Retailers are combining and altering traditional retail models and aligning with non-competing businesses."
New shopping preferences, competitive forces and economic realities are driving two big trends in grocery retailing: concept mashups and first-of-their-kind partnerships.
Looking to attract shoppers in an increasingly competitive landscape, retailers big and small are combining and altering traditional retail models and aligning with non-competing businesses to create a distinctive offer and increase sales.
Here are seven developments worth watching:
Albertsons’ Flagship Store
“Supermarket” doesn’t adequately describe Albertsons’ two-story, $7.2 million, year-old flagship store in Boise.
Beyond traditional grocery items sold at prices comparable to those at other Albertson’s locations, this store offers an expansive line of higher-margin prepared foods and unusual-for-a-supermarket items. The store features a pizza oven, sandwich bar, stir-fry station and burger grill, plus an in-store bar, Broadway on the Rocks, that serves beer from 36 taps, wine by the glass and mixed alcoholic drinks.
The Living Well section is stocked with holistic, natural and organic health and beauty products and includes an in-store pharmacy. An on-site expert educates and guides shoppers on their purchases.
Hosting more than a dozen special events each month, the location has table seating for 200 and is designed with an outdoor deck and a roll-up door that lets the outside in during nice-weather days. It’s also equipped with a meeting room used for cooking demonstrations and can be rented by groups of up to 26 people.
Walmart’s Pet Projects
Targeting the 68% of U.S. households that include a pet, Walmart in May revealed plans to increase the number of stores with walk-in veterinary clinics. The retailer plans to open 100 clinics, which offer routine vaccinations and treatment for minor illnesses at 40% to 60% discounts, by May 2020.
In another out-of-the-big-box move, Walmart’s Town Center initiative will repurpose selected locations to attract people from surrounding areas with entertainment, dining and exercise options and community activities. Parking lots and other acreage will be transformed with play areas, including skate parks and walking and biking paths, the company announced. “Mobility hubs” will offer bike rental, bus, taxi and ride-share services.
Depending on the site, vendors will do business at storage-container venues; “pads and parks” will enable other franchises and businesses to contribute to the local community on Walmart-owned sites; and food halls, food trucks and in-store tenants will provide on-premise dining.
Better-for-You Basics Market
The year-old, 7,500-square-foot Basics Market serves as combined market, classroom and gathering space. This store and two soon-to-open sister locations are positioned as better-for-you local markets with a proclaimed purpose of “nurturing strong, healthy communities through food.”
Partnering with regional, sustainable producers whenever possible, Basics Market offers pantry staples, produce, meats, cheese and dairy items, frozen foods and a coffee bar, plus meal stations organized around chef-developed recipes using seasonal and local items.
Nutrition, kitchen skills and cooking classes for adults and kids, some complimentary, are offered daily.
Target and Disney
In mid-August, just days after Target unveiled plans to drive its grocery business and strengthen its position as a one-stop shopping destination with the private-label Good & Gather grocery brand, the mass merchandiser revealed it’s partnering with one of the most beloved brands in the world: Disney. The new partnership calls for 65 Disney stores, 25 to open before this year’s holiday shopping season, inside select Target locations. The Disney stores, which will average 750 square-feet and be staffed by Target employees, will sell more than 450 items, including 100 products previously found only at Disney retail sites.
As part of the partnership, Target will open a small-format location outside the Walt Disney World Resort in Orlando.
There’s close to 90% overlap between Target and Disney customers, Bob Chapek, chairman of Disney Parks, Experiences and Products, told CNBC. “The experiential retail coming to Target is just what today’s consumer is looking for.”
ALDI and Kohl’s
In February, ALDI opened a store in a portion of a Kohl’s building — the first of five to 10 Aldi test stores expected to open in right-sized Kohl’s stores.
The ALDI store, which has its own entrance and no common space with Kohl’s, is stocked with the standard ALDI offer of fresh and on-trend items, general merchandise and a limited number of private-label items at competitive prices.
Kroger and Walgreens
Last winter, The Kroger Co. and Walgreens unveiled the Kroger Express concept, a curated assortment of 2,300 products at 13 Walgreen test stores in Northern Kentucky, near Kroger’s Cincinnati headquarters. The assortment includes Kroger’s Our Brands products, including Simple Truth natural products, and Home Chef Express meal kits. As part of the pilot, products from both brands are available for purchase on Kroger.com for pick up at Walgreens.
At the same time, Home Chef Express meal kits were added to 65 Walgreens locations in Chicago.
This fall, the partnership expands with the Kroger Express curated grocery assortment and Kroger Pickup service in 35 Walgreens stores in the Knoxville, Tennessee, market. Plus, Walgreens own-brand health and beauty care products will be sold in a Walgreens-bannered section in 17 Kroger supermarkets in Knoxville.
Hy-Vee, Fresh Joe’s, Smokey Row and More
Hy-Vee continues to enter into unique partnerships to expand its offer in selected markets across its 260-store, Midwest footprint. In late July, the grocer announced an agreement with Canadian fashion retailer Joe Fresh to add apparel, accessories, footwear and beauty items for women, men, children and babies to select stores in seven markets.
The retailer also is expanding its foodservice partnerships, with a Smokey Row Coffee Co. restaurant opening mid-September in Chariton, Iowa, home of Hy-Vee’s largest distribution center. The Smokey Row, the first of several planned, will offer coffee and other beverages, breakfast items, soups, sandwiches, ice cream and other desserts, and a kids’ menu. Customers will walk up to a pay station and order breakfast, lunch or dinner items and be able to sit and enjoy their meal in a casual self-service atmosphere.
It’s not the supermarket operator’s first foray into restaurants. Later this year, the retailer will open its fifth Wahlburgers restaurant, selling the chain’s signature burgers, homestyle sides, fish, chicken and vegetarian options, plus specialty drinks, such as adult frappes and floats. Hy-Vee, which also offers Wahlburgers-branded items in its full-service Hy-Vee Market Grille restaurants in Des Moines and Minneapolis, plans to build, own and operate 26 Wahlburgers.
The grocer is testing its own concepts, too. The first of 50 to 60 planned Hy-Vee HealthMarkets opened last summer. Designed to attract grocery shoppers who also want to pick up healthy lifestyle and personal care items, the small-format HealthMarket sells 11,000 fresh items, including organic and pre-cut produce, meat and seafood, dairy, frozen food and Hy-Vee Mealtime Kits. The store offers a full-service pharmacy, health clinic, hearing aid center, sports nutrition section and Aisles Online order pickup. A hydration station merchandises nitro coffee, infused waters. A nearly 3,000-square-foot Orangetheory Fitness center operates adjacent to the first store in West Des Moines, Iowa.
These retail mashups and collaborations will be successful — or won’t. But in retailing today, the biggest risk is not taking one.