Roundup on urban grocery stores

Urban Market in Downtown Dallas. NATALIE CAUDILL/Dallas Morning News. You can have a glass of wine at the market's full bar while preparing your grocery list.

One of the big problems in inner cities, even in relatively healthy neighborhoods, is a dearth of grocery store options. Part of the problem is that as the industry has scaled up in size, and moved from a locally-based industry to one of a national scale, smaller stores more appropriate for urban locations have been tossed aside in favor of behemoth stores fronted by a sea of parking.

Wegman's, the Rochester, New York-based store is a perfect example of this. They have entered the DC region, and their stores are in excess of 125,000 square feet--at least 10 times larger than the urban grocery stores from the 1950s and 1960s.

Here are some interesting developments in the arena:

1. Food Emporium, the NYC chain owned by A&P (which like Gristedes has city-appropriately-sized stores) is upgrading their format according to Progressive Grocer magazine. A&P has been perennially unsuccessful about as long as I've read newspapers... but this could be a winning format for them, if they would think about taking it to other urban centers. See "Local Assortments, Decentralized Sourcing Mark New Food Emporium Format." From the article:

... will unveil the latest iteration of its Fine Foods Concept format, at the new landmark BridgeMarket store under the 59th Street bridge on the Upper East Side of Manhattan."It's an upscale urban brand," said Hans Heer, s.v.p. of A&P and g.m. of The Food Emporium, and the architect of the new concept during a press briefing yesterday. "We don't want to copy Dean & DeLuca, we don't want to copy Whole Foods Market. It's something special, something unique."

Locally, A&P owns Super Fresh. (Safeway's old Townhouse markets, now there is only one left, and other similar formats are remnants from the days when they had smaller stores placed throughout DC's neighborhoods. In the 1980s, they began closing these stores in favor of larger, regional stores such as at 4th and Rhode Island NE; on Kentucky Avenue SE; or at Hechinger Mall in NE. For each of these new stores, many smaller neighborhood-based stores were closed.

2. A nonprofit attempt to open a grocery store in an underserved Northside Pittsburgh neighborhood appears to have failed. See "Creditors pursue Spring Garden nonprofit grocery: Banks, Kamin Realty seek repayment of rent, other debts."

3. While condominium residents with money in Portland are organizing to create their own grocery store on the ground floor of their condominium building, according to "Condo owners take retail future into their own hands: In attempt to influence shopping destiny, residents want to run grocery store" from the Portland Business Journal. This story is particularly interesting because one of the lead organizers of the effort is Rick Gustafson, who also runs the Portland Streetcar. Had I known about this yesterday, I could have asked him about it... Click here for information on the Community Market on Broadway and here as well. (The two sites are slightly different.) From the article:

Broadway is probably the strongest retail potential of Northeast Portland," said Zadeyan, whose background includes working in a family bistro in Southern California and an assistant manager stint with Wild Oats. Zadeyan will become the $4,000-a-month chief operating officer with responsibility for overseeing the market, according to the prospectus.

He said Community Market on Broadway could conceivably purchase additional retail space in the neighborhood. The idea, he said, is to give the neighborhood a seat at the table when it comes to kinds of the businesses that set up in their midst.

Asking neighbors to invest in a company to set up the kind of market they want is an unusual approach, he said. "This is unprecedented as far as I know," he said.

4. An urban grocer is expanding in St. Louis. See "New customers feed need for City Grocers to grow." From the article:

City Grocers, the only grocery store in downtown St. Louis, will more than double in size when it moves across the street to the Syndicate Trust Building in fall 2007. At its new location on the ground floor at 915 Olive St., the full-service grocery store will have expanded services, including a pharmacy, an in-house butcher and a larger bakery. The new site also will feature cooking and wine classes. City Grocers' staff of 32 employees will double with the move.

Since September 2004, City Grocers has leased 6,500 square feet on the ground floor of the Bell Lofts building at 920 Olive. "We knew when we opened two years ago, the store would need to grow and evolve as more people moved downtown," City Grocers co-owner Rance Baker said.

After the move, the grocery store will occupy 14,000 square feet in the Syndicate Trust Building. The cost to move and buildout the new location will be less than $1 million, Baker said.

For some other pieces I've written on this issue, see:
-- (Urban) Grocery Shopping
-- Nurturing independent businesses through creatively reducing capital requirements
-- The urban supermarket concept cities should be seeking out
-- Grocery store necessary for walkable communities and commercial districts
-- More rethinking grocery stores for the urban setting
-- To get independent businesses you need to rebuild the supporting infrastructure.

A story in Forbes about the failure of Tower Records made an important point about how "brick and mortar" retail has to change to better meet the demands of customers, especially in segments facing great competition. See "The Tower That Fell."

For records and books it is online competition, for supermarkets, especially in cities, it is the competition with prepared food and restaurants.

Also, while it is not relevant to urban supermarkets per se, Supervalu has launched a new store market, comparable to Safeway's Lifestyle format. It's worth looking at the article to see where supermarkets believe that value added service differentiation can occur. On the Retail Wire website, one of the commentators made this point:

No question about the components - these are what consumers are looking for - taste, convenience, value, simplification, premium, etc. Retailers are getting smarter and recognizing that value can be about price or about benefits and there is more margin opportunity when focusing against the benefits value component. Consumers will pay more for benefits that simplify their lives and make them feel better, both real and perceived. So, moving from undifferentiated to differentiated by providing all the key trend needs (in one location) for consumers should be a positive strategy.

Here is the Supervalu press release: "Supervalu Launches Exciting in-Store Program for Customers as it Invests Approximately $1 Billion in Capital for Remodeling and New Stores in Fiscal 2007 ." In the DC region, Supervalu owns Shoppers Food Warehouse. I think they converted the former Metro chain in Baltimore to SFW. They also own Farm Fresh Supermarkets in the Southern Virginia market.

Index Keywords: supermarkets