The growing interest in urban locations is making supermarkets street-smart about a different type of retailing.
As operators commit to more urban sites, their goal is for their new customers to enjoy the shopping advantages open to consumers in the suburbs.
But some retailers have learned that in order to achieve that goal, significantly different planning, staffing, merchandising and marketing toolboxes may be needed.
Retailers interviewed around the country underscored the challenges of operating urban supermarkets, which include:
Contending with very high real estate costs, sometimes requiring creative modifications of physical plant layout.
Tailoring product offerings to the unique needs of specific cultural groups.
Adjusting staffing and employee-training policies to address differences in the urban labor market's job-readiness.
Working closely with community organizations, often in ways that are unique to urban locations.
Urban neighborhoods are easily characterized by higher population densities than suburban towns. However, that is sometimes the only common denominator between different urban neighborhoods, even within the same city. The customer base of urban supermarkets may range from people in severe poverty to some with extreme wealth, and often includes people with diverse cultural backgrounds. Obviously, different customer bases often require different sets of strategies.
Physical Plant Challenges
Some supermarket companies see a large physical plant as essential for urban retailing. "It's necessary to have a box that big to accommodate the diverse needs," said Bernie Rogan, director of corporate communications for Shaw's Supermarkets, East Bridgewater, Mass. He said that Shaw's had identified 45 different ethnic and religious groups within a 5-mile radius of its store in Waterbury, Conn., which opened this March. "If we're going to be the store for everybody," Rogan said, "then we need to have product for everybody within the walls of our stores. We now need a minimum of 6 acres with a parking lot for an urban store."
"A store in our most affluent suburb will look remarkably similar to the urban stores we have just opened," said Harvey Gutman, Pathmark Stores' senior vice president for retail development.
Of Pathmark's 134 stores, approximately 20% are located in urban neighborhoods. Its first urban store, in the South Bronx, opened in 1964, is still a strong location for the chain.
Late this spring, the Carteret, N.J.-based retailer opened a 53,000-square-foot newly constructed store in New York's Harlem. "Urban locations get magnified," said Gutman. "Small challenges can become large challenges." In addition to locating stores along public transit routes, urban supermarkets must confront issues of parking in different ways than at most suburban sites.
At other stores in New York's boroughs of Brooklyn and Queens, Pathmark developed underground or adjacent garage parking. For its Harlem store, Pathmark created rooftop parking. The solution allowed the store to use more of its street-level space for retail and receiving. By placing the entrance and exit ramps on East 124th Street near the back end of the store, the rooftop parking plan also enabled the retailer to satisfy the neighborhood's anxieties that the store may have generated a traffic nightmare on East 125th Street, Harlem's main commercial street.
Food Emporium and other upscale supermarkets located in affluent Manhattan neighborhoods have no parking provisions. The population density from the neighborhood's high-rise buildings enables some chains to successfully operate several locations within blocks of each other.
Although city locations often impose certain limitations on supermarket operations, unique sites sometimes produce quirky bonuses. Shaw's Rogan noted "In East Boston, we're right on the harbor. Tugboats pull up to a dock 50 feet from our entrance to stock up for their run to New York City!"
In pricey markets, ample real estate is clearly a daunting challenge. SN has learned that Pathmark, whose stores average 54,000 square feet, will be developing a smaller prototype. Two 35,000-square-foot Pathmark stores will open in New York this fall. Pathmark is remodeling a former Waldbaum's store in Flushing, Queens; the other will be in the Sheepshead Bay section of Brooklyn. Gutman advised, "The customer will still find a very representative selection, and greater than they find in stores where they currently shop."
But Pathmark is not abandoning its larger footprint stores. In May, it opened a full-size store in downtown Philadelphia, near City Hall. Construction is under way on two more stores in the Bronx set to open next year. Ground was also broken last month for a full-size Pathmark in the Springfield Gardens section of Queens. With a median household income of about $50,000, the neighborhood is one of the most affluent African-American communities in the country.
Managing a Different Work Force
"More than half of our work force is women," said Bill MacAloney, chairman and chief executive officer of Jax Markets, Anaheim, Calif. MacAloney explained that the labor demographic presents some challenges in training. "Many of them have never had an opportunity to be in the workplace because of their family background; in some cultures, women traditionally did not take jobs. Computers and registers are all new to them."
