In Ian Ritter's recent Counter Culture column, he raises the question of the new grocery experience moving toward a model more like Trader Joe's and Fresh and Easy. This is especially endearing because, as a college student, my team proposed a very similar concept for Whole Foods (now being pursued in Tempe, AZ). It's great to know we were ahead of the curve.
Below is my very AZ-influenced response to Ian (different from a NYC or SF perspective, I'm sure), copied from his blog at http://globestcounterculture.wordpress.com/2008/09/12/the-smaller-the-better/
Small can be successful because of the way we now treat information and use it for planning purposes. More complex networks of smaller outlets can become workable for the consumer because that consumer can more easily pre-shop and make the most of a quick trip to the grocery store.
Since most daily purchases are driven by either an impulse or a few basic needs, why waste the time trying to navigate through a larger retail space with more bottle-necked checkout lines and less convenient parking. Anymore, a trip to a large shopping center is becoming a much more significant experience in terms of time and energy, yet the consumer benefit isn't as easily improved in tandem.
We should have learned as one-stop department stores and individually located cosmetic/clothing stores replaced malls, so too will smaller targeted shop spaces with easy access replace the mega strip malls. From an urban planning perspective, this bodes well for the neighborhood village concept prevailing in sprawling communities we never thought possible. From an economic perspective, it potentially means a more competitive market environment as smaller more nimble companies can grab scarce space as easily as the behemoths of the world, and their suppliers will need to negotiate differently in turn.
But most importantly, from the consumer perspective, this means that our daily transactions became even easier and less tiring than they have been. Our culture tends to value efficient transactions, so why shouldn't the real estate market adapt accordingly?
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Well I for one certainly enjoy the convenience of a convenience store; jumping into a walgreens, CircleK or CVS for just a few items I need on the spot, rather than spending almost an hour sucked into a large grocery store. And I do not mind knowing I am paying a little more of course.
ReplyDeleteHowever, in grocery retail, it's all about margins and the big ones like Kroger and Safeway are only profitable due to their size and economies of scale (remember economics 101). With only about 2% margins, it's easy for them to screw something up and lose money.
For smaller rivals like Whole Foods, Wild Oats (now part of Whole Foods) and private Trader Joes, they need to compete on products such as "organic" rather than price, and hope people will pay more for them. However the incremental cost for a superstore to add an organic isle is almost nil, and that's why so many have in recent years.
I still enjoy going to my local Trader Joe's instead of the big guys, mainly due to their increased selections of quality foods, but also from loyalty as I kind of "grew up" with them in northern California. I just wish they'd go public one of these days... :)
I agree with you on this! First off, this is a rural community. I feel that too many people are trying to turn this rural Village into a sprawling metropolis.
ReplyDeleteThe powers that be need to be under the understanding that this is a decision that should be made by the community. I don't want thrift stores, more convenience stores or more low end retailers. These are the businesses that tend to attract the most crimes. We don't need more crimes.
Before we consider building more small and low end retailers, we should be pressuring District 7 Councilman Nowakowski, the City Council as a whole, the mayor and anyone else who will listen, to get a hospital, police sub-station and more officers in Laveen.
I don't shop at WallyWorld any more than I have too, and enjoy the convenience of going to Fresh and Easy. It's clean, it's nice, it's what we needed in the Laveen area. I would like to see less of the same, and more of a variety.
It's true that economies of scale factor into the retail equation, but too often the major retailers seem to get it all wrong when analyzing the higher margin all-natural and organic segment.
ReplyDeleteA survey conducted a few years ago found that because the established major chains often don't support their special "all-natural" section, they don't compete on price with the likes of TJ's, and thus they tend to make less money on these items. But then, when they cut them from inventory, overall store profit declines because those snooty customers tend to spend more on other high-margin items.
What I can anecdotally claim to have seen changing in recent years is that chains like Safeway are suddenly getting it right. They went almost all in with a generic brand of organics, and then co-located the products alongside everything else. This move enables them to cut the price, almost to reasonable levels, and attract value-minded customers who also want to eat well.
That is the model that I see continuing. It just so happens that smaller stores can more nimbly make that happen. Fresh and Easy hedged on volume by entering the American market far more aggressively than most chains. To achieve this rapid growth, like QT gas stations, they have managed to create value on otherwise undervalued real estate in established markets. I'm a huge fan of this strategy.
And to Stef's point, smaller is better in high-barrier markets and in areas where permitting is tough. Not only can they sneak in on already entitled properties, they can also better maneuver the permitting process on small, free-standing pads.
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