Fresh & Easy may exit U.S. market

U.K.-based Tesco, the third largest retailer in the world as measured by revenues, recently launched a strategic review of its struggling U.S. Fresh & Easy Neighborhood Market chain. Many analysts believe the results, scheduled to be announced at the company's annual meeting later this month, will lead to Tesco exiting the U.S. market.

There is speculation that buyers could include Trader Joe's, Aldi, Wal-Mart or real estate companies.

Fresh & Easy stores are located mostly in California, with additional stores in Nevada and Arizona.

Walmart ramping up its smaller-format stores

Wal-Mart said earlier this month that its smaller-format stores are making inroads against dollar stores, supermarkets and pharmacies, and that the company will increasingly move toward stores below 60,000 square feet.

During the current fiscal year, Wal-Mart's Bill Simon said they expect to open about 115 smaller-format stores, with The Neighborhood Market and Express locations accounting for about 40% of stores the retailer opens. Simon calls it a "rapid ramp-up."

"We can deliver price, and assortment and fresh food and Rx," said Simon, who believes the smaller-format stores provide a full package of products and services that competitors lack.

Even with the growth of these smaller-format stores, about 90% of Wal-Mart's existing stores are supercenters or large stores. The company plans an additional 125 supercenters this year.

Study shows Wal-Mart's price advantage over Target is growing

According to Kanter Retail's semi-annual pricing study, Wal-Mart is widening the gap over Target. A basket of branded goods at the world's largest retailer was 4% less expensive than the same basket at Target, which represents the largest gap since the study began in 2009. The last time Target's basket was less expensive than Wal-Mart's was in January of 2011.

"This price separation is a key strategic piece of Wal-Mart's efforts to shore up shopper traffic and drive its 'save money' brand proposition," said Kantar Retail Senior Vice President Leon Nicholas.

Top grocery chains buying up shopping centers

Demand among investors for grocery-anchored shopping centers is high, and grocery chains are buying up many of the centers in what may be both a defensive and cost-saving move, according to a story last week on retailtrafficmag.com.

The defensive purchase by a grocery chain limits the uncertainty that a new shopping center owner brings. At the same time, it can be an effective cost saving move. Kroger, which owns 45 percent of the 2,435 stores it operates, says it saves $1 per square foot per year by owning its stores versus leasing them.

Overall, the biggest grocery chains in the U.S. have invested about $450 million in grocery-anchored shopping center purchases in the last two years. Publix has led the way. The company, which operates 1,058 stores in the Southeast, spent $187.2 million to purchase 17 centers, making it one of the top 10 most active buyers of grocery-anchored centers.

Ahold (Giant, Stop & Shop) also purchased 17 centers during this time period, spending $118.4 million. Kroger has spent $61.7 million for nine shopping centers, and Wal-Mart has purchased four centers for $24.8 million.

According to the story, in many cases the grocery chains are taking advantage of "right of first refusal" clauses that allow them to match other buyer's offers, rather than having to outbid them.

Wal-Mart ad campaign targeting supermarket prices

Wal-Mart reported last week that net earnings for its fiscal second quarter increased 5.7% compared to the same quarter one year ago. More interesting to me were two tidbits about pricing that I read in a summary of the company's results:

1) Due to Wal-Mart's continued investment in pricing, gross profit as a percentage of sales declined by 20 basis points in the U.S.

2) The company said it was pleased with the results in the 25 markets in which they are running ads built around basket price comparisons with other supermarkets in the market.

Clearly Wal-Mart is paying great attention to price and making significant efforts to be perceived as the low price alternative to supermarkets.

Walmart less threatening to supermarkets than it used to be

Supermarket News asks food retailers every year "which alternative channel has posed the biggest threat to Center Store sales in supermarkets?" Walmart has consistently remained the top threat, but the fear they put into supermarket competitors is obviously diminishing.

In 2009, 64% of respondents listed Walmart as the number one threat. In 2010, 50% of respondents answered the same way, and last year, the percentage fell to 45.3%. In the most recent survey, Walmart's total fell to 34%.

Dollar stores have emerged as a significant threat to supermarkets, as 22.6% of respondents listed them in the top spot. Last year dollar stores received only 17% of the votes.

