Niche retailers take aim at Publix, Walmart
In Part 1 of this series, industry analyst and “Supermarket Guru” Phil Lempert forecast that large grocery stores will soon disappear. Are smaller-capacity stores taking over Florida and making the big, “Supercenter”-sized stores extinct?
Some established chains are already trying smaller concepts. In August, the new “365 by Whole Foods Market” was revealed during a seminar on statewide grocery growth at the Orange County Convention Center.
Jim Sud, executive vice president of growth and business development for Whole Foods Market, says 365 will be aimed at younger consumers in urban areas, smaller than their regular stores and stocked with less-expensive products. Plans are to open three in 2016 and 10 or more in 2017. In contrast, the main chain now has 420 locations. Of those, Florida is home to 24; six are in development and 40 more are planned for 2017.
Despite aggressive expansion plans, investors are unconvinced that Whole Foods can make a serious run at Publix and Walmart, as recent sales figures have been below analysts’ expectations. Plus, competition from other organic grocers is increasing.
Ben Friedland formerly led marketing efforts in the Rocky Mountain region for Whole Foods. He now heads marketing for Lucky’s Market. For organic grocers to succeed, he says it’s important to put first-time shoppers at ease with smaller stores and fewer selections.
“We try to take the word ‘chore’ out of shopping,” said Friedland. Customers at Lucky’s Market can even sip on beer or wine while browsing the aisles. “It’s a more intimate, less intimidating experience where newcomers needn’t worry about having too many brands to choose from.”
Like other organic grocers, Lucky’s Market develops close relationships with local growers. “One reason Florida is attractive to us is the abundance of great agricultural products there that we can put in our stores,” he continued.
But small and organic is no longer limited to niche retailers. Publix carries GreenWise organics and has three specialty GreenWise stores (Boca Raton, Palm Beach Garden and Tampa). Walmart has 70 Neighborhood Markets throughout the state and is adding more. Modeled at 40,000 square feet, they’re about one-quarter the size of a typical Supercenter. Redesigned Supercenters and Neighborhood Markets are coming online; the first are already complete in Rogers, Ark. And in 2014, Walmart started carrying Wild Oats, a discount line of organic products.
Such moves have already impacted organic chains. “Our partners at United Natural Foods estimated over 70,000 new points of retail for natural and organic products over the last three years,” said Whole Foods’ co-CEO John Mackey during a November earnings call.
When Size Matters
As market newcomers come aboard, the retail grocery business has never been more competitive. Yet, most analysts believe Publix and Walmart will still dominate in Florida, at least for now.
Here’s one reason why many believe bigger is simply better: Justin Greider, vice president of retail for real estate brokerage firm JLL, says commercial property owners prefer dealing with retailers enjoying the largest market share and smallest credit risk. Though newer, niche stores may appeal to millennials, Greider says established brands are still the most popular commercial tenants.
What’s Up the Aisle?
Though the newer, natural and organic grocers grab a lot of attention in the battle for Florida grocery shoppers, the traditional brands are showing resilience. Industry analyst Lempert may be right about home delivery and smaller stores as the future of grocery shopping, but it’s quite possible the big players are finding ways to adapt.
Photo Credit: Top image by Whole Foods Market®.