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Will Wegmans Revolutionize the Supermarket?
On Oct. 18, Wegmans announced that its new Astor Place location in Manhattan is open after taking over the space previously occupied by Kmart — though it was originally a Wanamaker’s Department Store a century ago, according to PIX11 News. Comprising two floors and 87,500 square feet in total, the store features hot and prepared foods on the ground level.
PYMNTS explained that “Wegmans is pushing beyond the typical grocery format to open a hybrid supermarket/food hall in New York City.” The new setup will mimic a market, offering a diverse selection of food areas, such as a sushi bar, bakery, fish market sourcing selections directly from Japan, and a pre-made salad area. Store Manager Kyle Butta emphasized that their mission extends beyond mere grocery sales to enhancing the local community.
According to the grocer’s original press release announcing the new store, Wegmans’ Astor Place location also offers sandwiches, pizza, soups, wings, and hot Asian cuisine options. Additionally, its “ready-to-eat and ready-to-heat options feature a wide selection of entrees and sides for both individuals and families.”
Wegmans’ hybrid concept is gaining traction as other supermarkets have started to evolve into pseudo-restaurants or destinations rather than simple grocery outlets. For instance, FreshTake, a grocery store opening in Augusta, Georgia, next summer, will offer amenities like a five-hole golf green, an on-site café, a bar, a barbecue smokehouse, and a fire pit.
Other examples of supermarkets moving beyond food categories include the Midwestern grocer Hy-Vee, which “brought exercise equipment showrooms to its stores” in 2021, and “around the same time, Texas supermarket chain H-E-B opened jewelry shops in its stores.”
However, many grocers are focusing more on the trend of meeting consumers’ daily needs that “have been centered on the connected ‘eats’ category, which brings in meal kits, ready-to-eat options and restaurant meals in addition to traditional groceries.” Kroger, as the No. 1 importer of sushi in America and the owner of a meal kit company called Home Chef, has already taken steps to meet these needs. Additionally, smaller chains “are adding more hot food and prepared meal options, adding self-serve in-store restaurants and more.”
Consumers often prefer to eat out rather than cook on their shopping days, which has prompted a rise in demand for hot food options in supermarkets, according to Atul Sood, chief business officer at Kitchen United. Sood believes consumers appreciate the convenience of ordering restaurant meals from grocery stores, leading to high repeat orders and strong retention rates.
Additionally, these initiatives allow grocers to distinguish themselves from competitors and attract customers to their physical stores, creating higher margins without incurring pickup or delivery costs.
On the opposite end of the spectrum, some stores have tried creating grocery locations with an e-commerce focus, but there hasn’t been much reported success. Walmart experimented with a store model that specialized in grocery pickup and delivery only and shut down operations of these locations after nine years. Another similar setup was attempted by the retail company Addie’s in Norwood, Massachusetts, which was established as one of the first drive-thru-only supermarkets yet closed down only six months after opening in early 2023.
Forbes noted that Wegmans took the food hall model “with high service and convenience levels and [put] it into an urban, dense, high-income neighborhood where most people have tiny kitchens that aren’t made for elaborate cooking. That’s a way to get much higher margins than supermarkets normally can.” The question now is if this model will work equally well elsewhere.
Discussion Questions
Do you think more supermarkets should or will adopt this hybrid trend? Would the model fare as well in suburban or rural areas as it might in urban, high-income neighborhoods like Manhattan? If supermarkets like this become more widespread, what challenges might they face?
Poll
Loading …BrainTrust
DeAnn Campbell
Head of Retail Insights, AAG Consulting Group
Dave Wendland
Vice President, Strategic RelationsHamacher Resource Group
This hybrid model makes great sense and I expect to see a lot more of it. Going far beyond private brands, this hybrid model offers retailers more opportunities to differentiate their offering. It’s also more flexible, and enables retailers to create time-limited and themed offerings that tap into holidays and events, like the Super Bowl for example. While this model may work in a variety of markets, it seems ideally suited to urban neighborhoods where a concentration of consumers looking for prepared foods is likely higher. But while there appears to be plenty of good reasons to adopt a hybrid model, it does require different labor skills, equipment and displays to facilitate, which need to be considered.