Club stores (Costco, BJ's) and limited assortment discounters (Save-A-Lot, Aldi) finished third and fourth, respectively.

Walmart to reportedly lower grocery prices

Although Walmart officials remain mum on the subject, several publications have reported that the world's largest retailer is determined to regain its image as the low price grocery leader and lure back customers who are frequenting dollar stores and discount grocery chains.

The speculation is that Walmart is putting pressure on its food suppliers to keep wholesale prices down so they can pass along the savings to customers. And if any retailer has the power to convince wholesalers to absorb cost increases, it's Walmart.

New Walmart Supercenter in Springfield, PA goes head-to-head with Giant

A 112,133 square foot Walmart Supercenter opened last week in Springfield, PA's Marple Crossroads Shopping Center. The store employs approximately 300 people and features more than 30 merchandise departments, including a full grocery section with fresh produce, meats, dairy products, a deli and bakery.

According to Walmart's website, the average wage for full-time hourly associates in Pennsylvania is $12.15 per hour.

The store opening comes a little more than a year after a 67,000 SF Giant Food store opened less than a half mile away in Springfield Shopping Center.

Walmart calling on experts to keep their shelves stocked

Not only is Walmart suffering from declining sales, but they are also having trouble keeping their shelves stocked in an efficient manner. A Bloomberg News story last week reported that the world's largest retailer has hired consultants to "walk the aisles and track whether hundreds of items are in stock."

A combination of more products (the return of about 8,500 items in an effort to boost their competitiveness) and reduced labor hours has created a logjam in storage areas, so much so that an industry expert says some items meant for bare shelves may actually be misplaced in the back room. Although a Walmart spokesperson claimed last week that the company's in-stock levels are at historical highs, one Walmart supplier thinks they are worse today than in the past. The supplier said that during the summer less than 90 percent of items in a typical basket of goods were available for shoppers.

Problems stocking the shelves must be an embarrassing issue for Walmart, which attributes much of its success to superior supply chain practices. Factor in their nine consecutive quarters of declining same-store sales, caused in part by competition from Aldi, dollar stores and Amazon, and the retail giant needs some good news to report.

Family Dollar plans 450-500 new stores in 2012

Family Dollar, which operates over 7,000 stores nationwide, said it plans to open 450 - 500 new stores in fiscal 2012. The Charlotte, NC-based company posted a strong profit in its most recent quarter and cited high demand for food and other essentials as big factors in both its quarterly results and future growth plans.

Analysts say that dollar stores like Family Dollar, Dollar Tree and Dollar General have been taking customers from Wal-Mart by offering name-brand items at lower prices, even though customers may pay more per ounce than they would when buying larger packs at major chain stores.

Wal-Mart has posted nine consecutive quarters of declining same-store sales and is fighting to win back customers lost to dollar and discount stores.

Hurricanes increase wine sales, not kiosks

Before we get to the hurricane, let's talk about the wine kiosks...

According to a special performance audit by PA Attorney General Jack Wagner, the Liquor Control Board's wine kiosk program has fallen short of established goals. Currently there are 22 kiosks operating in supermarkets owned by Giant Eagle, Giant Food Stores, ShopRite, The Fresh Grocer and Shop 'n Save. Wegmans had several kiosks but recently ended its participation in the program, and Wal-Mart announced last week that they would not install 23 kiosks in its stores, as previously planned.

Wagner's report states the following:

• From 1/29/09 through 3/31/11, the kiosks showed net income of $206,060 with total operating costs of $1,131,375.
• 20 of the 32 kiosks that were operating during the audit period failed to meet the minimum weekly sales threshold.
• All kiosks had to be shut down in the height of last year's holiday season due to mechanical and technological malfunctions.
• 919 malfunctions were reported in a six month period last year, and 118 additional malfunctions were reported in the one-month period after the original malfunctions were repaired.

The report also suggests that the Liquor Control Board (PLCB) "take immediate steps to terminate its contract with Simple Brands LLC of Conshohocken if kiosk operations cannot be modified to meet the originally stated objectives."

