November 27, 2007
Supermarkets Downsizing
The traditional grocer is back. That is the belief of some industry watchers who point to anecdotal and quantitative data showing Americans, especially those 50+, are tired of trekking around big boxes and prefer smaller and more physically manageable stores.
“You’re seeing a return to the traditional grocer,” Kevin Griffin, publisher of the Griffin Report of Food Marketing, told The Patriot Ledger. “The smart retailers are waking up to realize that the mammoth superstore at 90,000 square feet – its day has just come and gone.”
One retailer known for larger stores that has begun to roll out smaller boxes is Hannaford Bros. The chain’s newest format, roughly 36,000 square-feet, is about one-third smaller than the traditional Hannaford Bros. store.
Other stores on opposite ends of the spectrum from a targeted consumer standpoint have also demonstrated that smaller stores can succeed. Trader Joe’s and Aldi operate units typically around 15,000 square-feet. Tesco’s new Fresh & Easy concept is also configured in a store that more closely resembles a convenience store in terms of footprint.
Discussion Questions: Does the construction of smaller stores mean companies are returning to the “traditional” grocery model as some have suggested or is something else taking place? Has the day of the big box come and gone in the grocery business? Are smaller stores the wave of the future?
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We believe that the “return to traditional grocery stores” will not be a return to that model ‘as is’. Although smaller, more convenient stores are certainly a viable option, traditional grocers still have to modernize (simplify, get fresh, get service oriented, etc.) and have a long way to go in that regard.
This report should not be seen as a ‘return to normal’…and of course, don’t be surprised if you see those ‘big box’ retailers be the first to provide the ‘modernized’ version of the smaller box. Now’s no time to be sleepy!
Smaller stores have their place in the retail mix. No doubt the super store concept is not the place people want to go when they only want to buy a few select items. The traditional c-store concept is too small to serve this need and leaves the door open for a more medium size store format to make it. I’ll forgo the large super store anytime when I know I can find what I’m looking for in a smaller store that allows me to get in and out faster.
I agree with most of the comments made here about these smaller boxes being built out of necessity, but I would add one more comment.
With more emphasis on the environment and buying locally, many smaller stores are located closer within the community, meaning people can actually walk or at least not drive as far as they would to go to the big box. The move toward fresher foods means more frequent trips for perishable items and these stores are simply more accessible.
I’m constantly amazed by the assortment that is available in the very small store close to my home. You may not have as big of a selection of brands or sizes, but there are actually items I can find there that I can’t find in my newly expanded and upgraded big box grocery store. If they don’t carry it, the manager, who knows me by name, will often offer to get it for me. I’d like to think that I’m special, but I know he does this for all of his customers.
I don’t think that the smaller footprint even needs to give up as many things as Sasha indicates. I don’t know the square footage of the store near my home, but it is small. Yes, they manage to include gourmet, organic and upscale offerings and they also manage to have greeting cards (granted they are on spinners), a very nice floral and gift department, and a really good wine and liquor selection. I’m sure this is helpful to their bottom line as these tend to be higher margin categories that grocery. What they don’t have is 24 feet of paper toweling. Each sku has a one or two face outs, not 4 or 6 or 8.
Yeah it is a little more labor intensive to keep it stocked, but as someone pointed out, I’m sure the sales per square foot is amazing. Because they have multiple stores in the area I’m sure there is some sort of localized warehouse that allows them to still buy in quantity without overwhelming the store.
Maybe the jack of all trades and master of none has hit home. For years grocers have tried to stick their nose into every retailing segment. I can enter my local chain and buy clothing, bicycles, hardware, lawnmowers, tents…etc. I can get everything but a Margareta pizza because they can’t seem to allocate enough shelf space to keep it in stock.
My point is that the grocery business has become a second thought as we try and find room for merchandise like the new machine that downloads songs to cell phones.
I honestly believe that a retailer can provide service in a small footprint by simply doing away with all that is not grocery. Now if someone could only find a way to schedule help so the lines won’t be three blocks long! Could it be that all of this is about long lines?
