Photos: Royal Blue Grocery
Are grocers missing the mark with urban consumers?
Food shopping options for downtowners can be downright dismal. I know — I’m a center city dweller. I feel fortunate to have a great Ralph’s in my neighborhood, but before the store opened, downtown San Diego was pretty much a food desert.
I met Royal Blue Grocery, an operator of “compact urban markets” on a recent visit to Austin, TX. They have been in business for 15+ years and operate a handful of urban sites. Royal Blue understands and caters to how urban consumers shop (smaller baskets, more fresh and prepared foods, upmarket treats) and ensures the experience is pleasant, quick and easy.
I was impressed with how each store is individually assorted to address the needs of multiple cohorts in the neighborhood: residents, visitors and workers.
Essentials
Royal Blue carries almost everything a local resident needs to operate a household, prepare meals, snacks or entertain guests. Goods are packaged in sizes appropriate for smaller households that typically live in multi-unit residential buildings in urban areas.
- Produce – fresh fruits and salad ingredients
- Dry grocery items – smaller-sized packages of cereals, baking ingredients, spices
- Fresh – limited assortment of packaged meats
- Adult beverages – mostly craft brews, local spirits and basic wines
- Household products – a limited assortment of cleaning basics and paper products
Specialty items
Proximity to the convention center, hotels and the river walk means many visitors. Royal Blue stocks fancy foods and gifts that reflect Austin’s personality.
- Niche local brands – chocolates, coffees, honey, “healthy” bars, spices and rubs
- Organics, including fresh juices
- Souvenirs and cards
- Naturally produced candles, lotions
Convenience items
A variety of grab-and-go foods for multiple day-parts are popular with residents, visitors and workers. Outdoor seating areas are available for enjoying one’s beverage or snack.
- In-store coffee bars – local java and baked goods
- Wine and beer on- and off-premise sales, with an emphasis on craft brews
- Texas favorites like breakfast burritos, empanadas and barbeque
- Prepared good-for-you foods – fruit cups, salads, juices and boosts
There has been lot of store format experimentation lately, and even more discussion on the role of the store. Royal Blue has all the right ingredients for each neighborhood and all its cohorts. Smaller neighborhood stores have a big part to play, especially in diverse urban areas where consumers shop differently.
Discussion Questions
DISCUSSION QUESTIONS: Are grocers generally doing enough to serve urban consumers? Why are there so few successful small-format urban grocery stores operated by major chains?
Poll
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Gene Detroyer
Professor, International Business, Guizhou University of Finance & Economics and University of Sanya, China.
Andrew Blatherwick
Chairman Emeritus, Relex Solutions
In the U.S. urban grocery provision is often terrible. Many traditional stores are cramped, expensive, and fairly dismal. Part of this is down to the expense of the location, part is a lack of competition because of a dearth of big boxes, and part is because there are a lot of other food options including takeout from restaurants. However this is changing. There are now more pop-up grocers, better convenience stores like Foxtrot, some new and interesting independents, and more multiples like Target operating small stores in urban locations. The urban market is significant, and I expect more efforts to be made to exploit it over the next 5 or so years.
It is evident that the center city has been abandoned by most grocers. This has created a disparity of wealth and created the food deserts the author mentions above. Trying to find urban locations that fit the typical grocery format has been a challenge. Smaller footprint locations like one in Boston’s Downtown Crossing, opened by Roche Brothers, is an example of thinking outside of the box. The transaction volume of that location proves that it’s an oasis in Boston’s urban desert.
Grocery chains that add urban locations can leverage community engagement to build brand loyalty and foster a positive reputation. This is what improves customer retention and profitability anywhere, suburbs or in urban areas. Right? Also, I’m not sure that most people in urban areas are looking for “upmarket treats.” They’re looking to put food on their tables, preferably not hyper-processed frozen stuff, either.
When my wife and I moved to Manhattan about five years ago, our choices were two conventional supermarkets, one across the street and one on the next block. Both were small (four checkouts). Both operators were city chains. They were expensive, and the assortments were limited.
Today that has all changed. We have Whole Foods (twenty-nine checkouts), Trader Joe’s (twenty-two checkouts), and one of the original conventional stores. All are within two blocks of our apartment. And, of course, we have full-service delivery operations — Fresh Direct, Stop & Shop, and Whole Foods.
Surely this is not typical for Manhattan, though Whole Foods and Trader Joe’s have multiple stores throughout the city. Brooklyn even has a Wegmans. Why can these chains successfully operate? It is all about real estate and scale. Major chains are oriented to business models that demand a large-scale operation. Their ROI and efficiencies are based on size. The small format is not just a matter of making something smaller. It is an entirely different operational endeavor.
The UK has seen a huge growth in town and city center convenience stores over the past few years with all the major grocers competing in this space. With the smaller format ranging and display is absolutely critical to ensure that you have the right range for each location to cater to local needs. Store specific planograms and range management tools have helped achieve this, helping the winners in a very competitive marketplace. One might think running a small convenience store is easier than a big box store but the opposite is true, the discipline and controls have to be better even though the staffing and space is smaller.
It’s funny — you see these small format stores everywhere in urban areas in the UK. I have only recently seen these types of stores being built in my area in apartment complexes, etc. I like what Foxtrot is doing with their stores. As long as these stores are able to tailor their format to the neighborhood, they will be successful and customers will appreciate that they don’t have to get in the car and drive a few miles down the road for a six-pack of beer or that sandwich they really like and want.
I thought about you when I was in Royal Blue — in Austin and San Antonio — may be coming your way! I visited three of the units and each was excellent and had its own personality.
Thanks Patricia, I will have to visit their stores. Fox Trot just opened a location in Austin as well. Again, tailoring to the community is essential to their success.
Gene is correct. In designing and executing small format stores for a behemoth once, the giant in question soon discovered that the real difference between store formats was operations and logistics. Everything they normally received was on pallets. Not for a smaller store. All shipments arrived in big trucks. Not for a smaller store. On and on. And the people you hire and what you pay them is not the same either. Big stores going small is not easy, but I’d look to those who are pulling it off for ideas, like Nordstrom, who created a totally different model. Because if the pain points can be solved, the rewards would be great — a recent study we did showed that in no uncertain terms.
The short answer is no. As the article points out, it is not making a store sampler; it means customizing the store’s offer to meet the need of its shopper mix. That can mean different format/offers in two or more stores in the same urban market. That requires a lot more work that just using a cookie cuter approach that many employ.
I’m glad Patricia found a market she likes, but I’m confused by the terminology. For the past few decades, much to my chagrin, but it is what it is, “urban” has been used as a synonym for “impoverished, inner city” (a euphemism for slum or ghetto). So the explanation for the food deserts there was simple: it wasn’t profitable. Clearly, here, we’re using the word in a different context, but I think the issue ultimately may be the same: not enough money; the households have high incomes, but there aren’t enough of them.
Although project developers and civic boosters like to project an image of huge, thriving markets, the reality is only the largest cities are likely to have a population large enough to support a major retailer within walking distance. And that becomes the key, because if they have a car, then they’re not really in a desert, they can just drive a few miles to a store in the inner suburbs.
Merely shrinking a typical store format and dropping it into an urban setting doesn’t serve the community. And it’s a waste of company resources because it will never be in alignment.
Urban stores need to be built for those who live nearby, work nearby and largely for walkers. Customers who shop here need smaller sizes for smaller kitchens, meals designed for 1-2 people, good snacks and bites for meetings, products and packaging designed to fit an on-the-go lifestyle. Add locally made offerings and you’ve got a winner.