Brief revisiting of small store grocery format stories: big companies continue to say "no"

For years I have been arguing that center cities, but by extension town centers and conurbations "in the suburbs" too, can be the location of successful smaller format grocery stores.

For example, see "Urban grocery shopping" (2006) and this 2008 op-ed, "Urban Safeway misses mark," from the Washington Business Journal.

I was quite heartened that Ahold Delhaize, the parent company of the DC-area Giant chain, which in my opinion had lost its edge ("Urban retail #4: how to prevent the coming failure of the DC region's Giant Supermarket chain," 2012) but now seems to be more on the ball, not only in pricing, but in upping its game on private label, had opened two different small store formats, Everything Fresh in Philadelphia, and bfresh in Boston.

And I was about to write a "revisiting stories" piece versus the 2012 Giant piece.

Good thing I didn't because a few weeks ago, the company announced they are junking their small store effort, merging it from a separate initiative into their Stop and Shop division ("Supermarket chain said to be dropping small Bfresh stores planned for Philly ," Philadelphia Inquirer; "Stop & Shop to rebrand bfresh chain, close 1 store," Boston Globe).

Separately, this week, Kroger announced that they won't be expanding their Main & Vine one-off "small format" store, which is based in Gig Harbor, a Seattle suburb ("Main & Vine in Gig Harbor closing in January," Tacoma News-Tribune).

The reality is that most large chains aren't set up to think too carefully about differentiated formats.  Kroger is a great example that I wrote about recently ("Problem solvers vs. possibility thinkers (and Kroger)"). 

Kroger has gobs of best practice initiatives spread out across their various divisions, stuff new to me that I keep finding out about, such as the Kroger Signature store, which like Kroger Fresh Fare, is about providing a high grade experience, but not quite to the level of a Wegman's, Market District, or Central Market. And recently, they announced they'll be adding a restaurant to a store ("Here's your first look at Kroger's new restaurant concept, Kitchen 1883," WCPO-TV), something that chains like Hy-Vee and Wegman's have been doing for awhile.

But imo, they aren't very good at systematically capturing and harvesting this best practice and building it in as standard operating procedure and transforming their operations, even though they are good at adding nonfood items to stores (Fred Meyer, Marketplace format) or having upper scale but not super duper supermarkets.

And so it makes sense that they aren't willing to commit to the creation and maintenance of a separate urban initiative.  I guess the company's failure to not buy the Marsh's downtown store in Indianapolis earlier this year that was an example of a differentiated center city store is another confirmation of this.

The one major exception is Giant-Eagle's Market District Express.  The only significant exception to this trend seems to be Market District, Giant-Eagle's upscale store group, which has opened up some significantly smaller stores, in various Ohio area markets ("Giant Eagle Market District Express opens in Bexley," Columbus Business First).  G-E also has a somewhat upscale convenience store chain, called GetGo, that better leverages its relationship to G-E than does Kroger's convenience store divisions to its supermarket divisions.

A potential exception.  Shoprite, the banner of the Wakefern supermarket business cooperative acquired the right to market the "Fresh Grocer" banner when the company running it joined the group ("Fresh Grocer Joins Wakefern Co-op," Supermarket News). 

Fresh Grocer is a small format urban grocery store in the Philadelphia area.  But it doesn't seem to have been used in a new location outside of the Philadelphia market since the acquisition of the brand, although one member of the cooperative, in addition to the original operators, have adopted the format for some of their new stores going forward (but they aren't small).

FWIW, About 10 years ago, Fresh Grocer was considering entering the DC market.

Avis to buy Zipcar

Given the success of car sharing in the DC-area, with Flexcar, later acquired by Zipcar, and Zipcar, plus the more recent entry of car sharing operations by Enterprise and Hertz into DC, plus the even more recent entry of the one-way car sharing service, Car2Go, DC must be a hotbed of carsharing in the U.S.

The one thing we don't have in DC is a nonprofit car sharing organization like they do in San Francisco, City Car Share, Philly Car Share in Philadelphia or  in Montreal, Communauto.  The disadvantage that nonprofit car share organizations have is having to raise capital for purchasing vehicles, especially when they have to replace the original fleet.

So that Avis, a major car rental company, is purchasing Zipcar, is quite interesting in what it communicates about car usage as an application or service (see writings on "product service systems" among other things).

See the Associated Press story, "Avis buying Zipcar in deal worth nearly $500M."  Also see "Why the 49% premium Avis paid for Zipcar is a bargain" from Quartz, "Zipcar and the Death of Entrepreneurship" from LinkedIn and "Zipcar: Entrepreneurial Genius, Public-Company Failure" from the Wall Street Journal. (Thanks to Notions Capital for the heads up on the latter articles.)

Note that while I know you can use Zipcars in other North American cities, I didn't realize that they have coverage in some UK cities including London and Barcelona through their acquisition of Avancar (press release).  And apparently the same Zipcar infrastructure works between the systems.  Of course, I've yet to test it out.

I don't think there will be many changes.  The article suggests that the Avis fleet can be used by Zipcar members during peak demand periods.  I don't expect that will happen any time soon as it will require a variety of changes to how Avis manages their cars, plus most of their car rental locations are not in those kinds of places where car share members are likely to be living.

-----
WRT the articles by Dennis Berman about "the death of entrepreneurship," this is an issue, but not in the way that he thinks, at least not to me. The problem has to do with scale and operating in multiple cities and scales. It's a similar process to how in many markets (especially in retail and increasing in retail development, at least in the major metropolitan areas) local operators have been supplanted by national firms. In select markets that are more engaged as part of the global economy, such as the real estate market in major cities like NYC, DC, San Francisco, Seattle, Los Angeles, etc., international developers and financiers may trump even national actors.

It becomes very difficult for comparatively small companies to operate in multiple cities and get access to the necessary capital to build and expand their business. (This by the way is an issue faced by my own business, BicyclePASS. I know how we can position ourselves to be a major force nationally. Capital is a key element in our ability to expand. And patient capital--because in start up phases you lose money, you don't make money--is especially hard to find.)