We are experiencing the fragmentation of grocery formats to service the changing demographics of the country. From baby boomers to ethnic markets, two income households, single parent households…the need for different formats to satisfy consumer needs is a reality. It will be critical to understand the make up of the RTA, but I believe that with smart planning, fragmentation will yield higher profits due to the increased customer visits.
I think mass (Target, Meijer, Wal-Mart) and the smaller grocery stores is the growing trend. Those with growing families, entertaining or wanting to streamline store stops will go the mass route. Routine grocery purchases, small family or one-person households will be very content with the smaller stores.
Also, consider the 80/20 rule–80% of sales will probably come from 20% of the offerings–that’s the reason I often choose the smaller stores–why go up and down…up and down the aisles to pick up cheese, milk, chips and frozen vegetables when you can be in and out in 15 minutes?
There is also the added psychological warm and fuzzy that comes from a smaller store, particularly a familiar one.
Yes, smaller stores are the wave of the future. This is evidence that some grocers are truly utilizing their data to determine optimal assortments and thus realizing, aisles contributed to any given category are NOT necessary for most markets.
Adequate size is optimum size. What’s changing is the definition of adequate size versus emotional size…emotional in the sense that a supermarket doesn’t need to be the size of a superstore to compete successfully. Competing successfully is determined by what the retailer does with the size they have, not necessarily the size in itself being influential.
As more and more retailers begin to truly measure contribution to overhead, store size rationalization will continue to evolve in to a more adequate and sufficient size to support and deliver their true customer needs. Follow that formula and you may actually have customers becoming more satisfied and loyal.
So OK, we’re not talking about a return to the hometown IGA or mom and pop grocery store here. I also don’t think we’re talking about Tesco’s 10,000 to 15,000-sq. ft. format being the one that will take off and have other grocers follow it.
What consumers want is convenience and choice. Stores still need to accommodate close to the same number of different food items available in your typical grocery as well as continue to innovate and expand prepared meals and ethnic and organic food sections. However, sections can be downsized or cut out–like the elements that made it a “Super Market” years ago–such as the seasonal aisles and greeting cards and housewares and movie rentals and floral sections. I think the 70,000-sq.ft. store isn’t what America wants, I think we’re talking more about the 25,000 to 45,000-sq. ft. store that has softer lighting, wider aisles, better organization and a smarter checkout like Hannaford has done with its new store format.
The concept is definitely Trader Joe’s and not the urban grocer of old, which for me brings back memories of merchandise that never turned quite fast enough. (Ew!)
Although I’ve got to admit that I really wish my Trader Joe’s (Brentwood, MO) were just a bit bigger, and I’m tempted to drive out to the new, big Straub’s that just opened — I’ve never really been a fan of their small stores, even though they were very upscale. Presumably I never had to worry about freshness, but the layouts are very cramped.
All that said, I expect demographics will eventually trump all. How are we going to feel about walking through a Sam’s Club at 85, especially after putting in a full day’s work? (And my daughter thinks I don’t park straight in a space now . . . ;-D)
I think the smaller-format stores will win their place well before then — if they have appealing products in an attractive environment. Because big or small, that’s what we all want . . . right?
Bigger isn’t necessarily better in retailing. Big box has price and selection but one very important component has fallen by the wayside, and that is customer service. How many times have I heard that customers dread going to the local big box for something!
An interesting development is occurring in the hardware sector here in Canada. Smaller hardware store franchises that are connected to a major brand are finding success as they can provide the customer service and product knowledge required for that particular sector.
I think the same would hold true for the grocery industry. Smaller, less imposing stores that can offer exceptional service would give the big boxes a run for the money. Wouldn’t it be nice if the cashier or manager knew your name and what flavour of Shasta you like and always have it in stock?
Let me add a mushy psychological side to this discussion because maybe it’s about more than merchandising and footprints. Maybe we miss “community.” Food and drink; the proverbial ‘breaking of bread’ is at the heart of belonging and of being nurtured on many levels.
