Tampa, St. Petersburg: Convenience is king for older-skewing shoppers
The growing Tampa/St. Petersburg, Fla., market is becoming one of the more competitive retail battlegrounds in the country. Buoyed by retiring baby boomers from the North, the area is seen as a great place for retailers to grab market share.
Several small, innovative retailers and discounters are chipping business away from operators of big-box stores: Walmart, the struggling Winn-Dixie and Publix, the dominant grocer in the area.
Over the last few years, Publix has lost market share to Trader Joe’s, The Fresh Market, Whole Foods Market, Sprouts Farmers Market and Lucky’s Market. Also, Save-a-Lot, Aldi and soon Lidl lure shoppers with their blend of limited assortments, private labels and low prices. These smaller-than-average formats appeal to millennials, a key demographic, because they will soon be starting families. Many of them tend to prefer smaller stores with unique offerings instead of the traditional grocery store.
Publix commands a 36.5% share of the mass retail business, according to Portland, Ore.-based ARM Insight. Mass retailers and clubs combine to exceed that heady figure with a total of 52.8%. The breakdown is Walmart at 34.7%; Target at 7.9%; Sam’s Club at 6.4%; and Costco at 3.8%.
Food, drug and mass merchants continue to tweak product assortments and merchandising programs to appeal to retiring baby boomers, and other elderly shoppers, who have traditionally been drawn to the Sunshine State. Walgreens dominates among drug store chains with a 61% share, according to ARM Insight. CVS Pharmacy follows at 37%, with small independent drug stores accounting for 2%.
“An aging demographic benefits the pharmacy business as there is a direct link between aging and prescription drug use,” Neil Stern, senior partner at the McMillanDoolittle consultancy, said.
Operating a pharmacy in a grocery store, or a Target or Walmart store, would be an obvious asset. Inmar’s 2018 Shopper Behavior Study found that more than 44% of shoppers rate the ability to shop for groceries at the same location as “important” or “very important” in selecting a pharmacy to fill their prescriptions. Publix operates a Publix Pharmacy in 19 supermarkets in Tampa and 12 in St. Petersburg.
“Elderly shoppers, which is an expanding segment in these metro markets, want shopping to be more convenient and easy,” Ken Morris, principal at Boston Retail Partners, said. “In-store product displays should be at appropriate heights, especially for products more frequently purchased by people who are potentially in a wheelchair. Some stores are carpeting more areas to help prevent slipping and falling. Offering magnifying glasses near packages with fine print or working with manufacturers to offer product packaging with larger print are added conveniences for shoppers with limited vision. Drive-through lanes at drug stores are becoming expected and are especially popular with elderly people who have difficulty getting in and out of their cars.”
Target is taking a bold step into the future of this retail battleground with its dual-concept store that aims to provide an edge over Publix, Walmart and Amazon.
A Target in Tampa Bay is undergoing a multimillion-dollar renovation to become “a next-generation store” that emphasizes convenience. One entrance leads time-crunched shoppers into the part of the store designed for convenience, where they can buy groceries and pick up online orders. The other part of the store, with its own entrance, is designed for leisurely browsing of typical Target merchandise.
That compares unfavorably with the plight of Winn-Dixie. Its parent company, Southeastern Grocers, will close 10 Winn-Dixie stores in the Tampa Bay area as it restructures the debt that bankrupted the grocer.
Stage set for drug market share battle in San Diego
The retail marketplace continues to churn in San Diego, a metro area that is growing by leaps and bounds, but also is hounded by high real estate and worker costs. Albertson’s pending acquisition of Rite Aid could shake up the drug channel here, which is dominated by CVS Pharmacy as it competes with a growing number of grocers in a club- and mass-dominated market.
Meanwhile, other factors affecting retail competition are the growing Hispanic population and the increasing popularity of such specialty stores as Sprouts, Trader’s Joe’s and especially Whole Foods, which is sure to flex its muscles due to its new owner, Amazon.
Change began in this area three years ago with the merger between Albertsons and Safeway, the parent company of the Vons banner. Today, according to ARM Insight, Vons has an 18.5% market share in San Diego, while Albertsons only has 2.9%. Adding 7.0% from Ralphs gives traditional grocery slightly more than a quarter market share. More than half of the marketplace is controlled by market leader Costco (22.8%), Walmart (17.6%) and Target (10.8%).
Retailers are certainly aware of the growing population in the San Diego metro market, especially among Hispanic consumers. This will naturally lead to more store growth, which will intensify retail competition. Neil Stern, senior partner at Chicago-based McMillanDoolittle consultancy, predicted that much of this new growth will be in the value grocery segment.
“The immigrant population will also drive significant change in retail,” he said. “The millennial generation is already more than 40% ethnic, as an example. This leads to potential changes, large and small. From a merchandise standpoint, food, drug and mass must make changes to the assortment to accommodate the profiles of various ethnic consumers. On a larger scale, we will see the emergence of more specialty-focused chains, particularly around the Hispanic consumer, with a number of very strong regional chains already emerging.”
