Monday, September 12, 2016

Target adding grocery employees, pushing to boost food sales

The Wall Street Journal reported last week that Target stores across the U.S. will soon have teams of employees working exclusively in their grocery sections. The change is part of a plan to improve the company's grocery revenue, which currently accounts for about 20% of the retailer's business.

Last March Target announced it would cut back on its dry packaged goods and add more fresh produce, as well as more organic and gluten-free products. However, Target is not alone in these efforts, as similar investments in the product mix and in customer service have been made by Walmart, Kroger, Aldi and Trader Joe's.

Despite Target's recent changes, their most recent quarterly results showed a 1.1% decrease in comparable store sales.

Whole Foods hoping to boost sales with coupons and loyalty program

With traffic and sales falling at Whole Foods due to competition from food retailers selling natural and organic products at lower prices, the company has started to offer discounts and began rolling out a customer loyalty program.

The discounts come in the form of digital coupons available on the Whole Foods mobile app, and company officials says the adoption rate so far has been very high. The loyalty program, launched initially in Dallas and here in Philadelphia, provide member-only deals like 10% off purchases and rewards points that lead to free products.  The program is set to roll out nationwide in 2017.

Whole Foods is hoping to achieve results similar to what Starbucks experienced when they introduced a loyalty program in 2009. Starbucks now has more than 12 million users and more than $1 billion in prepaid value. The program is cited as a major reason that Starbucks has been able to grow same-store sales year after year.

Lidl adds third U.S. distribution site

Lidl, which has been acquiring supermarket sites up and down the east coast for the last couple years, said last month it would build a regional distribution center in Cecil County, Maryland. The site will be the company's third such center in the U.S. Lidl previously announced it would build warehouses in Fredericksburg, VA and Mebane, NC. Its U.S. headquarters are in Arlington, VA.

Lidl operates about 10,000 stores in 27 countries, and is considered a major competitor to Aldi. In the U.S., Lidl reportedly plans to open about 100 stores in early 2018. At 36,000 square feet, the stores will be nearly twice the size of Aldi's U.S. stores.

Dollar General acquires 41 Walmart Express stores

Dollar General announced this summer that it purchased 41 former Walmart Express stores and would relocate 40 existing stores to these sites this fall. Walmart Express was the small format concept that Walmart abandoned last year. At 12,000 - 16,000 square feet, they are significantly larger than traditional Dollar General stores, so the sites will allow for the larger "DG16" format, which include additional coolers and other store enhancements.

According to Dollar General, "the DG16 layout is designed to expand traffic-building categories in a more customer-friendly format with faster checkout." Initial rollout of the format has reportedly increased sales of perishables and front-end items.

The acquired stores are generally in the southern U.S.

Aldi has risen to be a powerful, disruptive force

A story earlier this summer in Supermarket News reported on Aldi's strategy and how the discount grocer is transforming itself into a serious competitor in the food retail industry. The author called Aldi a "powerful, perhaps underappreciated, disruptive force in a competitive marketplace." Here are some examples of what Aldi has been doing.

  • Expanding the product mix to include more high-margin, gross profit generators (packaged meats, produce, dairy and frozen products, seasonal merchandise)
  • Leveraging total store merchandising (marketing a theme throughout the whole store rather than by department or category)
  • Generating profit reserves for driving end-of-month traffic (reinvesting profits from the beginning of the month so they can drive traffic at the end of the month; end-of-month circulars include pages of hot-priced items)
The bottom line is that Aldi is successfully attracting more shoppers and increasing market share, which puts pressure on other grocers who are struggling with how to match Aldi's low prices and expand services.

ShopRite opens new stores in Philly and Brookhaven, PA

Earlier this month ShopRite opened a 60,000 square foot store in South Philadelphia's Whitman Plaza, replacing an older ShopRite about a mile away. The new store is in a former Pathmark location that Wakefern acquired during A&P's bankruptcy auction last year.

The renovated supermarket includes the standard grocery departments plus an in-store cafe, on-site dietition, and meal planning services for customers. It also offers ShopRite from Home internet shopping with home delivery and store pick-up options.

In August, ShopRite opened in Brookhaven, PA, also in a former Pathmark location. At 63,000 square feet, the store is open 24 hours a day and offers a beer garden as well as grocery delivery services. A Giant supermarket is under construction across the street.

Thursday, September 1, 2016

Kroger may look to buy part of Rite Aid portfolio

The Cincinnati Business Courier reported on Monday that Kroger could be a prime bidder for some Rite Aid or Walgreens drug stores that will need to be sold when the two companies complete their merger later this year. Kroger was rumored to be interested in purchasing Rite Aid before the chain reached a deal with Walgreens.

Industry experts say that about 500 of Rite Aid's 4,600 stores will need to be sold.

Kroger, the nation's largest operator of traditional supermarkets, is also the nation's fifth largest pharmacy operator with 2,200 in-store locations. Leon Loewenstine, an investment strategist with RiverPoint Capital Management, believes such a deal would only make sense if Kroger planned to keep running any acquired drug stores, where they could keep using the chain's customer loyalty cards. Loewenstine compared the idea to Kroger's launch of stand-alone gas stations, which supplement their gas stations at Kroger supermarket locations.

"It would be a new venture, a new avenue of growth for the company," said Loewenstine. "They could compete with Walgreens and CVS. If anybody can do it, it would be Kroger."