I’m a raving Costco fan but there’s something about our Trader Joe’s that is irreplaceable. It’s almost like my good old single days in downtown Toronto where I went to one guy to get bread, to another shop to get cheese and so on. You just felt like you were getting stuff from a friend. At Joe’s with its hand drawn signs, the great variety of quality products and sales people you can actually talk to it just feels good. Not only that but you are automatically friends with the other shoppers because they came there for community too. AND some of the prices actually beat the big box. Long live Trader Joe’s!
This is not a “back to normal” trend, it is a herald to the changing grocery retail marketplace both from a physical size and location to assortment and convenience.
I have maintained for some time now that the marketplace was developing for the rise of smaller and more neighborly (read convenient) shopping venues. Tesco’s Fresh and Easy entre is an example of what this new marketplace will look like, but they are not alone. Aldi’s will expand, Sheetz and others like them who are offering expanded Fresh assortments in the convenience store industry will help to transform this marketplace much faster than many might believe possible.
Will big boxers disappear? Of course not, but their dominance is certainly threatened and a consolidation of those left standing is quite likely to happen over the next decade.
In response to these threats I have anticipated that Wal-Mart, amongst others, will launch an newer downsize neighborhood market concept that can reach concentrated populations with a fresh and easy type of concept.
So, the consultants and management of grocery stores HAVE been reading my posts/rants on RetailWire! How gratifying.
Yes, the grocery landscape is morphing before our very eyes and it is a beautiful thing. The mega “stock-up” stores a la Sam’s and Costco will continue to thrive touting price and selection, while more and more “regular” shoppers will welcome and gravitate toward smaller boxes for their more manageable parking and in-store shopping environments.
I had the opportunity a few months ago to hear Ray Smaltz from Giant Eagle talk not only about store size but also the ramifications that filter through the rest of the industry. I want to give the proper credit to the following thoughts that I felt were insightful–but not surprising–from a company that has been a leader in a number of different areas:
1. Yes, small size stores are another option for retailers not only because of changing demographics but because key real estate no longer comes in easily;
2. As stores get smaller, case packs are going to need to become smaller and will push closer to single units;
3. Duplication of items and unnecessary multiple sizes of the same items will not have room;
4. Categories that are shrinking are less likely to be looked at for new items that do not grow the category;
5. Back door logistics and shelf replenishment will be closer to time of sales with less room for back room storage;
6. Terms may need to reflect closer to real time sales. Who can park a million dollars of inventory on their credit card when you have players within mass paying for a lot of merchandise after it’s been sold based on their terms?
This is not a “back to the future” trend toward traditional grocery stores. Rather, we are seeing a new evolution in shopping formats where the consumer selects from alternative store formats based on the shopping need state or mission. On that basis, the “big box” discount store will still have a role for major trips and non-foods while the smaller “fresh foods” type store may be preferred for basic grocery needs. This may put additional pressure on the large format grocery store to define its role.
The trend to smaller stores is not so much in size per se as it is in innovative assortments. New, unique store designs do not require a ballroom-size store to succeed. A clever retailer can also carve out stores in many otherwise unavailable areas when it doesn’t require enormous square footage and large parking lots. As this trend continues it should bring about continuing innovations by both established and new-entry retailers.
While some of this is born of customer centricity and trying to create smaller, more focused stores, I think the “downsizing” trend in grocery is more born out of necessity–the market is saturated, and the only way to grow is by carving out smaller and smaller niches with smaller and smaller stores.
I don’t think this is the end of big boxes at all. When I think that what I accomplish at a Super Target would take me 3-4 stops at smaller stores–with all the “in and out” of the car seats and the kids grumbling and the hassle over parking spaces…I’ll take the big box experience any day. One stop shopping isn’t in any big trouble soon.
In many built-up areas, there just aren’t many large footprint locations available at a reasonable price. In areas with strong local economies, lack of developable land, and tough zoning restrictions, it’s a lot easier to find 7 decent 15,000 square foot locations than 2 decent 90,000 square footers. so retailers who want to grow their location count have an easier job with smaller prototypes.
