Thursday, 11 September 2008

For shoppers in a hurry, U.S. grocery stores shrink (IHT)

HARMAR TOWNSHIP, Pennsylvania: Like cars and homes, grocery stores in the United States are beginning to shrink.
After years of building bigger stores - many larger than a soccer field and carrying 60,000 items - retailers are experimenting with radically smaller grocery stores that emphasize prepared meals, fresh produce and grab-and-go drinks. The idea is to lure time-starved shoppers who want to pick up fast meals without paying restaurant prices or wandering down long grocery aisles.
Safeway has opened a smaller-format store in Southern California, and Jewel-Osco is building one in Chicago. Wal-Mart plans to open four Marketside stores in the Phoenix area this autumn, and Whole Foods Market is considering opening smaller stores.
And here in the northern suburbs of Pittsburgh, the grocery chain Giant Eagle opened a Giant Eagle Express last year that is about one-sixth the size of its regular stores. It offers gasoline pumps, wireless Internet and flat-screen televisions in a small café, a drive-through pharmacy and an expansive delicatessen that offers sushi, rotisserie chickens and ready-to-heat dinners.
"It's perfect," said Dusty McDonald, a 29-year-old bank teller who was buying breakfast sandwiches recently for her co-workers at the Giant Eagle Express. "It's on my way to work. It only takes me 10 minutes to get in and out."
The opening of smaller stores upends a long-running trend in the grocery business: building ever larger stores in the belief that consumers want choice above all. While the largest traditional grocery stores tend to be about 85,000 square feet, or 7,900 square meters, some cavernous warehouse-style stores and supercenters are two or three times that size.
Statistics compiled by the Food Marketing Institute show that the average size of a grocery store dipped slightly in 2007 - to a median of 47,500 square feet - after 20 years of steady growth.
The biggest push toward these new stores is coming from the British retailer Tesco, which made a splashy entry into the United States last autumn by opening a 10,000-square-foot Fresh & Easy Neighborhood Market in Las Vegas.
Since then, Tesco has opened 72 more stores in Nevada, Arizona and Southern California.
Gary Smith, founder of Encore Associates, which advises the food and consumer goods industry, said the smaller stores opened by other chains were "a loud message to Tesco that they are not going to be able to walk in and grab market share."
"It's also a way for them to do some testing for if and when Tesco comes to their market," Smith added. "They are better able to counter it."
Grocery retailers face competition other than Tesco on multiple fronts. Chains ranging from Target to dollar stores are selling more groceries, and some small convenience stores are offering higher-quality food.
The big grocery chains are not thinking about closing their larger stores, which have been a success. But they hope to capture new business with the smaller stores, appealing to consumers on days when they do not have time for a long shopping trip.
"The average person goes shopping for 22 minutes," said Phil Lempert, who edits, a Web site that tracks retail trends. "You can't see 30,000 or 40,000 products. We are moving into an era when people want less assortment."
Of course, small grocery stores have been around for eons, and some old-time neighborhood markets still exist. Meanwhile, a handful of specialty retailers have proved that shoppers will flock to smaller stores if they are offered a novel experience.
Trader Joe's, for one, has thrived by offering a limited selection of high-quality, relatively inexpensive products in quirky stores that are 15,000 square feet or smaller. Aldi and Save-A-Lot are drawing customers in droves by selling a limited assortment of aggressively discounted products.
What distinguishes the new stores is that they are being built by more traditional retailers, and they emphasize fresh, prepared foods for busy consumers.
Kevin Srigley, a senior vice president at Giant Eagle, whose stores are spread across western Pennsylvania, Ohio, West Virginia and Maryland, said that the express store sought to provide customers with a "smart stop to save you time on the things you need most," in addition to offering fresh foods.
Will customers come to the smaller stores? Analysts said Tesco's initial sales had fallen short of expectations, and the company had stopped opening stores for several months this year to assess customer feedback and make adjustments. The company has not released figures detailing the Fresh & Easy stores' performance.
Will Carless contributed reporting from Laguna Hills, California.

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