Supermarkets are increasingly engaged in a battle for ‘share of stomach’. This means they don’t just compete with each other; they compete with foodservice outlets, including good restaurants offering takeout meals. As such, it makes sense to widen the proposition to include more prepared and convenience foods. While most retailers have nudged in this direction, Wegmans has taken it to a whole other level with its food hall concept. This is not surprising given how innovative Wegmans is. Will this be rolled out further? Yes and no. Quite honestly, I don’t think this format would work as well outside of a big city like New York. I also don’t think the majority of traditional grocers like Kroger will do anything other than dabble in more experiential formats.
Wegmans has always excelled at customer experience and kept their finger on the pulse of their surrounding community. While this concept wouldn’t work for every location, it is perfect for this dense urban area and only highlights Wegmans as a core part of the neighborhood. This underscores the importance for grocers to have a range of store formats and ecosystem partners to personalize their value proposition to each community. If food is love and the kitchen is the heart of a home, then grocery stores should reflect the soul of the community.
Just like the ‘mall + anchor department stores’ model needs a drastic update, the supermarket of yesteryear needs an energetic push into the current century. Call it a food hall or a food bazaar, a new model could be tremendously appealing. Eately would never be considered a grocery store, but there are elements of Eately that can be combined with the dreary nature of center aisle CPG products that would provide a truly heightened grocery experience. I’m sure my diet would expand as a result. I would just have to be careful my waistline doesn’t do the same thing.
Hasn’t Whole Foods been doing something like this for forever? The Whole Foods in downtown Denver sounds pretty much exactly like this. Maybe Wegmans is actually late to the game…
Uwajimaya in Seattle/Portland for something like 50 years now?
As long as the incremental margin exceeds the incremental cost and waste,it’s a great idea. There are a lot of food halls in NYC. Could be a good draw.
Yes, if due diligence and research are done correctly, I think this format has tremendous potential. On the West Coast, Northgate Markets recently opened a new grocery store in southern California with numerous restaurant ‘puestos’ inside the store. It has been open for two weeks and sales have been extremely brisk. The focus is traditional Hispanic food/beverages, targeting a key demographic in the LA market. If location intersects with utility, price/value ratio, experience and high-quality food/beverage, the probability of success is good.
This strategy is right for urban locations. Suburban, not so much. Any food retailer considering this strategy should also consider what “share of stomach” (Thank you Neil Saunders) they are chasing. When I see people eating at the local Whole Foods it is usually someone by themselves or a family in a hurry-not a group trying to have a nice meal out. So-convenience meals-yes. Night out-absolutely not. That puts them in competition with fast food (Sorry! “Quick Service” 🙂 ) restaurants.
Hy-Vee is nailing it in suburban areas all over the Midwest – incorporating both traditional and food-court formats. Fine dining it isn’t, perhaps a step above Perkins or Denny’s, but when you’re in NW Omaha or Shakopee, MN, that’s your Friday night date restaurant. They know their demo isn’t headed to $100 steak restaurants downtown.
Wegmans knows their customers exceptionally well. They know what resonates with them, which is why they enjoy a passionately loyal following. This hybrid approach seems perfect for that market. New Yorkers love their takeout; something about small kitchens and walkable neighborhoods.
This is a model that has been part of grocery in the UK for decades, with some of the Canadian Grocers coming as a close second. In these cases, it also includes made to order quick take out (not just shiny rows of hot and cold self serve food). In the US the “hot food” section behind the counter usually lacks enough people serving to make it quick, and (in my local grocer) looks like the food has that well aged, indestructible look. (that glaze on the orange chicken, that just can’t be good for you).
