 30% market share). Santa Isabel included the Plaza Vea chain; both were
formerly part of Royal Ahold. (Economist Intelligence Unit, Sept. 2003). In 2003, a $1.1 billion ac-
counting scandal at Royal Ahold forced the resignation of the Chief Executive Officer and Chief Finan-
cial Officer and caused the Dutch food retailer to sell its Latin American holdings. As a result, Inter-
bank, a Peruvian corporation involved in banking and insurance, bought the Santa Isabel supermarket
chain. Santa Isabel had 20 stores in Peru with plans to add five stores.

Although some speculated that Wal-Mart would enter Peru through the Santa Isabel chain, that
didn’t occur. Instead, Wal-Mart moved into Brazil in 2004 with the acquisition of Royal Ahold’s Bompreco
Supermercados do Nordeste, a 118- store chain.

Colombia’s largest commercial chains, Almacenes Exito and Carulla, planned to enter the Peru-
vian market in 2004 to compete with the leaders Grupo Supermercados Wong and Santa Isabel (América
Economía, Jun 2004).

Corporate Values
Over time, the Wong family developed four corporate values that summed up their business philosophy
and defined their company. These values played an important role in GSW’s growth and success. The
company culture promotes awareness of the values and their application in day-to-day business opera-
tions. The four corporate values are: 1) the customer is our reason for being; 2) our employees are
number one; 3) we seek continuous innovation; and 4) we always look for better ways to serve the
customer.

Value #1: The customer is our reason for being.

The first corporate value at GSW was the most fundamental: “the customer is our reason for
being”. Efraín Wong believed that, “we should see everything through the eyes of the customers, to
think as if we were customers, and to treat them with care because thanks to them our business lives.”
Since the early days of the bodega (neighborhood grocery store), the family worked hard to satisfy the
most demanding customers. As a company, GSW continued to look for better ways to provide service.
GSW’s service was nationally famous. According to Latin Trade correspondent Lisa Wing (2004), “It’s
a level of service that is incomparable not only in Peru, but in any supermarket anywhere, including the
United States or outside of Peru.”

Even though prices at E. Wong stores were slightly higher than its competitors, people valued the
service and were willing to pay for it. The up-market E. Wong customer was interested in both the
quality of service and goods. Carlos Wong (2004) commented that the two must go hand-in-hand since
both are necessary for success.

• A Broad Definition of Service

The Wong family defined service very broadly and viewed it as fundamental to every aspect of their
business. According to Carlos Wong (2004), “thinking of the preferences of the public is part of
service also. Everything is part of service.” The company considered whom its customers were in
managing the mix of products offered in its stores. Different zones in Lima had distinct neighbor-
hoods where Japanese, Chinese, Arabs, Americans, Germans and Swiss lived. Their preferences had
an impact on what goods the GSW stores in their neighborhoods carried.

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 Customer preferences also differed at E. Wong and Metro stores. Metro customers preferred hap-
pier and louder volume music than those who shopped at E. Wong. In addition, they liked to smell
the aroma of bread or roast chicken. The Metro customers also wanted a different type of meat.
Many E. Wong customers preferred juicy meat with a lot of fat. In contrast, some people from the
lower economic classes who shopped at Metro stores preferred meat that was less expensive and
leaner.

Other buying preferences were taken into consideration as well. For example, some customers
preferred to buy eggs in a carton, while others liked the eggs loose in a plastic bag. The store
manager acknowledged that even though eggs in cartons were more convenient, easier to carry, and
broke less often, some customers were used to buying their eggs in a plastic bag. For that reason, E.
Wong sold eggs both ways.

If someone asked where a product was located in the store, a GSW employee would take the
customer there rather than just give directions. Customers who went into the wine room could
sample different wines and get recommendations from a sommelier, or consult a book with more
information about each type of wine and its history. When a customer purchased a light bulb, an
employee tested the bulb to make sure that it was working.

• Surprising the Customer

Delivering outstanding customer service was the goal not only at the upscale E. Wong stores, but
also at Metro supermarkets and hypermarkets. Efraín Wong said, “we look to exceed the expecta-
tions of our customers. We try to surprise them. This has given us a strong position in the market.”
As a result, Wong customers were passionate about the supermarket chain. One woman in an E.
Wong store told the author that she much preferred Wong, even though she lived only a half block
away from a competitor’s store.

