E.V. supermarkets battle for shoppers - East Valley Tribune: Business

E.V. supermarkets battle for shoppers

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Posted: Sunday, June 15, 2003 8:02 am | Updated: 2:11 pm, Thu Oct 6, 2011.

The East Valley is becoming a battleground for grocery shoppers, with giant discounters, small independents and supermarket chains fighting for market share.

Wal-Mart plans to debut its first local neighborhood market in Mesa. The neighborhood market is like a Wal-Mart Supercenter with the general merchandise portion chopped off.

Super Target, the trendier discount department store’s version of a general merchandise-supermarket combo, plans to build its first two Arizona stores nine miles apart in Gilbert. Target said the deal for the Super Target stores is still in progress — for now, they are the only Arizona sites under consideration for the new chain.

And, several niche grocers have opened in the East Valley. Sprouts debuted in Chandler and spread to Scottsdale. Wild Oats has stores in Scottsdale and Phoenix. Whole Foods has stores in Tempe and Phoenix.

Throw in the independent grocers and the supermarket chains, and the result is a cornucopia of choices for the consumer.

Nationwide, grocery store sales increased 1.6 percent in 2002, according to the Food Marketing Institute, which just released its annual state of the industry report.

Factor in population growth, and sales actually decreased on a per capita basis, said Tom Rex, research director for the Center for Business Research at Arizona State University.

Rex said it’s likely that budget-minded shoppers are slashing gourmet cookies and caviar from grocery lists during tough economic times. Also, people continue to dine more at restaurants.

While overall supermarket sales are down or flat, he said, different types of retailers are selling food, adding more sides in the battle for the consumers’ food dollars. With the explosion of warehouse and supercenters, dollar stores and niche grocers, traditional supermarkets are watching their food sales get squeezed.

The East Valley’s supermarket scenario differs from many U.S. markets in that there are more choices for the consumer, said Rich Jennings, president of the Arizona Food Marketing Alliance, the local industry trade group.

"Rapid population growth makes (the East Valley) attractive to retailers," Jennings said.

Finding a niche is key for food retailers trying to succeed in trying times, Food Marketing Institute senior vice president Michael Sansolo said recently.

In fact, independently owned supermarkets seem to have an edge, Sansolo said.

"FMI research shows that consumers value stores that have friendly employees and pay attention to special requests," Sansolo said.

Independents generally have lower overhead and therefore can offer lower prices, said Tom Stabler, who owns Franklin Farms Market in Mesa.

Independents also can react faster than big chains to market trends or neighborhood needs, Stabler said. Or to try out strategies without mounds of red tape. Stabler, for example, added a "99-cent section," that has turned out to be a big hit with shoppers.

"I asked customers what they thought, and I heard, ‘Now I don’t have to go to the dollar stores,’ " Stabler said. "I was losing business to the dollar stores that I didn’t even know about."

But Stabler said independents are still fighting "the big gorilla" — meaning one-stop shops such as Wal-Mart Supercenters and Super Targets. Wal-Mart Supercenters, where customers can pick up produce, new tires and a pair of shoes at the same time, have been a hit in the East Valley.

Wal-Mart has changed the entire landscape of grocery selling, said Todd Hale, senior vice president, consumer insights for AC Nielsen U.S.

The national pollster completed a report in March on the "blurred channels" of food sales. Supermarkets have a big lead as the most popular place to shop for food, but the Nielsen study showed a surge in food shopping at supercenters and dollar stores.

"Wal-Mart is causing other retailers to take a hard look at how they price," Hale said. "Kroger’s (Fry’s parent), Albertson’s and Safeway are focusing on cost-cutting and selling product categories they haven’t sold before. Groceries are selling more patio furniture than ever, TVs, DVDs."

Competition with the supercenters has caused supermarkets to house banks, drug stores and other services to attract time-starved consumers, he said. Albertson’s and Safeway are touting Starbucks stores within their stores, for example.

"Our main focus is groceries, but by adding things that make sense, we add attractions for our customers," said Kara Glover, spokeswoman for Safeway’s Phoenix division.

Albertson’s, which is newest to Arizona among the national grocery chains and has the fewest stores, is at the forefront of the war against Wal-Mart for the one-stop shopper.

The company recently completed a major project to move entire Osco Drug Stores into nearly all of its Arizona supermarkets, and it added gas stations to 15 of the stores, 12 of them in the Phoenix metro area, said Karen Ramos, Albertson’s Phoenixbased spokeswoman.

Just a week ago, the company announced an exclusive arrangement to hawk Toys "R" Us toys in all its stores. And it’s already selling Krispy Kreme donuts.

"We try to offer convenience as many ways as we can," Ramos said.

Homegrown Bashas’, which operates the high-end AJ’s, the ethnic Food City stores and the mainstream namesake stores, carves out its niches like a mega-sized independent grocer.

"We do extremely well at understanding what each neighborhood needs and providing it," said Mimi Meredith, Bashas’ spokeswoman. Because the company is family owned, it can make decisions without corporate approval.

Stabler, who has watched the food sale evolution in the East Valley for more than 25 years, said the consumer is becoming ever more diverse. To stay alive, supermarkets will have to continue to adapt.

"If you are content, you are doomed," Stabler said.

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