The demographic changes also will affect drug stores, which are carrying more food items and other nontraditional drug store merchandise to drive impulse and convenience purchases.
CVS Pharmacy dominates the San Diego marketplace with a 57% share, per ARM Insight. Rite Aid trails at 30% and Walgreens at 12%.
The drug channel in San Diego and across much of the country will be affected by Albertsons’ pending purchase of Rite Aid. “The move will allow Albertsons to go public as a “fully-integrated one-stop shop,” Albertsons’ CEO Bob Miller said when the merger was announced.
Brandt Sharrock, vice president of development and acquisitions of Wellesley, Mass.-based Charterhouse Development, said, “For drug stores, the pharmacy market has become extremely competitive through acquisitions of supply chains and individual drug store chains, small or large. Drug store companies that are successful will be those that focus in an area that is hard to duplicate and is based on health and wellness.
Consumers still want to go to a trusted provider, and the convenience of a wellness clinic in a pharmacy is hard to beat. Combined with a personalized experience in health and beauty, there is a strong, personalized market that is impossible to duplicate online.”
As more retailers offer pharmacy services outside the drug channel, Sharrock said that retail drug chains are well-adapted to compete.
“Grocery providers remain strong in the day-to-day needs, but many drug stores recognize that and are providing convenience store needs to add on to the general checkout ticket and provide immense value in urban markets where convenience is extraordinarily important,” Sharrock said.
Twin Cities grapple with glut of grocers
Minneapolis and St. Paul
After a bit of a shakeup, the drug channel is stable in the Twin Cities of Minneapolis-St. Paul. It began to evolve in 2010, with the purchase of the remaining 25 stores of 80-year-old Snyders Drug Stores Walgreens.
At the time, Love Goel, CEO of Minnetonka, Minn.-based private equity firm GVG Capital Group, said, “The reality of specialty retail is that if you’re not No. 1 or No. 2, you’re not going to be around. Walgreens and CVS dominate, and eventually, the others will evaporate or be consumed by these guys.
Eight years later, Goel seems to have been proven right. Today, ARM Insight reported that Walgreens enjoys an 82% market share in the Twin Cities, while CVS holds 16% and 2% goes to “Other.”
And while the drug channel has stabilized in the Twin Cities, the grocery channel is another story. For retailers, it’s a food fight. For shoppers, it’s a foodie’s dream.
“The grocery scene started to heat up and change toward fresh and local in 2016,” Todd Huseby, a partner with the global consultancy A.T. Kearney, said. “About the city as a foodie destination, local chef and TV personality Andrew Zimmerman said, ‘What used to be fly-over country is now as white-hot as any food destination in America, and is the most interesting.’”
Analysts consider the affluent Twin Cities to be an over-stored grocery market today. What led to this situation began in 2014 when Rainbow Foods closed or sold 27 stores, giving other grocers an opportunity to step in and snatch up its shoppers.
With some 58 stores in the Twin Cities, Cub Foods, a subsidiary of the once-powerful Supervalu, holds the top spot among grocers with a 21.6% share, according to ARM Insight. But analysts have reported a consistent market share decline for several years due to growing retail competition.
Other retailers with double-digit market shares are Target and Walmart at 20.6% and 18.9% respectively. Club stores Costco and Sam’s Club hold respective shares of 7.6% and 5.2%. Trailing Cub Foods in the grocery channel are Edina, Minn.-based Lunds & Byerly’s at 6.6% and Des Moines, Iowa-based HyVee at 4.2%
“Generally speaking in the food sector, there seems to be stifled growth from the publicly traded chains, as Wall Street is paying close attention to CapEx beyond e-commerce and technology investments,” Douglas Munson, principal at MTN Retail Advisors, said. “This is providing a window for some niche formats and chains to try to take advantage of the slow down by the larger publicly-traded companies. In Minneapolis, Hy-Vee is continuing steady growth.”
Hy-Vee is considered the most aggressive grocer in the market. It entered Minneapolis-St. Paul in 2015 and built its eighth store there last year. The family-owned Lunds & Byerly’s is an upscale operator that branched out into e-commerce two years ago. It operates five stores in the Twin Cities. Nipping at the heels of its larger competitors are such specialty retailers as Whole Foods, Trader Joe’s and Aldi.
Cub Foods is enlivening the grocery scene by modernizing stores and adding such attractive departments as a honey bar, popcorn stand, a burrito bar, and a juicery.
Grocers in Minneapolis/St. Paul are stocking more halal products to meet the cultural and dietary needs of the growing Somali population. Lari Harding, vice president of product strategy and marketing at Inmar, said offering this special product assortment is a necessity nowadays.
“If retailers don’t have the correct merchandise to appeal to immigrants, they may not at first perceive change because immigrants won’t be shopping at their stores,” she said. “Retailers seeing a decline in sales may not necessarily attribute it to changing demographics. Therefore, it’s important for retailers to maintain maximum awareness of how the population makeup is changing in the neighborhood outside of the store.”