The tagline of E. Wong highlighted the company’s commitment to service and its desire to provide
a pleasant shopping experience: “E. Wong, donde comprar es un placer” (E. Wong, where shopping
is a pleasure.) Marco Suárez, Commercial Projects Manager, explained, “If shopping is a pleasure,
the customer comes to the store and buys because she enjoys the experience. Maybe it’s because in
countries like ours, the very act of buying is an act of entertainment. So, therefore, it is fun for our
customers to shop.”

• The Five Senses

The managers at Grupos Supermercados Wong realized that the shopping experience engages all
five senses of the customers. For that reason, GSW asked its employees to work with all five senses
to enhance the shopping experience for the customer. The company wanted each store to be an
island of tranquility, a place where the customers should feel peaceful from the moment they en-
tered the store. The atmosphere should appeal to all five senses. Concerning the sense of smell,
supermarkets were required to have neutral or fresh odors, since management considered nice odors
to be part of the service. The smell of bread or coffee was acceptable in the stores.

With regard to sight, the company insisted that the store is very clean. Since the sense of touch is
also important, GSW had employees make sure that the handles of grocery carts were not sticky or
unpleasant to touch. Since people don’t like to walk on a floor with grains of rice under foot,
employees kept the floors clean throughout the day.

Concerning the sense of sound, GSW created a peaceful atmosphere where employees could hear if
a customer spoke to them and needed something. So the stores played music that was not too loud.
The Wong brothers understood what the customer wanted, and offered it in three formats: E.
Wong supermarket, Metro supermarket, and Metro hypermarket.

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 In keeping with the company’s broad definition of service, managers believed that service includes
even the approach to the store. Therefore, they ensured that the trip into a GSW store was pleasant.
When customers approached the store, they saw directional signs, freshly painted sidewalks, and
guards to regulate traffic. The stores also kept the street clean and free of trash.

Personal Relationships with “el Cliente Amigo”

Latin American business culture places a high value on developing close personal relationships.
This cultural value played an important role in the company’s relationship with customers. Manag-
ers and employees considered the customer a “cliente amigo” (customer who is also a friend).

The company believed that customers came to E. Wong or Metro because they were treated like
friends. For example, almost everyone who came to the store managed by Carlos Wong knew him.
If they had a problem, they knew that he would solve the problem and that they were protected.
Customers at his store, or any GSW store, knew that the merchandise was guaranteed. Carlos
described the close relationship between his customers and his store, “We know them and they
know us. We are a well-known family and they trust us. They come to the store of their friend, and
this is a very strong tie. It’s even to the point that if they go to the store of the competition, they feel
bad, like they betrayed us.”

When possible, employees called customers by name, because management saw this as one of the
best ways to personalize service. However, this became more difficult as E. Wong and Metro serve
hundreds of thousands of households. The only way to maintain this personalization company-
wide was through technology and direct marketing. The company sent cards addressed by name to
customers that were electronically signed by the President of Grupo Supermercados Wong. The
company wanted customers to feel like they knew the owners personally.

Managers compared the company’s relationship with customers to a marriage, but one in which the
spouse is very fickle. If one thing goes wrong, the customer might forgive the company. But if
several things go wrong, the customer will quickly abandon the store for a competitor. Efraín Wong
notes, “In order to serve the customer, we have to love him. One cannot serve a person well that one
doesn’t like.” In sum, Grupo Supermercados Wong considered it very important to maintain a
personal connection with customers. The personal relationship was vital to maintaining the iden-
tity of the company.

• Children
Grupo Supermercados Wong loved children and considered them future customers. People told
Efraín Wong that the first words out of their children’s mouths were “Daddy, let’s go to Wong!” The
cashiers at a GSW store treated children with special care and got to know them. Children could
also use mini shopping carts to learn how to shop.