Generally I find the highest sales per square foot stores are often the smaller ones in the marketplace. Still, I would not call smaller formats traditional. Niche operators are building smaller stores. Traditional chains are building smaller stores, not so much because they want to but because of building restrictions. So when we see some plain vanilla chain building a small format in one or two locations, I really doubt it is newsworthy. We are seeing a slow elimination of conventional supermarkets anyway. Thats not news either. Aldi, Trader Joe’s, Fresh & Easy, Save-A-Lot, and various natural foods stores are growing with small formats. Chains like Winn-Dixie, Ahold and A&P are closing and selling off stores by the bushel.
I agree that the trend back to smaller stores will become commonplace but it is not back to the “old style” stores. These new smaller stores will be more compact, efficient and designed for the customer experience. To gain loyalty in this environment it’s about convenience to the customer. A shoppers dream, get in-get out-get everything you want in one easy to shop experience.
In terms of the right size for supermarkets, the best formula for the 50+ consumer are stores that size up at about 80% of the regular supermarket size because these stores are large enough to carry ample variety and assortment, including enough upscale and higher end products, but small enough for ease of shopping and more convenience.
One beautiful example is a Dierbergs grocery store in Chesterfield, MO, a suburb of St. Louis. The store is probably 70% to 80% the size of the newer larger suburban Dierbergs supermarkets in the newer strip malls, however this particular store is the favorite of the majority of the 50+ neighborhood market, including also the busy soccer moms, upscale consumer market, etc, and it’s also “the place” where people in the neighborhood like to meet and greet, and find what they need, completely but fast.
Rising energy costs, aging population, high real estate, obesity epidemic, increased health consciousness, disloyal customers. Smaller stores have the potential to address each one of these important external factors. Innovative grocers would be smart reduce their footprint while speaking to these needs.
But this is not a return to the past. Small footprint grocers will want to use every bit of technology at their disposal. They’ll want to tightly integrate web services such as menu planning, home delivery, entertainment planning, and social networking. Care should be taken in pruning assortments so that that loyal customers are suddenly without their favorite item.
Does your grocer need more than hundreds of linear feet of soft drinks, cookies, candies? Detergents, paper towels, toilet paper? No. It’s time to scale it back, especially in communities where significant populations are concerned with energy consumption and health.
A&P and its family of banner stores, including the very soon to be acquired Pathmark stores, operates stores in all sizes.
The recent reopening of its A&P Fresh Market in Park Ridge, NJ, is an excellent example of totally utilizing 26,000 sq. ft. of space to its maximum. Shoppers are delighted with the format, and A&P can adapt this format when they remodel existing smaller stores such as their older centennial store footprints.
But others, such as Giant Eagle, will continue to build their monster 150,000 sq ft Market District formats as well as Getgo smaller 15,000 sq ft formats, trying to be everything to everybody. This may work, and it may not. Time will tell.
Here’s a few random thoughts….
The tools to make efficient assortments have been used to determine these “New Formats” for years….
Just change the word demographic into lifestyle. All the characteristics that make up the historic demographic measurements are still being used, albeit slightly differently to come up with these lifestyle combinations and how they’re applied for coming up with that all important efficient assortment by category based on section size.
Talk about the 80/20 rule…. Each section will fulfill an individual need in THAT particular location so what you let live means more that what you kill. So if your choosing items for a destination category selection is very important. Not so important if the category is deemed “convenience” and offers little return to the owner.
I believe we ARE talking about stores that fit in the “Hometown IGA” size (sorry Sasha) and Hannaford as well. There’s no need to put a number to it, just smaller than a big box. So long as it has the right location, location, location! Convenience is King to all lifestyles.
I wouldn’t term these retailers “traditional” though. They are what the market has made them into. As long as these retailers continue to yield to the requests of their customers and offer GREAT SERVICE and a somewhat customized selection they will win over the lifestyle customer wishing to fulfill an emotional need while shopping. MAKE ME FEEL SPECIAL/COMFORTABLE just being here!
Consumers are going to make those three/four trips a week to meet all of their needs regardless of what the grocery store is dabbling in this week. So they will need to make every single customer count. Offer just one more item, etc….
In times like this we remember how many categories in the store are NOT brand loyal and the needs of the customer overtake the needs of this weeks ad and it’s extensions of the basic needs.
