Drive to any Hy-Vee store around Des Moines, Iowa, these days, and one of the first things you notice are the QR codes.

They’re emblazoned on cart corrals and exterior signage. Walk inside, and they call out from shelf tags and hang down from banners. Many of the codes appear in the shape of a scannable “H” and link to Hy-Vee’s digital circular. There are other codes shoppers can snap to learn more about Hy-Vee’s membership program, order a meal online or buy shoes from partner retailer DSW. 

Hy-Vee isn’t the only retailer to incorporate QR codes, which have experienced a renaissance during the pandemic as shoppers seek contactless ways to connect and pay. But the grocer’s fervent embrace of the scannable technology points to its drive to be on the cutting edge of industry innovation, to wade deeper into digital service and to offer new tools for its shoppers.

The company’s newest location, a testing ground for its latest innovations, has quite a few QR codes. And these codes are attached to an array of departments and services the company is trying out for the first time. The store, which opened Tuesday in the northwest suburb of Grimes, has Hy-Vee’s inaugural food hall and candy emporium. There’s a new cake section that hosts live decorating demonstrations. The store also features branded showrooms, including a new one with Johnson Fitness & Wellness equipment, along with a DSW store-in-store, W Nail Bar, Pair Eyeware kiosk and Joe Fresh fashion section, that bring to mind similar partnership strategies employed by retailers like Best Buy and Target.

In each space, shoppers can scan a QR code to open an online catalog or learn more about a product or service. The cake department and food hall have digital ordering kiosks, while informational kiosks positioned around the store ask shoppers if they need help finding anything. There are more than 100 TVs positioned around the retail floor to show off products and break up the monotony of aisle merchandising. There’s also a mobile checkout program, Hy-Vee Scan & Go, and the robotic salad maker, Sally, that’s taken off in grocery stores nationwide as salad bars have powered down.

“We really tried to merge the digital space with the physical space with this store,” said Jeremy Gosch, Hy-Vee’s co-chief operating officer, who spearheaded the store’s development.

After a year and a half of battling health risks, supply disruptions and other immediate concerns, it would be understandable if Hy-Vee’s signature drive to test out new innovations had slowed a bit. But the spirit of experimentation is still very much alive and well in Des Moines, said Gosch, along with CEO Randy Edeker. 

Hy-Vee now operates its own gig-labor force, which mainly performs fill-in tasks around stores as needed. It has a few small drive-thru pickup-only depots in Des Moines, as well — a response to the massive pandemic demand for the service that remains high. The Grimes location features the company’s first drive-thru grocery pickup lane that’s attached to a store.

Regional grocers aren’t known for living on the cutting edge, but Edeker stressed the importance of being willing to try new things, fail and learn. He cited the company’s lone HealthMarket location that's closing down and will, in a fitting pandemic-era development, become the chain’s first Wall to Wall Wine and Spirits location. He said HealthMarket will eventually reopen in downtown Des Moines.

“Amazon will experiment with 10 things that are a thousand times more expensive than that HealthMarket, and nobody even blinks,” he said.

A restless mind and a student of retail, Edeker said Hy-Vee, if anything, isn’t doing enough.

“If there's anything I wish we could do, it is just to stoke that fire more, to have our people thinking more and trying more and taking risks, because they can come up with amazing stuff,” he said. “So, you'll continue to see us try new things.”

Hy-Vee is under growing competitive pressure from discount players like Aldi, Walmart and the dollar stores. That means the company has to do a lot more than just tinker. It needs to project value as well, which has been a weak point for the company in the past, Edeker said. 

To that end, Hy-Vee is stepping up private label development in categories like gluten-free foods, Edeker said. It’s also ramping up its low-price messaging with sale tags and signage with phrases like “Low Price Lockdown” throughout stores. Those QR codes, which in the Grimes store hang down in large silver “H”s and will also feature on the back of employees’ shirts, are also a key part of Hy-Vee’s low-price strategy because the digital circulars they link to promote an array of “hot” deals. 

Edeker pointed to Wegmans as an example of a fresh-focused, full-service grocer that's been able to effectively convey a value message to shoppers. He said Hy-Vee is heading down the same path.

"I think we've tended to downplay [value] a little bit more, and it's not been our focus for the last several years," he said. "But we've really made it an emphasis that we've got great deals, and we've got to talk about it more." 

Hy-Vee’s focus on new offerings, digital innovation and low-price marketing all come together at its Grimes store. Here’s a closer look at that location.

More digital touchpoints

Throughout its DSW and Johnson Fitness showrooms, Hy-Vee has posted QR codes that link shoppers to ship-to-home services for both retailers. At its food hall, located at the other end of the store, shoppers can scan a code to place their order through Hy-Vee Mealtime.

The Grimes store is also the first Hy-Vee grocery store to feature digital price tags, which can be updated quickly and help centralize store pricing operations, a spokesperson said. Hy-Vee began testing the tags at its Dollar Fresh stores, and now all 12 of those locations feature them.