Johnny Johnson, president, chief executive officer and owner of Community Pride Food Stores, operates a total of nine units in and around Richmond, Va. His first four stores were opened concurrently in 1992, then two more in 1995 and 1996. In May, Community Pride acquired three substantially larger Rack & Sack stores -- all in suburban locations -- from Richfood Holdings.
Johnson highlighted many stark contrasts regarding staffing. At his urban stores, 80% of his personnel are single females with children. He said, "There's always a crisis in their home, so they come to work with different issues than the suburban employee. They're trying to get through today. The suburban employees are planning their futures."
The "issues" affecting employees translate to very practical differences in Community Pride stores' operations. "We provide day care and transportation for our urban staff," Johnson said, "but at the suburban stores, we may offer a 401K plan." He said that managers at his suburban stores will keep physicians' numbers for their employees handy, but at his urban stores, "we need to have numbers for bail bondsmen and legal counsel." Johnson added that "permanent jobs" have a very literal reality in his urban Richmond neighborhoods. "In suburbia, it's a job. At the urban stores, people stay here forever. It's their life."
At Jax Markets, MacAloney reported, "The staff pretty much has to be bilingual." More than 90% of his employees speak English and Spanish. In other areas, however, multilingual capabilities are needed. Rogan said that because most waves of immigration pass through Shaw's New England territory, "You'll regularly hear Spanish, Portuguese and other languages on the store PA system. Even in Maine, where there is a substantial Cambodian community, there'll be periodic announcements in Cambodian," he said.
New Rules for Merchandising
Understanding and responding to the customer base is essential to successful supermarket operation, in any community. "People have to feel that the business is part of the community," said Todd Turner, vice president for urban affairs and diversity programs at the Food Marketing Institute, Washington. Sources indicate that adjustments in approaches to merchandising, marketing, communications and community relations are especially important at urban supermarkets.
"The urban consumer is the future of the grocery business," declared Johnny Johnson. "Consumers in urban areas are still cooking. They are still holding on to that family meal as being the ray of hope." Johnson said that the mystery about urban retailing could be alleviated by just getting to know the shoppers. "They eat different," Johnson noted about his African-American and Latino customers, "so the stores need to be merchandised differently. We like all the calories we can get. We like to eat things that taste good."
As an example, he noted that his urban customers shop the meat department by the package price, by how many chops are in the package, "because they have a certain number of mouths to feed," but that at suburban stores, "they shop by price per pound."
Burt Saltzman, president of Dave's Supermarkets, a six-store chain in Cleveland, said that meat sales are about one third of his total sales early in the month. "That's unheard of in the suburbs," where just one of his stores is located. Saltzman said that, annually, meats account for 25% to 27% of total sales.
To meet customers' needs, Dave's Supermarkets' urban stores feature 25-foot sections of smoked meats, including hocks, neck bones and chitterlings -- a substantial display, considering that the stores range in size from just 20,000 to 70,000 square feet.
Dave's Supermarkets' seafood departments are also different. "We carry fish like ocean perch and catfish in the city," Saltzman indicated. "At the suburban store, it's more striped bass and tuna. Our city customers won't buy fish at $10 a pound."
MacAloney reported that Jax Markets carries different cuts of meats, many varieties of chilies, Jumex juice and other Hispanic products. "You wouldn't be stocking jalapenos in a can in Beverly Hills like we do," he said, adding that his stores do "about 60% to 80% more in perishables than the average supermarket."
Rogan reported that Shaw's Supermarkets now "co-mingles products that used to be in an ethnic aisle in the mainstream aisle." He explained that "Some customers may not go down an ethnic aisle if they are not of that ethnicity, but will buy the product if it's in mainstream." But the store still maintains the ethnic aisle. "We'll do double shelf for certain fast-moving products," said Shaw. As an example, he noted that "Jasmine rice is really hot now. People are buying 50-pound bags, and not just Hispanic or Asian customers."
Indeed, highlighting ethnic products, particularly in conjunction with holidays, can be a total win-win plan. Rogan pointed out that in Fairfield, Conn., "Before and during Passover, we stationed two rabbis in the store to promote Passover products, oversee the strict Passover kosher certification and advise customers."
Supermarkets must also be cautious to recognize the distinct needs of different nationalities within an ethnic group -- even different divisions of the same nationality. "In Los Angeles, the Hispanic community is predominantly Mexican, so Hispanic products can be pretty standardized," said Rogan. "But in New England, the Hispanic community is Venezuelan, Brazilian, Colombian and many more, and each group has different products they need to see in the store." Accordingly, Shaw's now carries five different kinds of tortillas at one store, and even has a chef to make fresh tortillas in-store. "That was unheard of just five years ago," Rogan commented.
