Source: Target
Should grocers go full steam ahead on new store openings?
The novel coronavirus pandemic slowed new store openings to a near halt as it did with many aspects of the retail world. Now, however, a few retailers are moving ahead with opening plans, even as social distancing rules remain in place nationwide and COVID-19 remains a significant public health concern.
Giant Food has opened a 53,000-square-foot store location in Fairfax, VA, after months of pandemic-related delays, according to Progressive Grocer. The store had to implement social distancing modifications as it opened, repurposing its salad and hot bars — as others have done — for grab-and-go items. The location is comparatively small for the grocer, which tends to have stores in the 64,000-square-foot range and up.
Giant is not the only retailer that has been taking its new store expansion plans off pause.
A small concept Target, which had been under construction for a number of years in the Logan Square neighborhood of Chicago, announced its opening recently, according to Rejournals. The store is an anchor tenant to the development of apartments, and various other retailers are signed on for ground-floor locations in the space.
There are signs that others are setting themselves up to launch when the U.S. is closer to an all-clear.
Amazon.com, for instance, recently began building a new grocery store, distinct from Whole Foods, in Southern California, according to OC Register. The store is being built in a former Toys “R” Us location. It is the second of the new concept’s locations in the region, though neither have opened and no tentative opening dates have been disclosed.
Early during the pandemic, Chicago grocery maven Bob Mariano announced he was planning to launch a small format, urban grocery concept called Dom’s Market & Kitchen with an opening date of March 2021.
The store promises to feature many experiential elements, such as wine tasting classes and in-store dining, which would be difficult to execute were social distancing measures still in place when it opens in Chicago’s Lincoln Park neighborhood.
- Giant Food Powers Through Pandemic to Open New Store – Progressive Grocer
- Status Update: Amazon building grocery store in Fullerton Town Center – OC Register
- Target opens as anchor tenant at Logan Apartments in Chicago’s Logan Square – Rejournals
- Bob Mariano has plans to create a great ‘next-gen’ grocery store – RetailWire
Discussion Questions
DISCUSSION QUESTIONS: Do you think newly opened grocery stores will do more business or less than they would have pre-pandemic? What do you think about non-essential retailers opening new locations at this time?
Poll
BrainTrust
Dick Seesel
Principal, Retailing In Focus LLC
Roy White
Editor-at-large, RetailWire
The very elevated levels of demand we are currently seeing in grocery spending will not last forever. A lot of the uplift is driven by consumers dining out less and eating in more and, at some point, that trend will reverse. That said, some modest shifts will remain, especially from people working more from home – which means lunchtime foodservice trade is switched to buying products from supermarkets.
As such, no grocer should be expanding based solely on current trends in the market. However, there are still opportunities to expand, especially to capture market share in areas where a banner is underserved. To be prudent, grocers should ensure that their stores cater to the needs of modern consumers and are able to play a role in fulfiling online orders. That means thinking carefully about the configuration and operation of new stores, and not simply rolling out the same formats that have been used for years.
Good suggestions, Neil. Opening tired, outmoded operations will fail fast. However, properly placed stores that meet new consumer expectations should perform very well.
Newly-opened stores should actually over-deliver results. Consumers remain ready and committed to getting beyond the pandemic (safely, effectively, and pragmatically) — retailers must step up or step out.
When times are tough, investing in the future is paramount. I say grocers should be moving full-steam ahead and innovating wherever possible.
Opening new stores is a big decision and investment that should be taken cautiously during these uncertain times. Many of the new stores that are successful may look a lot different than traditional grocery stores. Smaller formats with curbside pickup or even “drive-thru” for some convenience stores will be more common especially in small towns or urban locations. The increase in online grocery that will likely continue with some consumers who formed new habits will also drive an increase in dark stores.
David, no need for me to comment now – you covered exactly what I would have said!
Great minds think alike!
Wegmans recently opened a new store and while it was unannounced, it still garnered a lot of attention and loyal customers to its opening. I think grocers are being cautious in making sure they are taking care of their open stores with stable supply chains, and people to help support day-to-day operations. I don’t know if opening non-essential stores( apparel, shoes, etc.) is a good idea at least right now – people are still holding on to their money, spending the money on food, paying rent, and taking care of their families.