Bringing to these stores opportunity for private label development and margin opportunity as well as smaller sections while still meeting the needs of the masses.
So…what’s on your shelves?
I think the only “trend” is that someone, somewhere will continue to build even larger stores.
North America is getting its first major snowfall of the year which leads me to these related thoughts:
– do larger stores make more sense in colder climates where consumers are happy to come in from the cold once and make all of their purchases in one location? Think of the pedestrian path system in Minneapolis.
– is the same them true in extremely warm clients where air conditioning rules
In general, I believe that we’re see more small stores as older areas of large cities are built up again and “community” stores will start to thrive. This requires a more focused assortment and distribution system.
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We believe that the “return to traditional grocery stores” will not be a return to that model ‘as is’. Although smaller, more convenient stores are certainly a viable option, traditional grocers still have to modernize (simplify, get fresh, get service oriented, etc.) and have a long way to go in that regard.
This report should not be seen as a ‘return to normal’…and of course, don’t be surprised if you see those ‘big box’ retailers be the first to provide the ‘modernized’ version of the smaller box. Now’s no time to be sleepy!
Smaller stores have their place in the retail mix. No doubt the super store concept is not the place people want to go when they only want to buy a few select items. The traditional c-store concept is too small to serve this need and leaves the door open for a more medium size store format to make it. I’ll forgo the large super store anytime when I know I can find what I’m looking for in a smaller store that allows me to get in and out faster.
I agree with most of the comments made here about these smaller boxes being built out of necessity, but I would add one more comment.
With more emphasis on the environment and buying locally, many smaller stores are located closer within the community, meaning people can actually walk or at least not drive as far as they would to go to the big box. The move toward fresher foods means more frequent trips for perishable items and these stores are simply more accessible.
I’m constantly amazed by the assortment that is available in the very small store close to my home. You may not have as big of a selection of brands or sizes, but there are actually items I can find there that I can’t find in my newly expanded and upgraded big box grocery store. If they don’t carry it, the manager, who knows me by name, will often offer to get it for me. I’d like to think that I’m special, but I know he does this for all of his customers.
I don’t think that the smaller footprint even needs to give up as many things as Sasha indicates. I don’t know the square footage of the store near my home, but it is small. Yes, they manage to include gourmet, organic and upscale offerings and they also manage to have greeting cards (granted they are on spinners), a very nice floral and gift department, and a really good wine and liquor selection. I’m sure this is helpful to their bottom line as these tend to be higher margin categories that grocery. What they don’t have is 24 feet of paper toweling. Each sku has a one or two face outs, not 4 or 6 or 8.
Yeah it is a little more labor intensive to keep it stocked, but as someone pointed out, I’m sure the sales per square foot is amazing. Because they have multiple stores in the area I’m sure there is some sort of localized warehouse that allows them to still buy in quantity without overwhelming the store.
Maybe the jack of all trades and master of none has hit home. For years grocers have tried to stick their nose into every retailing segment. I can enter my local chain and buy clothing, bicycles, hardware, lawnmowers, tents…etc. I can get everything but a Margareta pizza because they can’t seem to allocate enough shelf space to keep it in stock.
My point is that the grocery business has become a second thought as we try and find room for merchandise like the new machine that downloads songs to cell phones.
I honestly believe that a retailer can provide service in a small footprint by simply doing away with all that is not grocery. Now if someone could only find a way to schedule help so the lines won’t be three blocks long! Could it be that all of this is about long lines?
We are experiencing the fragmentation of grocery formats to service the changing demographics of the country. From baby boomers to ethnic markets, two income households, single parent households…the need for different formats to satisfy consumer needs is a reality. It will be critical to understand the make up of the RTA, but I believe that with smart planning, fragmentation will yield higher profits due to the increased customer visits.
I think mass (Target, Meijer, Wal-Mart) and the smaller grocery stores is the growing trend. Those with growing families, entertaining or wanting to streamline store stops will go the mass route. Routine grocery purchases, small family or one-person households will be very content with the smaller stores.