Now, about the hurricane... The Philadelphia Inquirer reported yesterday that liquor store sales saw a large spike in the days leading up to Hurricane Irene. According to the PLCB, sales for the week ended Saturday (8/27) were $37 million, which is up $5 million (15%) over the same week a year earlier. Sales for Bacardi's Hurricane mix? Up 311%.

The sales increase for the two days prior to the hurricane were undoubtedly far greater than the overall weekly increase, although the PLCB only shared the weekly numbers. There are no stats currently available that quantify the aspirin intake on the following mornings.

Walmart Market posts 3% quarterly increase in comp sales

Wal-Mart announced that comparable store sales in the U.S. declined (again) in the second quarter of 2011, and overall U.S. sales were flat. However, comps for Walmart Market stores increased 3% from the previous quarter, prompting the mega-retailer to speed up the supermarket's rollout. So far, the company has announced that about 180 Walmart Market stores are in development.

Wal-Mart also announced that quarterly worldwide sales figures were up 5.5%, and net earnings improved 5.7%.

Wawa signs leases, plans to enter Florida market

According to the Orlando Business Journal, Wawa has signed "more than 10" leases in the Orlando, Florida market, and the retailer has indicated it will open as many as 100 stores in the state.

According to a Wawa regional real estate manager, site work on the first set of stores will begin in the next month or two, with openings taking place next summer.

Currently Wawa has 588 stores in Pennsylvania, New Jersey, Delaware, Maryland and Virginia. Fuel is offered at 298 of these locations (that's more than half for those keeping score).

I have previously written about Walmart's entry into the convenience store/gas arena and their roll-out of up to 350 stores per year, but I doubt the Greater Philadelphia area is high on their list because of Wawa's domination here. It'll be interesting to see, however, if the Big Ws battle it out in the Sunshine state!

Six "traditional" supermarkets among Top 20 U.S. Retailers

The National Retail Federation released its annual Top 100 Retailers list, and Wal-Mart remains at the top by a comfortable margin (nearly four times the annual sales of the #2 retailer). As usual, traditional supermarkets made a strong showing, taking six of the top 20 spots.

It wasn't supermarkets, though, that caused much of the buzz generated by the list (published in the July issue of Stores Magazine and based on 2010 sales figures). Two retailers - Amazon.com and Apple Stores - made big jumps from last year's list. Amazon jumped from #26 to #19, as U.S. sales grew 46.2% to $18.5 billion. And Apple Stores climbed more than 30 spots to #21, as U.S. sales increased 32.3% to $18 billion.

Here is the top 10:

#1 - Wal-Mart
#2 - Kroger
#3 - Target
#4 - Walgreens
#5 - The Home Depot
#6 - Costco
#7 - CVS Caremark
#8 - Lowe's
#9 - Best Buy
#10 - Sears Holdings

Here are the supermarkets in the top 20 (and local brands in parenthesis):

#2 - Kroger
#11 - Safeway (Genuardi's)

#12 - Supervalu (Acme, Save-A-Lot)

#14 - Publix

#16 - Ahold USA (Giant)

#18 - Delhaize America (Bottom Dollar)

Also on the list:

#29 - ShopRite

#31 - BJ's Wholesale Club

#38 - Whole Foods

#42 - Aldi

#45 - A&P (Super Fresh, Pathmark)

#55 - Trader Joe's

#65 - Wegmans

Walmart to have 300 Neighborhood Market stores by 2013

According to an article in Shopping Centers Today, Walmart said last week it plans to nearly double the number of its Neighborhood Market supermarkets over the next three years. Currently the company operates 185 of these stores, including 30 in Puerto Rico.

Walmart President and CEO Bill Simon is counting on the 42,000 square foot stores to help revitalize same-store growth after several sluggish years, while also easing entry into urban markets that don't have the room for a Supercenter.

Simon added that Neighborhood Market stores are easier to develop than Supercenters, which can take up to seven years to open.

The article also points to Walmart's Pick Up Today program, which allows customers to place orders online for pickup at a local store, as an additional benefit of the Neighborhood Market stores. The program launched last year and Simon said results have been encouraging.