I am pleased to see the enthusiasm many businesses are demonstrating about getting back to growing their companies. That said, I would advise anyone thinking about opening new locations or expanding to be cautious. COVID-19 shows signs of being on the decline, which is excellent news, but even if it were over tomorrow, we as a country would need some time to get ourselves back on track. Many businesses did not and will not survive, not to mention the number of stores and restaurants that are gone forever. Millions are still out of work, and there is no crystal ball telling us when they will find jobs.
The new business model looks like it could be very different from pre-pandemic days, especially if many businesses opt to keep employees working from home. What happens to all the office space that will be vacant and the stores and restaurants that will be vacant? So before we rush to open new locations, I would argue that it might be prudent to wait six months. Let the dust settle and let us see what the next retail and retail shopping world is like and how the customer reacts. There will undoubtedly be tremendous opportunities for retailers while having far fewer players and less competition, but we will also see new companies entering the game. Caution is wise so that businesses can make the right decisions.
We are seeing unprecedented levels of consumer demand in the grocery space during the COVID-19 pandemic. Now is a prime opportunity for new grocery formats, re-imagined center- and perimeter-store strategies, and smaller format stores that are focusing on services, “grocerants”, cafes, sushi bars, organic foods, increased fresh and perishables, premium prepared foods, and grab-and-go offerings.
The consumer behaviors were changing and evolving before the pandemic, and now with all the disruption accelerated by COVID-19, grocers in all formats must aggressively adapt their operating models to meet the surging demands for premium prepared foods. Now is the prime opportunity to drive innovative grocery store of the future formats, develop digitally connected experiences, ignite micro-fulfillment capabilities, and continue to pivot to the changing consumer behaviors.
If a new grocery location (such as Target’s in Logan Square) or concept (such as Dom’s) was a good idea before the pandemic, it’s still a good idea. The go/no-go decision shouldn’t be based on this year’s surge in grocery sales, but in the long-term trends driving grocery sales in the first place. Cooking at home may be an elevated trend that’s here to stay, but so are small format locations in previously under-retailed urban neighborhoods. After all, Trader Joe’s success isn’t by accident.
Eloquently highlighted as usual, Dick.
It would be foolish to open any new grocery store that is a duplicate of what already exists. I will go further. It would be foolish to open any new grocery store whose plans were drawn before COVID-19.
Grocery shopping has changed. What we thought would happen in the next five or 10 years (or never imagined at all) has already happened. Throw out the old plans and plan a future store for today. We know what to do.
My fear is that too many grocers can’t wait to get back to the way it used to be and will make costly errors in mapping their future.
Completely agree! It’s not a question about open or don’t open a new store. It’s a question about the format, size, assortment, and services. You can’t open a new store and offer exactly what you did pre-COVID. That’s just not how consumers are going to buy groceries anymore.
Opening the right store format is key. I am not sure opening a 75,000 to 100,000 square-foot super grocery store is the answer compared to a store format that merges physical and digital together to service the customer. Consumers are buying more groceries and eating at home more because their favorite restaurants are either closed or have limited capacity due to state and city ordinances. Digital commerce has been pulled forward by three years. Grocery stores’ digital commerce represented 4 percent to 7 percent of their total demand pre-COVID-19 and now 18 percent to 25 percent for some grocery chains. The pull back for many chains will be between 13 percent to 15 percent. Which is why the stores of the future are required to operate differently and will actually do more business if designed correctly to service both an in-store and/or a digital consumer.
The pandemic has made significant changes in the way the consumer thinks and acts. Some of these changes are not going to go away. One of them is the way we shop for groceries and when and where we eat. Grocery stores are going to be one of the winners when it comes to the consumer dollar. Restaurants are going to be one of the losers. The new look for groceries is going to be in a lot of cases smaller and more neighborhood-specific. Now is a great time to make the move. Real estate will never be cheaper.
My view is that shoppers don’t want to stop shopping in physical stores. Sure online shopping will continue to grow due primarily to its convenience. However people want to go outside and visit the real world, now more than ever. The pandemic will pass and shoppers will want new stores closer to their homes. Remember, “real” store shopping accounted for the vast majority of all retail prior to the pandemic. There is definitely pent up demand for real stores in the right categories, built in the right size, in the right locations.