I have always wondered why the concept of fresh take out never took off in the US. Curious what the return on space and labor is. Would be happy to have one of these, I think it can extend well past Manhattan, if its done right. Our local grocers would have some brand building to do prior to shoppers considering this as “restaurant quality” food.
Wegmans already offers a unique grocery store experience wherever you find a store. Now their 87,000-square-foot Astor Place location sounds like flying first class on an already classy airline. It might not have a fire pit and driving range, but it’s also not in Augusta, Georgia. For trips to NYC, this might turn into a must-see retail destination like Harrods in London. Even the locals on the Upper East and Upper West Sides will find their way there soon enough.
The observation that mobile-first will be important here is also a good one. A sit-down or even stand-up meal while in this Wegmans provides plenty of time to fill a take-home grocery order to pick up on the way out. Look for a few more of these new Wegmans formats in other prime locations once they’ve learned what they need to learn from this one.
Wegmans has built a cult following in Western New York with its premium prepared foods, meal kits, and high-quality produce, meats, and fish. Their hybrid operating model has proven to be very successful, and their expansion strategies to both CT and NYC have been done very tactically. Strategic expansion makes sense if Wegmans can stay close to these communities, keep its core customers satisfied, and continue its outstanding customer service.
The NYC Astor Place location, in particular, is precisely what a high-volume, cosmopolitan area needs. A typical Manhattan apartment lacks large kitchens, and meal prep is challenging. The prepared foods are a perfect fit for a population constantly on the go, with a significant amount of food options from restaurants and grocery operations. Considering the amount of volume and traffic the Astor Place location attracts, the premium prepared foods will be a margin and revenue driver.
Prior to the pandemic, Whole Foods, Kroger, HEB, and other grocery operations were experimenting with groceraunts and increasing the premium prepared food operations. In a post-pandemic world, we should expect investments to pick up in this space. The center store assortments will continue to shrink, with approximately 40% moving online by 2025. Profitability and growth will also come from the differentiated innovative perimeter, including premium prepared foods and store formats driven by valuable insights from consumer baskets.
Brandon, yes you are correct on al accounts. Whole Foods, HEB, Kroger have been building this concept for years. There is a limited amount of these that can open and be profitable especially with the investment the labor component. The number one aspect here is know your customer.
Prepared food is everywhere in grocery, and customers love it. Soup, sushi, prepared sandwiches, individual desserts, are all evergreen staples. Wegman’s will succeed too.
Wegmans is not afraid to innovate, experiment, and adapt. This format seems well-suited for its urban setting and raises the bar within the highly-competitive grocery segment.
Wegman’s will be successful as they usually are because they have developed a store and a food offering (Hybrid Food Hall) that has a high chance of appealing to the local community’s tastes and needs. While I am sure that this will be a fantastic store, it will likely not be revolutionary but perhaps an incremental improvement from other innovative retailers such as Whole Foods, Mariano’s, Dom’s and many others that have had appealing foodservice options. Density of the market area as well as affluence is an important factor for this type of food hall formats, and it would not likely work in certain suburban or rural areas.
While the Astor Place location appears to represent more foodservice options than other Wegman’s stores, Wegman’s stores have always been heavy into fresh prepared options of “what’s for dinner.” These forays into more foodservice offerings should be measured against the following criteria: customer acceptance, market differentiation & profitability. In some respects the Wegman’s trend reflects the movement by traditional convenience stores (C Stores) from mini grocery stores into full foodservice operations. One company I am very familiar with, Wawa, has been extremely successful in the breakfast & lunch dayparts & is focusing on the dinner daypart. Dinner is the same target that Wegman’s & other supermarkets, who recognize the differential advantage that correctly executed foodservice brings, are now ramping up investments. The winner is the customer!
Niki Baird said it first. Whole Foods has been doing this for years. I saw it in their 57th Street store in Manhattan where there’s a large dedicated area for seating and I’ve seen it in Alexandria, VA. Smaller seating area but still the same concept. If it works for Whole Foods, Wegman’s should have no real obstacles.