• Exchanges and Refunds

To build customer loyalty and attract new customers, E. Wong and Metro stores made exchanges
and refunds quickly and easily, often without a receipt. Some customers even came to a GSW store
to exchange a product that they’d bought at a competitor’s store. The store accepted the return in
the hope of gaining a new customer. Carlos Wong explains the policy, “If they buy something bad
from the competition, we receive it with pleasure. For us, it is a great opportunity to help a cus-
tomer our competition does not want to serve. By helping the customer, we gain her/his absolute
loyalty.” Management understood that it is much cheaper to exchange milk that has gone bad than
to lose a customer. Over a lifetime, a typical customer might spend over $100,000 at a supermarket.

Value #2: Our employees are number one.

The company called its employees “colaboradores” (collaborators) and considered them essential
for the company’s success. Carlos Wong commented (2004), “you cannot require someone to treat

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 your customer well when that person does not receive good treatment. So we treat our own person-
nel very well. It’s also one of our corporate values, the first one for the managers of GSW. The
customer is our reason for being, but for the manager, his people come first.” Efraín Wong agrees
(2004). “For our employees, the customer is the most important. For our managers, the most
important is our people.”

GSW cultivated employee loyalty in a variety of ways. The manager of the store next to corporate
headquarters explained why he had stayed with the company for twenty years. “I entered E. Wong
with the intention of working for a few years and leaving. For twenty years, I have been saying the
same thing. Talking about E.Wong is to talk about a family environment. I grew with them. They
began with the Bodega in San Isidro, and I worked there.”

Because the company placed great value in its employees, the selection and hiring processes were
critical. Prospective employees went through a demanding series of interviews. The company looked
for people who were highly oriented toward service. The profile evolved after Efraín Wong had a
discussion with the company psychologists concerning the selection of employees. At one of the
GSW stores, he observed that the cashiers were very serious. Efraín told the psychologists that
smiles come from the soul and cannot be trained in a class. So he asked them to select friendly
people with a disposition to smile and empathize with the customer.

• Training for Employees

All employees received basic training at the Wong School (Salguero, 1999). Grupo Supermercados
Wong occasionally brought in experts from around the world to train employees. The company
hired John Tschohl to train 8000 employees in customer service and empowerment. CEO Erasmo
Wong commented, “We are not a supermarket with great customer service. We are a great customer
service organization that happens to be in the supermarket business. Empowerment at E Wong’s is
bending and breaking rules. It’s taking care of a customer to the customer’s satisfaction—not to E.
Wong’s satisfaction” (Tschohl, 2003).

• Salary and Benefits

On the whole, salaries were average at GSW. However, its employees received additional benefits
and felt like part of a family. The company helped the employees in different ways, such as making
loans to families or paying for funerals when someone in the family died.

• Annual Show
The company encouraged competition among the stores in a unique way. Store employees put on
an annual show called “El Gran Show Artístico Primero de Mayo” every Labor Day, May 1st. The
employees were coached by professional choreographers, and their efforts supported by makeup
artists, costume designers, and set designers. Each of the 26 stores and Paramonga, the company’s
sugar cane plantation, had an entry. The teams made up their own lyrics, taking themes from
popular shows and movies. The spectacle involved two stages, one group performing while the
other set up. Employees prepared for the competition all year long. It was a morale booster and
outlet for employee creativity.

Each year, employees also held “El Gran Corso de Fiestas Patrias”, a parade that was a tourist event
for the national holiday “Fiestas Patrias.” Over 100,000 people watched the parade.

Value #3: We Seek Continuous Innovation

Ongoing innovation was the third corporate value at Grupo Supermercados Wong. Efraín Wong said
(2004), “In order for a company to survive and keep itself at the crest of the wave, it must constantly
innovate. In Peru, probably we don’t need cutting edge technology. What we surely need is adequate
technology. In spite of that, we have cutting edge technology in some things.” For example, the com-
pany pioneered in many areas such as bar codes, information systems, Web site, and direct marketing.

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GSW also innovated service with its home delivery, acceptance of returns without question or receipt,
and no tipping policy. Some stores offered valet parking, fast cash registers, banking inside the super-
market, a childcare center, and free shoeshines, among other services.

