Giant Eagle, Inc's (supermarket chain) first Giant Eagle Express small-format, neighborhood-oriented food and grocery store in Harmonville, Pennsylvania is about 15,000 square feet. (Photo credit: Pittsburgh Post Gazzette.)
Neighborhood Food Retailing USA
We've been writing extensively about what we termed the "small-format food retailing revolution" in the United States, and what we call the "international small-format food retailing revolution," since we started Natural~Specialty Foods Memo in August, 2007.
In conjunction with our small-format focus, we've written extensively about what we have called a return to neighborhood food retailing in the U.S., which goes hand-in-hand with the re-emergence of smaller-format food and grocery stores in the country.
We've received lots of correspondence from the mainstream press about our small-format food and grocery store and neighborhood food retailing reporting, coverage and analysis, including from reporters from the New York Times, Los Angeles Times (and other U.S. papers), business publications and daily papers from Canada, Mexico, Europe and Asia, and other mainstream publications, along with Blogs.
It has been interesting to receive this correspondence.
What we've also started to notice is that the mainstream press has discovered what we've been writing extensively about for 15 months -- that small-format food and grocery retailing and neighborhood food retailing is indeed a growing trend in the United States.
For example, on October 3, the Pittsburgh Post Gazette ran this story, "Tight economy has shoppers, grocers looking to neighborhood stores." The piece, by staff writer Teresa F. Lindeman discusses many of the issues we've been writing about since last August in terms of the external and economic factors involved in the small-format grocery store trend in the U.S.
It also talks about Tesco's Fresh & Easy Neighborhood Market, Wal-Mart's Marketside, Giant Eagle's Giant Eagle Express and SuperValu, Inc's Urban Fresh by Jewel" all small format chains, all which we've written about extensively.
And today, the Associated Press, which is syndicated to nearly every newspaper in the U.S., ran this feature story, Like shoppers' budgets, grocery stores shrink, which so far has been picked up and published by a number of American newspapers.
The AP piece also features a discussion of many of the issues we've been writing about, and suggested last summer would be occurring now, for the last 15 months regarding small-format food retailing in the U.S. and the greater focus on neighborhood markets.
Our analysis of the growing small-format food retailing trend in the U.S. isn't one that says smaller format, neighborhood grocery stores, which have never gone away completely in the U.S., are going to replace larger supermarkets and mega discount stores like Wal-Mart Supercenters, Costco club stores or Super Target combination food, grocery and general merchandise stores.
Rather our analysis is that the growing small-format trend, which is a unique event because major chains like Wal-Mart, SuperValu, Safeway, Tesco and others are driving it in the U.S., is a new layer of an old concept -- the independent neighborhood grocery store -- which is an American original.
Mega stores aren't going to go away. However, in our analysis fewer of such stores will be built and more smaller, neighborhood-oriented food stores will be built over the next decade.
We already are seeing evidence of this emerging. For example:
>Wal-Mart recently said it will built fewer of its combination food, grocery and general merchandise Supercenters (which average 180,000 square feet) next year and in 2010 than its original plans call for.
Wal-Mart also is building numerous smaller Supercenters and of course opened its first four small-format food stores, Marketside, in the Phoenix, Arizona Metropolitan region on October 4.
>Target Stores has recently decreased the size of some of its new Super target grocery and general merchandise mega-stores, and in some cases even shrank the stores significantly and decided not to add the grocery side in a few cases.
>Costco is looking at building smaller club stores in urban areas like the store it has in San Francisco's South of Market neighborhood. This even includes the possibility of building smaller, multi-story Costco stores in large cities.
>Supernatural foods retailer Whole Foods Market, Inc. has decided to downsize a number of the new stores it has in development. The retailer also is questioning whether or not it will even continue to build and open any additional stores in the 60,000 -to- 80,000 square foot range, something it has done a lot of in the last five years, in the future.
Our analysis is that just as cars, houses, bank accounts, retirement fund portfolios and other key aspects of American life are getting smaller, and will continue to do so for most Americans for the next few years, so too in many cases will food and grocery stores trend towards getting smaller.
But although size does matter, it's not just smaller square footage that's important in this analysis. What is equally important is that the reason the small-format trend is here to stay for a significant number of years is that it's neighborhood-driven. In other words, small-format food stores aren't just growing in quantity and popularity because they are small. They are doing so because they are designed to serve as neighborhood markets -- just like the independents have done and continue to do in the U.S. -- although to a far-lessor degree today than in the past because of the emergence of the big box chain store.
This means a few things.
First, it offers a new opportunity for the big chains to create small-format operations in conjunction with their larger store operations. Doing this can provide some real cost savings for retailers like Wal-Mart, Tesco, Safeway and the others.
Second, it's our analysis the small-format food retailing trend provides a renewed opportunity for independent grocers to thrive in the U.S. Independents are the original small-format neighborhood grocers and still do it the best.
Third, we see the small-format, neighborhood food retailing trend providing a new opportunity for traditional convenience store operators.
These chains and independents sit right between convenient retailing and neighborhood food retailing, straddling that definitional fence. As such, they can create new formats, as many are currently doing, that are hybrid grocery and convenience stores.
This offers the c-store chains particularly a new way to broaden their offerings away from the traditional c-store staples of alcoholic beverages, cigarettes, gasoline and "gut buster-quality" ready-to-eat foods, all of which are declining categories, into a more diversified product category mix. Not closing their traditional c-stores but diversifying with a new format. Pennsylvania-based Wawa is a good model of a very successful hybrid convenience store/grocery store retailer.
There is still a long way to go in the small-format trend in the U.S. We are just seeing the beginning of it at present. Our analysis is that the neighborhood retailing aspect of the small-format trend will get even stronger and we will see various different formats, as we are beginning to see at present, emerge to serve neighborhood residents' food shopping needs.
We will be covering and analyzing the small-format and neighborhood food retailing trend, as we have been for the last 15 months, extensively. We may even have a couple more new terms to coin.