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Thread: Grocery store over-saturation

  1. #1
    Cyburbian illinoisplanner's avatar
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    Grocery store over-saturation

    I'm sure it's a problem that one can encounter anywhere, from downtrodden industrial and agriculturual urban centers to suburbs to the inner city: too many grocery stores.

    But, what's really sad is when you see a grocery store that was built just 10 years ago go under, or when a property never really seems to find a decent tenant, going through so many in a short period of time.

    On a certain 4-mile long retail strip near me, there are probably a dozen grocery options:
    CostCo (self-explanatory)
    Dominick's (regional chain owned by Safeway...#2 chain in Chicagoland)
    Jewel-Osco (regional chain owned by Albertson's...#1 chain in Chicagoland)
    Cub Foods (a regional chain)...used to be an Eagle (another smaller regional chain)
    Aldi (smaller convenient grocer offering cheap prices and generics)
    Meijer (massive superstore based out of MI)
    Super Target (self-explanatory)
    Trader Joe's (specialty foods)
    Woodman's Market (Wisconsin-based warehouse grocer)
    another Dominick's

    Can an area really sustain all these stores? Cub Foods is leaving next month. Unlike Eagle, which folded chain-wide, Cub is simply closing just this location because of it's failure to do business (in an area with $100K avg. household incomes and rapid population growth). Dominick's, with their high prices, chainwide problems, and half-empty parking lots is also a concern.

    So what do you do? And what about these run-down industrial cities with empty big box after empty big box after empty big box? Nobody ever seems to want the old property (they would rather build new) and there are only so many grocers to fill the slot. Do you let non-grocery chains know about the property? And just how much grocery stores can an area handle? Or does it really all have to do with how well the store is managed and the quality of their products and which store is truly better?

    Also, some areas might have the same problems with drug stores. They're not really a big issue in Chicagoland though. Walgreens owns the market and location placement down to a science.
    "Life's a journey, not a destination"
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  2. #2
    Cyburbian Cardinal's avatar
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    The answer to your question is maybe. How many people are there in the market area? How do they spend?

    It is not surprising that Aldi and Cub are leaving. Both cater to the low end, and in an increasingly upscale place they are simply not going to hang on. Dominicks is saddled with ownership by Safeway, which in my opinion has taken first place in poor service. The surprise to me was that you did not say that Jewel was struggling. Albertsons is going under unless they begin to make some serious changes.
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  3. #3
    Cyburbian DetroitPlanner's avatar
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    I think a lot of the stores by you were built for an anticipated market that is yet to be there. With the slow down in the economy, people are building fewer homes in higher income areas. Therefore, in re-evaluating their market place and where it will be in 10 years, things are probably looking much different than they would havea few years back when these stores were being planned.

    In terms of the older areas with lots of industry, these are the neighborhoods that are losing the most population as people trade up to the slightly larger homes and the newer homes are built on the periphery of the city. Often times the house which may have had a family of five is replaced by a family of only one or two, or homes in this area get bought up for other uses further shrinking the ability for grocery stores to make a profit.

    That being said the grocery store business is good for someone with the right market plan, who keeps his stores clean and his prices marked competivily regarless of the neighborhood. People will travel slighty further to shop at cleaner, well kept stores.

    I've been to the Meijers and the Dominicks there, both seem to be clean stores. I never went to the Cub, becasue my sister said the store is always dirty.
    We hope for better things; it will arise from the ashes - Fr Gabriel Richard 1805

  4. #4
    Cyburbian illinoisplanner's avatar
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    Quote Originally posted by Cardinal
    It is not surprising that Aldi and Cub are leaving. Both cater to the low end, and in an increasingly upscale place they are simply not going to hang on. Dominicks is saddled with ownership by Safeway, which in my opinion has taken first place in poor service. The surprise to me was that you did not say that Jewel was struggling. Albertsons is going under unless they begin to make some serious changes.
    I don't think Aldi is leaving...hopefully not.

    Additionally, Piggly Wiggly, a smaller grocer (like Aldi) 2 miles east of the strip, moved out last year and is being replaced by Cantera, another low-cost grocer. And Jewel Osco is building a second store over here. Not sure if that's a good idea or not.

