Editor's note: In what we plan to make an annual end-of-year tradition, RetailWire has compiled a list of the most significant retail industry "Turning Points" of 2008. (See our news release...) What follows is the twelfth and last in a series of discussions based on the list.
Only a few years ago, any food store less than 40,000 square feet was considered a mom & pop grocery, not a real supermarket. The chains, and some independents, raced to build stores that rivaled even the 160,000 square foot scale of the Wal-Mart Supercenter. These mammoths carried every brand possible along with two and sometimes three private labels lines; charging past the 100,000 SKU mark.
During the last 18 months, the industry has experienced a sea change. Several new entries from foreign and domestic competitors are recreating the competitive landscape and, based on their success, the nation may soon see a more compact supermarket format as a viable competitor to the traditional big box.
Tesco's 12,000 to 15,000 square foot Fresh & Easy stores in California, Nevada and Arizona are among the progenitors of this new species of supermarket. The locations, nearly 100 have opened since Fall 2007, emphasize produce and prepared foods, and promote the Fresh & Easy private label throughout the store.
The appearance of Tesco's Fresh & Easy stores has prompted Wal-Mart, Safeway, Whole Foods and others to develop compact supermarket formats. Wal-Mart opened its Marketside grocery stores in Phoenix in October and Whole Foods is testing a small-store format in Boulder, Colo. Safeway opened a 15,000-square-foot store called "The Market" in a former Vons supermarket in Long Beach, Cal. in May after working on the format for more than a year. Like Fresh & Easy, the new store emphasizes fresh produce and prepared foods, but also features full-service meat and seafood counters and other developments borrowed from Safeway's larger-sized Lifestyle format.
While Fresh & Easy stores have captured many of the compact supermarket headlines over the past year, they weren't the first chain testing a compact supermarket. In 2003, then Alberston's-owned Jewel developed a prototype store in Chicago that featured prepared meals and other convenience food in departments like an oversized deli and a sushi counter. Now, Albertson's current owner, Supervalu, is testing a 16,000 square foot compact supermarket called Urban Fresh that will focus on ready-to-go meals, along with a selection of fresh meats, seafood and produce in Chicago's Lincoln Park section.
The compact supermarket still represents a tiny share of the U.S. grocery retail market, but observers note that it is the fastest growing segment in the industry. With the economy tanking, the time for a conveniently located store that allows shoppers to quickly buy the products they want may be here.
Discussion Questions: What does the future hold for smaller supermarkets? Are superstores destined to go the way of the dinosaur?