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: 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?
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27 Comments on "Should grocers go full steam ahead on new store openings?"
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Managing Director, GlobalData
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.
Vice President, Strategic RelationsHamacher Resource Group
Good suggestions, Neil. Opening tired, outmoded operations will fail fast. However, properly placed stores that meet new consumer expectations should perform very well.
Vice President, Strategic RelationsHamacher Resource Group
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.
Marketing Strategy Lead - Retail, Travel & Distribution, Verizon
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.
Chief Customer Officer, Incisiv
David, no need for me to comment now – you covered exactly what I would have said!
Marketing Strategy Lead - Retail, Travel & Distribution, Verizon
Great minds think alike!
Director, Main Street Markets
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.
Chief Executive Officer, The TSi Company
Strategy & Operations Delivery Leader
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.
Principal, Retailing In Focus LLC
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.
Vice President, Strategic RelationsHamacher Resource Group
Eloquently highlighted as usual, Dick.
Professor, International Business, Guizhou University of Finance & Economics and University of Sanya, China.
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.
Retail Transformation Thought Leader, Advisor, & Strategist
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.
Digital and Physical Commerce Thought Leader, enVista
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.
President, Humetrics
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.
Global Retail & CPG Sales Strategist, IBM
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.
Founder, CEO, Black Monk Consulting
President, Global Collaborations, Inc.
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.
Managing Partner Cambridge Retail Advisors
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.
Editor-at-large, RetailWire
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.
Retail Strategy - UST Global
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.
CEO, Currency Alliance
President, Protonik
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.
Editor-in-Chief, CPGmatters
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.
CFO, Weisner Steel
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.
SVP Sales & Business Development, Theatro
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.
Retail Transformation Thought Leader, Advisor, & Strategist
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.