    People like Jewel because they are most familiar with it, and it has the best selection, format, and quality of products (including meat, produce, bakery, etc.). We only stopped shopping at Jewel because they were starting to rape us with their prices. We now travel 15 minutes to go to Woodman's, which has everything under the sun at cheaper prices.

    The answer to your question is maybe. How many people are there in the market area? How do they spend?
    The population these stores serve vaires, but I think it's a safe bet to place this number at around 100,000-150,000. I think people like to go to places with the cheapest products, name brands, and the least sacrifice in quality of goods. They shop on the weekends, or at least on a weekly basis. And some have no problem going to the butcher, bakery, or just The Jewel for better quality items in those areas.

    Quote Originally posted by Detroit Planner
    In terms of the older areas with lots of industry, these are the neighborhoods that are losing the most population as people trade up to the slightly larger homes and the newer homes are built on the periphery of the city. Often times the house which may have had a family of five is replaced by a family of only one or two, or homes in this area get bought up for other uses further shrinking the ability for grocery stores to make a profit.
    That's true. I would think someone would open up on the fringes of town then, though. I've been to cities in western parts of IL and just seen empty grocer after empty grocer along the highway (as well as department stores, drug stores, etc.). Do they just have enough room that whoever comes into town next would rather build a new store, while others remain vacant.

    That being said the grocery store business is good for someone with the right market plan, who keeps his stores clean and his prices marked competivily regarless of the neighborhood. People will travel slighty further to shop at cleaner, well kept stores.
    I see what you mean, and I see everyone in my area flocking to the latest store. It seems like whenever my family finds the place that has the best balance between quality and price, everyone follows. But with 10 stores in a market, aren't you always going to have somebody who's in last place? So, then is 10 stores too much to handle?

    And what about when Wal-Mart decides to finally expand to a supercenter?

    I'm not trying to put you on the spot personally, though. Everyone, feel free to answer.
    "Life's a journey, not a destination"
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  5. #5

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    God. I remember being a poor student and shopping at Aldi. Nasty, nasty stuff.

    The town where I live has this problemm with the grocery chains abandoning older centers for newer, larger formats near the freeway. Nugget Markets is driving all of the mid-market chains (Safeway, Albertson's) somehwat upscale, but the latter are not there yet. I always shop at Nugget, even though an Albertson's is much closer. A southern California grocer that half-heartedly moved into the Northern Cali market (Ralph's) has now given up

    We have seen the older boxes sit vacant, be occupied by (fly by night) furniture stores, be taken over by a health club, etc. The fly-by-night furniture chains seem to be the biggest users.

    Super WalMart is moving into the market, but a bare boneswarehouse grocer, WinC, will probably retain its low end market share.

  6. #6
    Cyburbian mgk920's avatar
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    Quote Originally posted by illinoisplanner
    So what do you do? And what about these run-down industrial cities with empty big box after empty big box after empty big box? Nobody ever seems to want the old property (they would rather build new) and there are only so many grocers to fill the slot. Do you let non-grocery chains know about the property? And just how much grocery stores can an area handle? Or does it really all have to do with how well the store is managed and the quality of their products and which store is truly better?

    Also, some areas might have the same problems with drug stores. They're not really a big issue in Chicagoland though. Walgreens owns the market and location placement down to a science.
    How many of the vacant grocery stores, big boxes, drug stores, etc, have 'no compete' restriction clauses in their deeds? That can be a *HUGE* issue with getting them re-occupied.

    Mike

  7. #7
    Cyburbian illinoisplanner's avatar
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    Quote Originally posted by mgk920
    How many of the vacant grocery stores, big boxes, drug stores, etc, have 'no compete' restriction clauses in their deeds? That can be a *HUGE* issue with getting them re-occupied.