Also, consider the 80/20 rule–80% of sales will probably come from 20% of the offerings–that’s the reason I often choose the smaller stores–why go up and down…up and down the aisles to pick up cheese, milk, chips and frozen vegetables when you can be in and out in 15 minutes?
There is also the added psychological warm and fuzzy that comes from a smaller store, particularly a familiar one.
Yes, smaller stores are the wave of the future. This is evidence that some grocers are truly utilizing their data to determine optimal assortments and thus realizing, aisles contributed to any given category are NOT necessary for most markets.
Adequate size is optimum size. What’s changing is the definition of adequate size versus emotional size…emotional in the sense that a supermarket doesn’t need to be the size of a superstore to compete successfully. Competing successfully is determined by what the retailer does with the size they have, not necessarily the size in itself being influential.
As more and more retailers begin to truly measure contribution to overhead, store size rationalization will continue to evolve in to a more adequate and sufficient size to support and deliver their true customer needs. Follow that formula and you may actually have customers becoming more satisfied and loyal.
So OK, we’re not talking about a return to the hometown IGA or mom and pop grocery store here. I also don’t think we’re talking about Tesco’s 10,000 to 15,000-sq. ft. format being the one that will take off and have other grocers follow it.
What consumers want is convenience and choice. Stores still need to accommodate close to the same number of different food items available in your typical grocery as well as continue to innovate and expand prepared meals and ethnic and organic food sections. However, sections can be downsized or cut out–like the elements that made it a “Super Market” years ago–such as the seasonal aisles and greeting cards and housewares and movie rentals and floral sections. I think the 70,000-sq.ft. store isn’t what America wants, I think we’re talking more about the 25,000 to 45,000-sq. ft. store that has softer lighting, wider aisles, better organization and a smarter checkout like Hannaford has done with its new store format.
The concept is definitely Trader Joe’s and not the urban grocer of old, which for me brings back memories of merchandise that never turned quite fast enough. (Ew!)
Although I’ve got to admit that I really wish my Trader Joe’s (Brentwood, MO) were just a bit bigger, and I’m tempted to drive out to the new, big Straub’s that just opened — I’ve never really been a fan of their small stores, even though they were very upscale. Presumably I never had to worry about freshness, but the layouts are very cramped.
All that said, I expect demographics will eventually trump all. How are we going to feel about walking through a Sam’s Club at 85, especially after putting in a full day’s work? (And my daughter thinks I don’t park straight in a space now . . . ;-D)
I think the smaller-format stores will win their place well before then — if they have appealing products in an attractive environment. Because big or small, that’s what we all want . . . right?
Bigger isn’t necessarily better in retailing. Big box has price and selection but one very important component has fallen by the wayside, and that is customer service. How many times have I heard that customers dread going to the local big box for something!
An interesting development is occurring in the hardware sector here in Canada. Smaller hardware store franchises that are connected to a major brand are finding success as they can provide the customer service and product knowledge required for that particular sector.
I think the same would hold true for the grocery industry. Smaller, less imposing stores that can offer exceptional service would give the big boxes a run for the money. Wouldn’t it be nice if the cashier or manager knew your name and what flavour of Shasta you like and always have it in stock?
Let me add a mushy psychological side to this discussion because maybe it’s about more than merchandising and footprints. Maybe we miss “community.” Food and drink; the proverbial ‘breaking of bread’ is at the heart of belonging and of being nurtured on many levels.
I’m a raving Costco fan but there’s something about our Trader Joe’s that is irreplaceable. It’s almost like my good old single days in downtown Toronto where I went to one guy to get bread, to another shop to get cheese and so on. You just felt like you were getting stuff from a friend. At Joe’s with its hand drawn signs, the great variety of quality products and sales people you can actually talk to it just feels good. Not only that but you are automatically friends with the other shoppers because they came there for community too. AND some of the prices actually beat the big box. Long live Trader Joe’s!
This is not a “back to normal” trend, it is a herald to the changing grocery retail marketplace both from a physical size and location to assortment and convenience.
I have maintained for some time now that the marketplace was developing for the rise of smaller and more neighborly (read convenient) shopping venues. Tesco’s Fresh and Easy entre is an example of what this new marketplace will look like, but they are not alone. Aldi’s will expand, Sheetz and others like them who are offering expanded Fresh assortments in the convenience store industry will help to transform this marketplace much faster than many might believe possible.
