You need only look at this week’s closure of the Northwest Fresh Tidyman’s store—a store that was booming as recently as five years ago—to see that the supermarket business is a cutthroat industry.
While Tidyman’s was turning out the lights for the last time, citing “lack of profitability,” Wal-Mart is busy planning its third attempt to convince the Missoula Office of Planning and Grants to allow the company to convert its Brooks Street store into a Supercenter, according to OPG.
Having failed to get the proper zoning change approved in 2000 and 2002, Wal-Mart hasn’t given up on its plans to expand the existing 120,175-square-foot department store into a 213,617-square-foot behemoth, complete with a 10-pump gas station.
Nationwide, it’s no secret that Wal-Mart plans to do away with its piddly sub-200,000-square-foot “Discount Centers” in favor of the new-and-improved supermarket/department store/pharmacy/ bank/espresso bar/model. Of Wal-Mart’s 3,337 U.S. stores, Supercenters have surpassed Discount Stores by a count of 1,713 to 1,353. Nationwide, Wal-Mart also operates 85 “Neighborhood Market” grocery stores.
For local and national competitors, the choice is clear: carve out a niche in the shadow of the Supercenter or die.
No one (that we know of) is claiming Tidyman’s failed because of Wal-Mart, but there is a connection, says Pewaukee, Wisc.-based supermarket analyst David J. Livingston.
According to Livingston, even the larger supermarkets like Albertson’s and Safeway can’t compete head-to-head with Wal-Mart, so they go after smaller stores.
“If Wal-Mart is taking your business, you’re not going to get it back. Once it’s gone to Wal-Mart, it’s gone. The only way those stores are going to get business back is to do an about face and go after the weaker competitor,” says Livingston.
Livingston says the bigger stores are trying to differentiate from Wal-Mart the best they can, because they can’t beat Wal-Mart on price.
“In every study we’ve done [Wal-Mart] is typically about 20 percent cheaper,” says Livingston. “That varies from market to market, but I don’t think I’ve ever seen it any lower than 20 going against Albertson’s or Safeway.”
Once the bottom line is drawn, stores must scramble to attract available customers away from their weaker or struggling competitors.
“What you have to do is improve service levels, variety, and the attractiveness of the store,” says Livingston.
For smaller, locally owned stores like Grizzly Grocery, Orange Street Food Farm and Pattee Creek Market, remodeling (Pattee Creek, which used to be Bi-Lo, just did) and adding gas pumps isn’t an option, but they say that doesn’t mean they can’t remain competitive in a two-Supercenter town.
Paul Mori, manager of the Orange Street Food Farm, says the idea of another Supercenter is a little unnerving, but he doesn’t think it will pose too much threat to his business.
“We pretty much just have to focus on what we’re doing,” says Mori. “We’ll continue to try to provide the service as best we know how. There are a lot of people that are not interested in that type of store.”
Grizzly Grocery co-owner Loree Herr said she doesn’t like the trend she sees happening in Missoula.
“I do feel like we’re gravitating to where the only stores we have are super Wal-Mart and super Wal-Mart,” says Herr.
Herr says Grizzly Grocery has established its own niche and found a way to remain successful in the kill-or-be-killed grocery store business, but it hasn’t been easy.
“I think it’s because Dennis [Herr, her husband and co-owner] and I are here. We’re a big part of this store. We’ve been here six or seven days a week since we bought the store. We hire friendly clerks and we have a fair collection of groceries,” says Herr. “We get a lot of people who have been coming in here since we bought the store. They know they don’t have to come in and take a half hour to buy a loaf of bread or milk.”
Livingston says grocery stores don’t necessarily need state of the art lighting systems, faux wood floors and discount club cards to remain viable and competitive. Success can come from good old-fashioned customer service and quality.
“I’ve seen some pretty ugly stores do pretty well,” says Livingson. “Sometimes you can overcome a weaker looking facility with pricing and personalities and service. It’s all part of a big equation.”
“[Wal-Mart is] definitely a huge presence in the market, but I think most grocery shoppers shop at more than one location,” says Good Food Store marketing director Layne Rolston. “We feel their presence here but we have a little different niche than a conventional grocery store. The problems they face in a conventional grocery store aren’t necessarily the ones we face in the whole foods business.”
According to Livingston, whole food stores like Whole Foods Market, Good Food Store and other natural food co-ops, are seeing double-didgit same store increases from year to year.
“I’m seeing 25- to 30-percent increases in some markets, and that’s despite having Wal-Mart come in,” says Livingston.
According to Jennie Dixon, the planner at OPG in charge of the Wal-Mart re-zoning application, the retail giant hasn’t officially applied for the zoning change for the former Missoula Southern Baptist Church property. Currently, the property is zoned RLD-4 (Residential, with four dwelling units per acre). The necessary rezone would require the church property to be zoned in the “Wal-Mart Commercial Special District.”
“It’s possible that we’ll see a final application in a week or two,” says Dixon. “The next step is to schedule them for hearings. The earliest would be November.”
While a second Supercenter in Missoula is hardly a foregone conclusion, local supermarkets managers aren’t betting against it. If a second Supercenter does open, Tidyman’s could just be the beginning.
“This industry is in trouble,” says Livingston. “I would say a lot of that has to do with Wal-Mart Supercenters.”