Stores open, close and modify formats all the time, that’s just the nature of retailing. As to the specific question, that’s hard to say because it is almost impossible to posit when a “post-pandemic” state will be achieved and conditions currently vary wildly depending on where you live, so a lot depends on where a new store is located, if it is genuinely additive or a replacement store, and a variety of other variables including whether or not a relief package clears Congress and is signed by the President. And looking forward, assuming we establish an arbitrary day – say April, 2021 – when the pandemic will be over, there are still a lot of critical unknowns including the state of the economy, unemployment rates, pandemic conditions in other countries, etc. And we know some consumers are chomping at the bit to get out and go anywhere while others have learned to enjoy picking up their groceries without ever entering a store. I think we also have to draw a distinction between stores catering to a more affluent clientele like Dom’s and stores with a less affluent customer base. As to “non-essential” retailers opening stores right now — if it were my call, I’d wait.
Whether the new stores (essential or nonessential) do more or less business depends upon whether demand exists, their inventory tracking and delivery systems can accommodate in person, online, and delivery services, and whether they offer the right assortment of products.
I believe we are cocooning right now and probably will continue to do so for the next several years so I do think grocery will be a big winner. Opening non-essential locations at this time would be a bold move — I would put a freeze on that until we know where this thing is going.
New stores are the lifeblood of retail. However relative to grocery retailers, the marketplace was already overstored prior to the pandemic. The pandemic has introduced an enormous number of consumers to online shopping. The role and format of the store may be changing. Unless a retailer has an unstoppable low-cost, low-price format, new brick-and-mortar units should be carefully considered in light of innovation, altered consumer shopping patterns, and the requirements for developing an online business. Less may be more in the post-pandemic era.
Yes, but not the same store footprint that was designed for the consumer of the 1950s. If you take the paradigm that the past six months moved grocery three years into the omnichannel world, there were other trends that are likely to have moved into prime time. Grocerants (as Brandon mentioned) but with full service for quick carry out, micro-fulfillment in the back of the store with mobile ordering to reduce the center store space (think showroom with curbside pickup), and expanded fresh and perishable sections. Let the shopper pick the product they want to shop for, browse the rest in a reduced space, or prepare mobile orders with great recommendations, all with technology in the support role.
People can only eat so much and the number of people in six months will be roughly the same as six months ago. Therefore, I would think longer term demand can generally be predicted based on pre-COVID-19 trends. Having said that, where that demand will be over the next three to five (or 10) years depends much more on macro-trends and changing customer habits. Families are becoming smaller, so there will be fewer once-a-week, fill-up two shopping carts type trips. In fact it is not very economical to even cook for two or three people, so more demand might go to picking up smaller orders closer to home. I think retailers like Target opening smaller format stores closer to work and residential hubs makes a great deal of sense for them. Brands in North America might look to those in Europe for what the landscape might look like over the next decade and they might look to South Africa for how loyalty program design and partner mix ensures capturing maximum share of wallet in a crowded market.
This is a time to be quite careful about long term investments. A great deal of the upside in business is a unique, short-term windfall from the pandemic.
Grocery needs to be careful not to misread their “Bank Error in Your Favor” Community Chest card.
Any new stores should incorporate the shopping lessons learned from COVID-19
in terms of salad bars, cashiers, cooking stations for food demos, robots, and so on. Otherwise, I would recommend investing in improving e-commerce before investing in new stores.
Most people here seemed to discuss the wisdom of opening new groceries, though the actual question is non-essential retailers.
Suffice it to say, I think that depends on the type of business: a sit-down restaurant, or theater, or any other type of business whose operation is still iffy should be delayed until the situation is more stable. For other retailers, who are allowed to operate, it’s more problematic: depleted cash reserves may make expansion difficult — if not impossible — over the next few months, and I expect projects still in the planning stage to be pushed back for 6-12 mos. But if something is already finished, it seems pointless not to open.
Smart retailers, including smart grocery retailers, know that the best time to make strategic investments is during market disruption and chaos. Opening stores is a smart investment especially if it includes enhanced on-line ordering, curbside store pick-up, and new business processes and technology to support real-time product substitution and cross-selling. I’d love to see opinions about which grocers are doing this best today.
The key factors are not related to opening or not opening — it’s about size, format, assortment, and services offered that will make or break a new grocery store. Sales may be up right now, but that won’t last long-term. These decisions need to be done based on data, but not sales data. Location still matters, especially if you’re trying to reach underserved markets. But retailers need to think about what service mix will matter, it won’t be all in-store shopping any longer and what consumers buy will also be different. Grocers that adapt to this will be the ones that successfully open new locations.