Will big boxers disappear? Of course not, but their dominance is certainly threatened and a consolidation of those left standing is quite likely to happen over the next decade.
In response to these threats I have anticipated that Wal-Mart, amongst others, will launch an newer downsize neighborhood market concept that can reach concentrated populations with a fresh and easy type of concept.
So, the consultants and management of grocery stores HAVE been reading my posts/rants on RetailWire! How gratifying.
Yes, the grocery landscape is morphing before our very eyes and it is a beautiful thing. The mega “stock-up” stores a la Sam’s and Costco will continue to thrive touting price and selection, while more and more “regular” shoppers will welcome and gravitate toward smaller boxes for their more manageable parking and in-store shopping environments.
I had the opportunity a few months ago to hear Ray Smaltz from Giant Eagle talk not only about store size but also the ramifications that filter through the rest of the industry. I want to give the proper credit to the following thoughts that I felt were insightful–but not surprising–from a company that has been a leader in a number of different areas:
1. Yes, small size stores are another option for retailers not only because of changing demographics but because key real estate no longer comes in easily;
2. As stores get smaller, case packs are going to need to become smaller and will push closer to single units;
3. Duplication of items and unnecessary multiple sizes of the same items will not have room;
4. Categories that are shrinking are less likely to be looked at for new items that do not grow the category;
5. Back door logistics and shelf replenishment will be closer to time of sales with less room for back room storage;
6. Terms may need to reflect closer to real time sales. Who can park a million dollars of inventory on their credit card when you have players within mass paying for a lot of merchandise after it’s been sold based on their terms?
This is not a “back to the future” trend toward traditional grocery stores. Rather, we are seeing a new evolution in shopping formats where the consumer selects from alternative store formats based on the shopping need state or mission. On that basis, the “big box” discount store will still have a role for major trips and non-foods while the smaller “fresh foods” type store may be preferred for basic grocery needs. This may put additional pressure on the large format grocery store to define its role.
The trend to smaller stores is not so much in size per se as it is in innovative assortments. New, unique store designs do not require a ballroom-size store to succeed. A clever retailer can also carve out stores in many otherwise unavailable areas when it doesn’t require enormous square footage and large parking lots. As this trend continues it should bring about continuing innovations by both established and new-entry retailers.
While some of this is born of customer centricity and trying to create smaller, more focused stores, I think the “downsizing” trend in grocery is more born out of necessity–the market is saturated, and the only way to grow is by carving out smaller and smaller niches with smaller and smaller stores.
I don’t think this is the end of big boxes at all. When I think that what I accomplish at a Super Target would take me 3-4 stops at smaller stores–with all the “in and out” of the car seats and the kids grumbling and the hassle over parking spaces…I’ll take the big box experience any day. One stop shopping isn’t in any big trouble soon.
In many built-up areas, there just aren’t many large footprint locations available at a reasonable price. In areas with strong local economies, lack of developable land, and tough zoning restrictions, it’s a lot easier to find 7 decent 15,000 square foot locations than 2 decent 90,000 square footers. so retailers who want to grow their location count have an easier job with smaller prototypes.
Generally I find the highest sales per square foot stores are often the smaller ones in the marketplace. Still, I would not call smaller formats traditional. Niche operators are building smaller stores. Traditional chains are building smaller stores, not so much because they want to but because of building restrictions. So when we see some plain vanilla chain building a small format in one or two locations, I really doubt it is newsworthy. We are seeing a slow elimination of conventional supermarkets anyway. Thats not news either. Aldi, Trader Joe’s, Fresh & Easy, Save-A-Lot, and various natural foods stores are growing with small formats. Chains like Winn-Dixie, Ahold and A&P are closing and selling off stores by the bushel.
I agree that the trend back to smaller stores will become commonplace but it is not back to the “old style” stores. These new smaller stores will be more compact, efficient and designed for the customer experience. To gain loyalty in this environment it’s about convenience to the customer. A shoppers dream, get in-get out-get everything you want in one easy to shop experience.