The digital screens, meanwhile, project merchandising messages and promote company initiatives, like its charitable partnerships and HSTV streaming network, which offers educational content like cooking shows and fitness classes for shoppers.

A stage for new departments

Hy-Vee’s Grimes store features numerous legacy departments, including its Chophouse Meats section and HealthMarket specialty stop. It’s trying on a few new sections for size, too. There’s a newly rebranded Bellissima beauty department that sits next to the W Nail Bar. In the middle of the store sits a candy section, complete with a giant gumball machine.

The most eye-catching perimeter department in the store might be Cake This, a destination dessert spot that combines custom ordering with grab-and-go selections, including many small cakes that have been a hit in Hy-Vee’s Twin Cities stores, a spokesperson said. Cake This will also host daily cake decorating demonstrations from a stage situated next to the main display case. Decorators will interact with shoppers, and employees will call out customer orders, creating a festive environment, said a spokesperson.

Expanding partnerships beyond food

Hy-Vee’s tie-up with DSW raised some eyebrows when it was announced last year, but the locations are performing well so far, Edeker said. The grocer has showrooms in 20 stores so far, including small ones inside Dollar Fresh units, which serve rural shoppers that particularly value one-stop shopping, he noted.

The Grimes store’s DSW showroom sits next to the Joe Fresh outlet, creating an apparel destination for shoppers. Nearby sits the W Nail Bar, which is accessed through a door in the department or a separate entryway off the parking lot.

Neil Saunders, managing director with GlobalData Retail, said Hy-Vee’s push beyond grocery “makes a lot of sense” because these items often have attractive margins and can drive traffic. Still, the additions can be misguided if they don’t connect with the company’s core shoppers, he said. And they can overcomplicate a shopping trip if Hy-Vee isn’t careful.

“Adding lots of things into a store sometimes means shoppers lose focus and that a trip becomes more complex,” he said. “Not everyone likes very large stores and so Hy-Vee needs to strike a balance between competing needs.”

Pickup service remains hot — and evolving

Hy-Vee saw online sales shoot up 500% in the early days of the pandemic, Edeker said. Pickup saw the lion’s share of demand and that remains true more than a year later. Fulfilling a large volume of orders via store parking lots, however, has become difficult, said district manager Kevin Mills.

“It just really gets cumbersome to have all of those customers that drive up to the front of your building,” he noted.

Early in the pandemic, Hy-Vee brought in shipping containers to hold orders. Then the company began replacing those containers with standalone drive-up Aisles Online facilities — the company calls them "kiosks" even though they're effectively small buildings — that sit adjacent to stores.

The Grimes location marks the first drive-up pickup depot that's attached to a store. Here, shoppers can drive up, check in with the store and have their orders brought to their cars within five minutes.

Hy-Vee wants to add more drive-thru lanes onto its stores, but doing so is expensive and difficult to comply with local zoning laws, Edeker said. So the company plans to continue adding standalone kiosks to store parking lots. Hy-Vee is looking to also attach warerooms to some of its Des Moines stores — both automated and manual-pick — that can fill orders for their location as well as other stores.

More Mealtime options

Mealtime, Hy-Vee’s umbrella brand for its various foodservice and grab-and-go dining concepts, plays a prominent role in the Grimes store. There’s the food court, which features a Market Grille, Long Island Deli, HyChi Chinese food, Nori Sushi and the company’s first Mia Italian location — a rebrand of its Mia Pizza outlet. Customers can order at each spot or use a nearby digital kiosk, and have their order brought to their seat. They can also order online through Mealtime and get pickup or DoorDash delivery.

Located in the corner of the store, right next to the food court, sits a Wahlburgers restaurant with sit-down service, a full bar and a special order pickup entryway where DoorDash drivers can pick up delivery orders. There's a digital kiosk for placing orders. And then there’s the large selection of grab-and-go options situated at the front of the store, offering everything from main dishes to sides.

Fast & Fresh and growing

Located just south of the Grimes store is Hy-Vee’s latest Fast & Fresh convenience store. The concept launched around the same time as the standalone HealthMarket, but in contrast to that format, Fast & Fresh has taken off with customers, and now Hy-Vee is well into the process of rebranding all of its c-stores under the new name and positioning.

Fast & Fresh stores include more meal and beverage options than Hy-Vee’s legacy c-stores. Customers can fuel up and stop in for a fresh-made burger, sushi, fountain soda or coffee. Edeker said he sees the locations as miniature grocery stores that can address demand in areas where it’s not economically feasible to build a full-size location.

Frank Beard, a Des Moines resident and retail analyst who works for checkout technology firm Standard, said Hy-Vee could be doing a better job of marketing Fast & Fresh stores in a region that holds numerous strong c-store operators. But he had high praise for the store-level execution.

"They're not just slapping up some new graphics and new point of purchase displays — they're basically gutting the stores, completely changing the layout, putting in Market Grille Expresses and a lot of other things," he said. "I think they're doing an incredible job of utilizing the small space."