Walmart Express debuts in Gentry, Arkansas

Recently Walmart unveiled the first of their Walmart Express stores to the press. According to reports, this Gentry, AK store actually looks like a smaller version of Walmart's 180,000 square foot store, even though it's only 15,000 square feet. The store has exposed pipes and yellow walls, carries about one-tenth of what a superstore carries, but still has a varied selection ("from bacon and milk to socks and DVDs," according to one story.)

According to Walmart, most Express locations will have a pharmacy, and some will sell gas. The stores will generally be located in towns too small for a full-sized Walmart, and in cities where a big store doesn't fit. Fifteen to 20 Express stores are planned by the end of January, 2012, mostly in Arkansas, North Carolina and Chicago. Looking ahead, it's possible they will build 350 stores per year.

In the mean time, the world's largest retailer is experimenting a bit. According to a story in the CSP Daily News, Walmart Express will let customers help determine what they should carry by posting signs that say, "If you want it, we'll get it," and by offering delivery right to the store.

Click here for an external picture of the new Walmart Express store.

The Lehigh Valley grocery scene continues to evolve

One might think that a drive up north to the Lehigh Valley would alleviate the grocery schizophrenia we experience in the Philadelphia market. Not so. Apparently, Lehigh Valley consumers need a scorecard - not to mention a pencil with a good eraser - to keep track of the industry players and their comings and goings.

Coming:

• Bottom Dollar currently has four locations in The Valley, and may have as many as seven in the next year.
• Weis Markets has increased its budget for adding and updating stores, according to a company spokesperson. The grocer currently has 14 locations in The Valley and will soon have 16, second only to Giant.
• Giant, with 17 locations in The Valley, has been spending money on renovations at a number of area stores.
• A ShopRite is proposed in Trexlertown, along with a Target and BJ's. 
• Walmart is a major player in the area, of course, and the Whitehall location will soon become a Supercenter and include a full-service grocery store.
• Three of the four Target stores in The Valley include a Fresh Grocery section.
• Dollar stores and drug stores continue to expand their grocery selections.

Going:

• Pathmark shut its location in Lower Saucon, which is causing residents and reporters to speculate as to who will take over the space.
• Wine kiosks - Wegmans is pulling PLCB wine kiosks from all its Pennsylvania stores, including Allentown, Bethlehem and Easton, the three major cities in the Lehigh Valley (also known as A-B-E).

As always, I'm afraid something may have changed since I started writing this blog post.

Walmart still feared by supermarkets, but not as much as last year

Every year Supermarket News asks supermarket operators which competitors they fear the most. Walmart remains the top choice, but their fear factor is waning. In 2009, 64% of all respondents identified Walmart as their biggest threat. That percentage decreased to 50% last year and 45.3% this year.

Dollar stores (17%) were identified as the second most feared competitor, followed by club formats (15.1%) and limited-assortment discounters (3.8%).

The Supermarket News story quoted one respondent, who described the growing respect for dollar stores. "Walmart has been a threat for more than two decades, but the last year saw much more activity in the dollar stores when it came to Center Store items. Dollar stores have added cereal, canned goods, dairy and other items traditionally purchased in grocery stores."

Aldi vs. Walmart, Part II

Shortly after blogging yesterday about The New York Times' piece on Aldi's and Walmart's move to urban areas, I read a brief analysis about the two retailers.

A Gerson Lehrman Group expert contributor wrote that Aldi has quietly drawn the battle lines for market share against Walmart's new small format initiative. The author believes Aldi has some significant advantages, so much so that it may well outperform Walmart in market share and pricing strategy.

The author's analysis:

1. Aldi has beat Walmart to the market.
2. Aldi has a small format smaller than Walmart's.
3. Aldi's margins are better than Walmart's.
4. Aldi has avoided negative publicity.
5. Walmart may have the advantage in its ability to skew assortments to specific market segments, like Hispanic or Asian populations.

More details here: Gerson Lehrman Group

Aldi succeeds in urban areas as Walmart struggles to gain access

The New York Times story below reports on Aldi's success in the United States. The company has been able to move into urban areas with much success and seemingly no barriers (and non-union workers), while Walmart continues to face a wave of opposition from unions, politicians and residents alike. And the fact that the Aldi Group, a German company, was the eighth largest retailer in the world in 2009 is lost on many people.

Where Wal-Mart Failed, Aldi Succeeds