• E-Commerce at Grupo Supermercados Wong

E-commerce, although not a big moneymaker at GSW, enhances the firm’s reputation as an inno-
vator. The company Web site offered customers the option to shop for groceries online. In 2002,
online shopping generated sales that totaled about $250,000, a small portion of the company’s
$587 million in annual sales. Marco Suárez, Commercial Projects Manager, identified two ways
that the Web site could be used to do business with the consumer: 1) by developing online sales;
and 2) developing communication schemes to keep in frequent contact with customers.

The company launched its Web site at ewong.com in 1998. Until that time, GSW had two sales
channels: its stores and the telephone/fax ordering service. The company spent $80,000 initially on
the hardware and software for its Web site. It cost around $5000 per month to maintain the site,
including $3000 for a phone link. At ewong.com, the visitor could take a virtual tour of a store and
order any of 20,000 items, half the number carried by the traditional stores. Within certain areas, E.
Wong delivered virtual orders within three hours, as it did for orders placed by fax or phone.

In mid 2000, the Web site received approximately 800 to1000 visits per day. Of those, an estimated
2% or less placed an order. Regular online buyers tended to be men (Salguero, 2000).

Peru did not have a large penetration of computers, so most Internet access came from public sites,
ciber cafes (“cabinas públicas”) rather than the home. As a result, GSW’s Web site was used more
for sales than for communication. By 2004, more than 96% of the online orders came from Peru-
vians living outside Peru in places with a high penetration of computers. Peruvians living in the
United States used the Web site to send groceries to their families in Peru. To attract these custom-
ers, the company ran an advertising campaign in California, Florida, New Jersey, New York and
Washington, DC, areas with high concentrations of Peruvians. Many customers found out about
the service by word of mouth (Raymond, Pinheiro, and Bianchi, 2002).

For expatriates, the online grocery shopping service offered an attractive alternative to wiring money
home and paying a commission of 10%-30%. When customers used GSW’s virtual store to send
groceries to people in Peru, the entire amount of dollars was available to the recipient to buy goods
in Lima.

• Marketing Strategy
GSW applied direct marketing concepts in order to serve its best customers who probably generate
the most revenue. The company had segmented the market by consumption and frequency. Mass
marketing took care of the great mass of customers who didn’t generate much money, but with
whom the company wanted to maintain a certain image. For the different markets, GSW devel-
oped personalized promotions and special events with differentiated prices for certain customers.
Each week the company launched a series of events directed at the best customers. For example, a
relational marketing effort might involve sending personalized cards to customers and developing
daily events at a store for a period of time.

• Bar Codes
Grupo Supermercados Wong initiated the use of bar codes in Peru, and was one of the founders of
the Peruvian Association of Bar Codes. When the company introduced the bar code, it gained three
years advantage over the competition. The bar code system allowed the company to change prices
with great speed, and gave them significant economic advantages. To maintain an up-to-date inven-
tory, GSW relied on bar codes.

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 Center for Merchandise in Transit
For distribution of products to its stores, GSW had a central reception site called the Center for
Merchandise in Transit. To control inventory and improve logistics, trucks full of pallets drove
through the reception center, and then distributed that same merchandise to the stores. Thus, the
merchandise did not linger in central reception and went immediately to the supermarkets.

At the drive through, employees made a quality check and control inventory. Several engineers
evaluated the lots of fruits and vegetables so the company had only one standard for quality assur-
ance. In the past, GSW empowered the manager of each store’s fruit and vegetable section to accept
or reject a shipment, but that meant that the company had 27 standards. The new center increased
efficiency by providing one standard for quality control.

• Center for Meat Distribution

GSW established a Center for Meat Distribution with world-class technology that no other super-
market chain in Peru had. This innovation came as a result of a visit from Ecuadorean colleagues
who noticed that the GSW stores controlled many things, but not meat. They commented that
they put a lot more controls on meat than GSW. Because meat was so expensive, the store could lose
a significant amount of money if beef spoiled.

After their visit, Efraín Wong created a complete control system for meat and established a Center
for Meat Distribution to serve all the stores. Before the new center was established, GSW had 27
meat departments with 27 different levels of efficiency. After all the first meat cuts were made in the
Center, and the stores received meat ready for final cutting. In addition, GSW reduced the number
of butchers in each store from six or seven butchers to two or three.