Rogan said the benefit could be tremendous. "Many immigrant communities are used to buying in specialty stores where they know their people are going to take care of them. When they see that a food retailer our size can meet their needs, then we gain loyalty."
Saltzman suggested that great care needs to be taken not to alienate any potential customer base. "Where we are, we have the lawyer who lives downtown, young professionals, people on welfare, factory workers, the gay community -- it's like 'God bless America' -- so you try to merchandise your store in a way where nobody feels that you're only catering to one group."
Linking With The Community
The challenge of attracting customers sometimes is no challenge at all. "If you're going into an area where there is not a lot of retail development, the playing field is a little different, because you may be the only game in town," said the FMI's Turner. Tawn Earnest, communications coordinator for Food Lion, Salisbury, N.C., observed, "In some cases, they are so eager to have a retailer come in because the area had been so long abandoned."
Rogan noted "No modern supermarket had been built in New Haven in 21 years. So when we opened last year, it landed like a spaceship." But even when such fanfare surrounds a new store, retailers need to do their community homework.
Rogan described Shaw's strategy of conducting community meetings, generally in church halls, about one month before a planned opening. After a presentation and question-and-answer period, Rogan said, "Citizens move from table to table to talk with our buyers to let them know what specific products they want us to carry." Out of that face-to-face process, Rogan pointed out that Jamaican customers asked for goats' heads, which the store would not have otherwise planned to carry. "We also sourced a specific kind of pot that Colombian customers prefer to cook their rice," he said.
Listening and responding to such specific needs can also generate wider benefits. "It makes the customers happy, but it's also a great thing for minority vendors," Rogan observed.
The church is an important part of Community Pride's marketing strategy, albeit in a different way than for Shaw's. "I get my business from the churches," said Johnson. "I go to a church every Sunday. I get two minutes on the pulpit and tell my story."
Jax Markets, Community Pride and other stores serving predominantly low-income residents have discovered the value of providing transportation for their customers. Jax Markets' shoppers mostly live close to the stores, although some require rides of up to 8 miles. Johnny Johnson stated, "We take our customers home, with 14 vans running six stores. We save the customer $5 to $10 on the car service, so they'll spend it in the store."
Plans abound for many new urban supermarkets. In addition to Pathmark's additions in New York, Shaw's Supermarkets will open stores in Boston; Everett, Mass.; and Stratford, Conn., by the end of next year. Further, J. Sainsbury, Shaw's parent company, recently acquired 53 Star Markets stores in eastern Massachusetts, of which, Rogan noted, 33 are in urban locations.
Smaller retailers also have active plans to add or upgrade urban supermarkets. Over the Fourth of July holiday weekend, Community Pride Food Stores celebrated the grand reopening of its store in Richmond's Fan District. Tim Hammonds, FMI president, was on hand to tour the $700,000 renovation. Community Pride is remodeling two more of its urban stores, as well as its three new suburban acquisitions from Rack & Sack. Work started July 15. All the remodeling is expected to be completed by the end of September.
Ensuring Security
In discussing the unique challenges of operating supermarkets in urban locations, issues of crime and shrinkage were surprisingly low on many retailers' lists of concerns, but were still squarely real concerns.
"Safety is very important," said Shaw's Rogan. "We use sophisticated CCTV, and make it highly visible to deter the professional criminal -- both in the parking lots and in-store." He noted that some Shaw's stores have nearly 20 cameras and a control room.
At one of Dave's Markets' Cleveland stores, the parking lot is across the street. "We lose about 60 to 70 carts every month," said Burt Saltzman. "It's gotten so that we don't buy new ones. We replace them with used carts, because they just don't last."
"We have loss-prevention issues that aren't necessarily shoplifting," said Community Pride's Johnson. "From October to December, you have to beef up security, because people are going to fake slips and falls to get money for Christmas."
Saltzman recounted his favorite Christmas story: "It was snowing, and as I was pulling off our lot, a woman standing in the bus stop asked if I could give her a ride. She didn't know who I was. She asked if I liked steaks, then opened her coat, where she had four family packs of steaks that she had just taken from my store." In part out of concern for his safety -- but mostly in the holiday spirit -- Saltzman thought about turning her in, but instead drove her home.
