OSAGE BEACH, Mo. (FNS) -- Supercenter food sections aren't always a profit boon but fuel the format's success, said Bill Lancaster, vice president of sales at Associated Wholesale Grocers, Kansas City, Kan.
"There are some stores not doing [very well] on the food side, but all of them are very successful in that they have accomplished what they planned to do: increase the frequency of shoppers to their stores, thereby increasing sales of soft and hard goods by 25% to 30%," Lancaster told members of the Missouri Grocers Association, Springfield, Mo., at their annual convention here earlier this month.
Lancaster and his staff at AWG have extensively researched supercenter competition, publishing their findings in a book titled "Survive and Thrive." The latest edition, released this month, said the typical Wal-Mart supercenter, for example, does 35% to 40% of its business in food vs. 60% to 65% in nonfood. Overall sales exceed $1 million a week and are expected to reach between $50 million and $65 million annually per store.
Yet Wal-Mart's supercenter food sales can vary widely from store to store, the book said. For example, a 244,800-square-foot store in Mexico City generates $2.1 million a week in food sales, while a 128,000-square-foot unit in Ripley, Tenn., does $115,000.
While food may not be Wal-Mart's profit driver, its supercenter food sales can affect nearby supermarkets, noted Bob Headlee, owner of Bob's IGA, Carthage, Mo., who spoke in the panel. Headlee said his store's business, which had 10% to 12% sales gains for six months, fell 50% after a Wal-Mart supercenter opened 12 miles away in Joplin, Mo. The supermarket previously competed with just two regional operators -- one folded after Wal-Mart's arrival.
Bob's IGA countered with a comprehensive promotional campaign plus an employee retraining program to boost hospitality and store cleanliness. Its sales now are only 5% to 10% less than levels before Wal-Mart arrived, Headlee said.
After his speech, Lancaster told SN his research shows that Wal-Mart is eyeing big cities for supercenters. So far, he said, most units are in small or medium-sized towns and draw customers from a 30-mile radius.