• World-Class Information System

GSW installed a world-class SAP information system with administrative, financial and account-
ing functions (Microsoft, 2004). As a result, the company could receive information every hour for
each item that they sold and faced a new challenge of mining the information. Efraín Wong joked
that the company now had “so much information that one gets indigestion!”

• Marketing Promotions
GSW was also innovative with its marketing promotions. The company was the first in Peru to give
away autos. Later, many companies awarded autos, but GSW was the first to offer three Mercedes
Benzes as prizes. One promotion took place in Metro, where the store gave away an auto a day for
thirty days in a row. Often in Peru, a family’s first dream was to have its own car

GSW ran another promotion called “verde no paga“ (“green doesn’t pay”). This game was a take-off
on the experience of passing through customs at Lima’s international airport. After travelers picked
up luggage from an international flight, they pushed a button that lights up either green or red. The
color determined whether or not they must open their bags for a customs agent. A green light let
them pass through without opening their bags, while a red light meant that they had to open their
bags for the customs agent. In GSW’s promotion, customers pushed a button at the checkout
counter. If a green light came on, groceries were free! If a red light came on, the customer had to pay
as normal.

Value #4: We Always Look for Better Ways to Serve the Customer.
The fourth value encouraged managers to constantly look for better ways to serve the customer. The
Wong brothers believed that managers and employees should never be satisfied with the status quo, that
they should always seek to improve and try new things. As a result, some stores launched a food court.
To do it well, they contracted a chef and hired an American consultant. Five stores in the GSW chain
added food courts that became very successful.

10 A07-04-0029
• Government Business Relations
Government business relations were important to GSW, especially with the local governments and
municipalities. The company tried to maintain a very good relationship with the local govern-
ments.

Because of the environmental impact that supermarkets had, Wong and Metro stores were careful
to reduce the effect of noise on the neighborhoods where they operated. They worked to limit the
quantity of waste, and added air ducts and chimneys to eliminate odors. The company tried to
surpass the standards of the local governments. Efraín Wong explained (2004), “We are a little
ahead of what the law demands of us. We comply with all the laws, but we go a little further,
imposing on ourselves things that help us to get along well with the community and the govern-
ment.”

The company saw social responsibility as a duty. It contributed to various orphanages, homes for
senior citizens, and food banks. GSW was the first company in Peru to offer employment to people
with Downs’ Syndrome and other handicaps.

Challenges Facing Grupo Supermercados Wong

Grupo Supermercados Wong faced a number of challenges in the years beyond 2004. How can they
sustain growth by adding stores and increasing the number of families that shop at supermarkets in
Peru? What innovations should they add? How can they prepare to face foreign competition such as
Wal-Mart and Carrefours when these enter Peru? What can GSW do to keep its customers satisfied,
surprised and loyal to their stores? How will the stores handle the risk of political instability and
higher taxes?

• Maintaining innovation
The company constantly sought innovation and creative new ideas. As Marco Suárez (2004) ex-
plained, “we are permanently in search of new ideas. The President of GSW always points out that
he prefers the company to do one thousand things better 1%, than one thing 1000% better. That’s
because a thousand things will differentiate the company in many ways from the competition. So
the company is always looking for new programs.”

Where did the new ideas come from? According to Suárez, “We look at what the world is doing and
try to implement the new trends in ways that will meet the needs of our Peruvian customers.”

Maintaining Market Position and Facing Competition

Staying at the top of the supermarket industry in Peru presented a complex set of challenges. For
Carlos Wong, every day was a challenge, “Grupo Supermercados Wong competes every day, not
fighting in an aggressive way but in a wholesome, healthy, sound way with respect for the rules and
laws.”

Marketing was an important tool used to maintain market position. The company used innovative
offers to attract and hold customers. GSW studied customer behavior. First, the company seg-
mented its markets in order to concentrate on the approximately 20% who make 80% of the
purchases. The company periodically checked to see if the biggest customers were maintaining their
averages. If they began to go down, the company developed promotion schemes that were person-
alized by Direct Marketing. Second, people with a good record of purchases were rewarded with
personalized discounts. In this way, the company could give a differentiated price to certain cus-
tomers. A third strategy used by GSW was to develop programs to protect territory after the com-
petition suddenly opened a new store.