In terms of the right size for supermarkets, the best formula for the 50+ consumer are stores that size up at about 80% of the regular supermarket size because these stores are large enough to carry ample variety and assortment, including enough upscale and higher end products, but small enough for ease of shopping and more convenience.
One beautiful example is a Dierbergs grocery store in Chesterfield, MO, a suburb of St. Louis. The store is probably 70% to 80% the size of the newer larger suburban Dierbergs supermarkets in the newer strip malls, however this particular store is the favorite of the majority of the 50+ neighborhood market, including also the busy soccer moms, upscale consumer market, etc, and it’s also “the place” where people in the neighborhood like to meet and greet, and find what they need, completely but fast.
Rising energy costs, aging population, high real estate, obesity epidemic, increased health consciousness, disloyal customers. Smaller stores have the potential to address each one of these important external factors. Innovative grocers would be smart reduce their footprint while speaking to these needs.
But this is not a return to the past. Small footprint grocers will want to use every bit of technology at their disposal. They’ll want to tightly integrate web services such as menu planning, home delivery, entertainment planning, and social networking. Care should be taken in pruning assortments so that that loyal customers are suddenly without their favorite item.
Does your grocer need more than hundreds of linear feet of soft drinks, cookies, candies? Detergents, paper towels, toilet paper? No. It’s time to scale it back, especially in communities where significant populations are concerned with energy consumption and health.
A&P and its family of banner stores, including the very soon to be acquired Pathmark stores, operates stores in all sizes.
The recent reopening of its A&P Fresh Market in Park Ridge, NJ, is an excellent example of totally utilizing 26,000 sq. ft. of space to its maximum. Shoppers are delighted with the format, and A&P can adapt this format when they remodel existing smaller stores such as their older centennial store footprints.
But others, such as Giant Eagle, will continue to build their monster 150,000 sq ft Market District formats as well as Getgo smaller 15,000 sq ft formats, trying to be everything to everybody. This may work, and it may not. Time will tell.
Here’s a few random thoughts….
The tools to make efficient assortments have been used to determine these “New Formats” for years….
Just change the word demographic into lifestyle. All the characteristics that make up the historic demographic measurements are still being used, albeit slightly differently to come up with these lifestyle combinations and how they’re applied for coming up with that all important efficient assortment by category based on section size.
Talk about the 80/20 rule…. Each section will fulfill an individual need in THAT particular location so what you let live means more that what you kill. So if your choosing items for a destination category selection is very important. Not so important if the category is deemed “convenience” and offers little return to the owner.
I believe we ARE talking about stores that fit in the “Hometown IGA” size (sorry Sasha) and Hannaford as well. There’s no need to put a number to it, just smaller than a big box. So long as it has the right location, location, location! Convenience is King to all lifestyles.
I wouldn’t term these retailers “traditional” though. They are what the market has made them into. As long as these retailers continue to yield to the requests of their customers and offer GREAT SERVICE and a somewhat customized selection they will win over the lifestyle customer wishing to fulfill an emotional need while shopping. MAKE ME FEEL SPECIAL/COMFORTABLE just being here!
Consumers are going to make those three/four trips a week to meet all of their needs regardless of what the grocery store is dabbling in this week. So they will need to make every single customer count. Offer just one more item, etc….
In times like this we remember how many categories in the store are NOT brand loyal and the needs of the customer overtake the needs of this weeks ad and it’s extensions of the basic needs.
Bringing to these stores opportunity for private label development and margin opportunity as well as smaller sections while still meeting the needs of the masses.
So…what’s on your shelves?
I think the only “trend” is that someone, somewhere will continue to build even larger stores.
North America is getting its first major snowfall of the year which leads me to these related thoughts:
– do larger stores make more sense in colder climates where consumers are happy to come in from the cold once and make all of their purchases in one location? Think of the pedestrian path system in Minneapolis.
– is the same them true in extremely warm clients where air conditioning rules
In general, I believe that we’re see more small stores as older areas of large cities are built up again and “community” stores will start to thrive. This requires a more focused assortment and distribution system.