    Mike
    Yeah, I'm not sure. But BKM is right in that fly-by-night furniture stores and even shoe stores (yes, I once saw an independent shoe store move into an old Dominick's in a closer-in 'burb) are now in grocery stores. This, to me, makes the area even more unattractive. But what are you to do?
    "Life's a journey, not a destination"
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    I don't think I have seen more than one grocery store close up in this area (St. Louis metro) in the past 10 years. Within St. Louis City I have seen at least 2 stores open in the past 3 years and here in St. Charles a new store is getting ready to open at a prime location (I personally am a little sick about this one, its an Aldi's right in the middle of the new Bass Pro Shopping Center, the area that was promised to be developed as a regional draw...yep I bet Aldi's will draw people from ALL over the region )...
    We do have several other big box uses that have pulled out and the building sat vacant for some time. However, many of them have been reused/redeveloped over the past year. Two examples I can think of are an old Kroger, coverted to an ACE Hardware store and St. Louis Tan Co.; another is an old Venture Store that is being reused as a sporting good store and Hobby Lobby; and an old Target store that has been turned into a computer store. The only big box we have in this city that is sitting vacant is an old Kmart building. Access to it is not very good, the structure is old/ugly, the only positive thing about that site is the ample parking, it has been vacant for years. It seems it would be a great location to redevelop but it just never seems to happen.
    We still have a few "neighborhood, local" grocery stores, I was just working with the owner of a small IGA, his business is so good right now and only project to get better that he is investing hundreds of thousands of dollars (this is a small store, no where near a highway, smack in the center of a middle income neighborhood) to improve the inside and facade of the 1960's structure.
    Perhaps we are fortunate not to have all of the grocery stores popping up, and that tthe big box buildings that have been left behind have been redeveloped. I think it is the responsibility of the Economic Development Department within the city to ensure these structures are being reused.

  9. #9
    Cyburbian Random Traffic Guy's avatar
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    Food Lion came in big in DFW area, just as their big meat tampering "scandal" hit the news. They pulled out within only a year or so, leaving their new stores empty all over the place. Happily I think most of them have been recycled, mostly as government buildings like schools, etc.

    Wal-Mart is the #2 grocer in DFW now I think, and headed for the top in a big way.

  10. #10
    Cyburbian The One's avatar
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    Yeah.....

    It seems that the smaller grocery stores are taking over in mid sized towns of 25,000 to 75,000 people at about one store per 10,000 people.....at least that's my arm chair observation......anyone have solid numbers on this? I'm too lazy to look at the most recent economic census data.....
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  11. #11
    It must be pointed out that there are a lot of neighbohroods without access to any grocery stores, particularly rural areas and poor inner city communities. The impact on the quality of life and health is very strong

  12. #12
    Cyburbian imaplanner's avatar
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    Quote Originally posted by Gotta Speakup
    It must be pointed out that there are a lot of neighbohroods without access to any grocery stores, particularly rural areas and poor inner city communities. The impact on the quality of life and health is very strong

    Exactly what I was going to say. Many high density neighborhoods I have seen have access to no grocery stores. A combination of factors often sends them to the strip mall areas. Most notably I speculate that the typical parking requirements for a grocery store prohibit their placement in certain areas where they are most desperately needed.

  13. #13
    Cyburbian
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    Hey Aldi has some good stuff! I don't care for frozen dinners, etc... Those types of things but outside of that they have good stuff. They do a pretty good job locating in places and finding their niche. They have done very well in German markets. They have a decent financial backing and are expanding. Some of their chocolates aren't bad.

    It seem in the downtown I work in there is a lack of places to buy groceries, it has yet to land a big chain store downtown, but a newer market/cafe opened up. They have some good stuff and not too bad on the prices. I always expect to spend a bit more on groceries in a downtown setting... Gotta pay for the high rent!

  14. #14
    Cyburbian cch's avatar
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    My hometown of about 26K, in southeast Iowa had a ton of little grocery stores when I was growing up, and they all did fine until the Super Walmart came to town about 13 years ago. Now there is one neighborhood grocery, and two midwest franchises that are doing good, but several went under. Luckily, they have found re-uses for some, but not all, of them. One became a car dealership, one became a Hobby Lobby (craft/interior store), and one became a Harley Davidson store. It is my understanding that they really market these vacant big-box buildings, with more incentives and a more reasonable price, than if someone came and built new.

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