Wegmans has always developed stares that are differentiated by the products and experience of local markets. This concept is perfect for high-density urban areas. I expect them to learn a lot from this store and take the most successful aspects to other locations where they will appeal to consumers in the area.
Wegmans has been continuously iterating and pushing the boundaries of what it means to be a supermarket, for years. This latest incarnation shows that in the right location, the focus on innovation, through a much more immersive, experiential shopping environment, is a solid way to differentiate from everyone else – and a solid strategy toward capturing greater share of shopper attention, wallet and loyalty.
I was recently in Naples, FL and visited a similarly interesting concept, Seed To Table, combining a hybrid food hall with a significant area dedicated to live music, dining and a full bar upstairs that stays open until 2 AM on the weekends. The place is packed most evenings. It is great to see these retailers reinventing what has historically been a staid and conventional sector.
I have been to quite a few ethnic supermarkets with extensive prepared food selections like HMart (Korean) Seafood City (filipino) and Mi Pueblo (Hispanic) in the bay area. The concept does work and offer differentiation to traditional stores. I am sure it is more expensive to operate in terms of labor so you need to plan it based on the customer base and offer the right food items.
I like the idea for Manhattan or locations shoppers can easily walk or bike to in large population centers. Seems like a great way to create an experience/destination. The typical shopping center with an anchor tenant (grocery store) plus service businesses/local shops that stressed out parents drive automobiles to in order to pick up food for the family for the week does not scream destination. Like most retail site selection a variety of data points exist that should dictate where this type of format works best including retail traffic, walkability scores, average income in the catchment area, etc.
All this sounds good — in theory. Maybe it will work in Manhattan because it is a unique marketplace. But in general for most of the country, I think grocery stores should focus on groceries and forget the rest. Otherwise, the “innovators” among us will be recommending that supermarkets would be a swell place for zumba classes, ballroom dancing and astrology reading.
Wegman’s may well perfect this model in their effort – at the very least I expect an above average offering – but I don’t see anything really new here: prepared foods have been a staple in many groceries for decades, The observation that having a few hundred thousand high-income shoppers withing hailing distance of you impacts the kind of store you’ll operate is just as true – and obvious – as might be expcted. The best part of this sory I think is the one offered in passing: originally Wanamakers – who had taken over from AT Stewart – then K-Mart, now Wegman’s…the circle of quality is now completed !
For what it’s worth, Alibaba debuted this model 7 years ago with its Fresh Hippi stores,
It’s not about if supermarkets should adopt a new “hybrid trend” or any other innovative location, layout, etc. It’s when. Now, you have to identify what your market is and stay in the lane, but at the same time, change in retail is happening at such a high speed you have to keep up or consider the alternative: being left behind your competition. There is a right time to change, and good retail management knows when to make the change. Follow the lead from Wegman’s (and others) and learn!
This is a great concept that more and more stores are already starting to copy, albeit on a much smaller scale. The real key to success here is finding the right balance of maximizing the floor space focused on grocery vs. prepared/ready to eat foods, that will maximize the store’s profits, while increasing the numbers of shoppers who return to their store after each visit.
Maybe it’s a New York City thing having been starved of contact with actual retail for too long? I often wonder if analysts are “blinded by the light” when wandering into a Wegmans. In the US alone there are so many markets that do all these ‘hybrid’ things well including Hy-Vee, Inc., H-E-B (and HEB México), not to mention Fred Meyer in the NW, Cardenas Markets LLC and Northgate Market in the SW… H-Mart and T&T need have mention. Go back 100 years and you see Au Bon Marche and Harrod’s doing the same in grander terms in urban centers.
What really makes Wegman’s unique is having a high-experience, high-margin experience in 1/3 of the property to a very price competitive everyday supermarket on the other side in balance… much like a host of others such as Chedraui Selecto in Mexico