When some new store of the competition opened in the area of one of the Wong or Metro stores,
the company acted to protect the customers geographically during the opening of the competition
with marketing campaigns or more drastic moves such as converting an E. Wong store to a Metro

A07-04-0029 11
 supermarket. For example, in San Isidro, a Plaza Vea store (the less expensive brand of the Santa
Isabel supermarket chain) opened a few blocks away from an E. Wong supermarket. In response,
GSW swiftly converted the E. Wong store into a Metro supermarket with lower prices to compete
with the new Plaza Vea.

To fight competitors, the supermarket chain also developed campaigns of personalized marketing
by geographic zones. For example, the company rolled out promotions for 20-22 weeks, much
longer than the six weeks that was standard in the industry. Marco Suárez (2004) contended that
“the real secret of value added lies in our store having good products, good employees, good prices
and the services that the customer wants. Relational marketing is the motivation, but the reason
that the customer stays and keeps coming back is our store.”

How can GSW survive and grow in the highly competitive supermarket industry? The level of
service and quality of product were key parts to its success. The company continued to provide the
customer with incomparable service, empower employees, innovate continuously, and seek ongo-
ing improvement.

• Sustaining Growth
Assistant Manager Edgar Callo announced that GSW forecast a growth in sales of between 5% and
10% for 2004, up from the record-high $576 million sales posted for 2003. The positive forecast
for 2004 was based on consumer behavior in the Wong and Metro supermarkets in the first two
months of 2004, the implementation of new projects, and the opening of three new stores. GSW
also expected to reduce operating costs through streamlined logistical processes (ewong.com, 2004).

In 2003, the E. Wong store managed by Carlos Wong experienced an increase in sales of 14%,
slightly better than the overall company’s growth rate of around 12%. In 2004, the company faced
the challenge of growing the participation of supermarkets in Peru. The penetration of supermar-
kets was only 24% in Lima, where a small percentage of the population shopped in supermarkets.
Many people still preferred to shop at local markets and street vendors. The supermarket industry’s
goal for 2005 was to reach 40% penetration of the market.

Conclusion
GSW management considered service an integral part of the business. Their broad concept of service
ranged from the customer’s experience in and out of the store, the customer-company relationship,
employees, to innovation, technology, ongoing process improvement, marketing and relationship man-
agement. At GSW stores, service also involved surprising and delighting the customer. Fine leadership
and good communication also helped the company to achieve its top market position.

For the Wong brothers, customers were an extension of the family. Providing excellent service
implied building and maintaining a close relationship with customers. The owners compared their
business relationship with customers to a marriage, and worked to earn the customers’ loyalty every day.
The family stretched the definition of service to include the belief that they must love their customers in
order to serve them well. As a result of this customer-focused strategy, customers and employees felt like
part of a family.

How can Grupo Supermercados Wong continue to compete successfully in the supermarket in-
dustry? What new strategy should the company develop to maintain its competitive edge? What changes
are needed in order for GSW to keep its leadership position in the market?

Acknowledgements
The author thanks Efraín Wong, Managing Director of Grupo Supermercados Wong, Carlos Wong,
E. Wong store manager, and Marco Suárez, Commercial Projects Manager at Grupo Supermercados

12 A07-04-0029
Wong for generously granting video interviews for this case. She also appreciates the kind help of
Rosario Herrera, assistant to Efraín Wong, who made special arrangements for the interviews.
Appreciation goes to Robert E. Grosse and Bert Valencia, co-directors of the Thunderbird Center of
International Business Education Research, and Andrew Inkpen, Director of the Thunderbird Case
Clearinghouse for financial support of this project.

The author gratefully acknowledges the invaluable assistance of Henry Harman, Director of the
Comisión Fulbright in Lima; George Barton of Lima and Miami; Lisa Wing, correspondent for Latin
Trade; Wanda Lauterborn, professor of Spanish at Thunderbird, The Garvin School of International
Management; Susan Coffroth; and Celeste Scott. Special thanks to Georgia Lessard, Santiago Martello,
Amy Pate, and Brett Beyers of Thunderbird, The Garvin School of International Management, for their
kind help with this project.

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