Get ready to reap the benefits of a whole new level of competition among the Triangle’s grocery stores.
The competitive fires are being stoked by an invasion of new supermarket brands – Publix, Wegmans, Sprouts Farmers Market and Lidl – that already have begun vying, or soon will be vying, to become your new go-to store.
Economics 101 dictates that’s good for consumers.
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“You’re going to get better prices,” said supermarket industry analyst Phil Lempert, who’s also editor of the SuperMarketGuru.com website. “You’re going to getter better stores. You’re going to get better assortment. You’re going to get better service. All of those.”
But there’s a downside as well. Your favorite neighborhood supermarket may not survive the upheaval.
“There will be some casualties,” said David Livingston, a Wisconsin-based supermarket analyst who helps grocers identify and evaluate new store locations.
Livingston predicts that the region’s entrenched grocers will also feel the impact of new competition on its existing workforce.
“What is further damaging to these chains is companies like Wegmans and Publix, they’re going to attract the best employees (from) the competition because they’re really good employers,” he said.
The influx of new supermarket chains comes at a time when some of the region’s top grocery chains already are seeing their market shares eroding as a result of new competition, according to Chain Store Guide.
Three of the top four grocers in the Raleigh market – Walmart Supercenter, Food Lion and Kroger – lost market share from 2014 to 2016 while Sam’s Club, Costco and Publix posted gains with the benefit of new stores. No. 3 Harris Teeter maintained its market share during that span after adding two stores in the Raleigh market, which Chain Store Guide defines as Wake, Johnston and Franklin counties.
In the Durham-Chapel Hill region that includes four counties – Chatham, Durham, Orange and Person – market leader Walmart Supercenter lost market share over the past two years but the next three in line – Food Lion, Kroger and Harris Teeter – gained.
Preparing for the onslaught
Some of the Triangle’s entrenched supermarket brands have been taking steps to up their game as the competition heats up.
A few years ago Lowes Foods shuttered its poorly performing stores in the area and remodeled others for a more upscale look. Last year Fresh Market launched a new look as well, and this year Aldi announced it would spend $1.6 billion to upgrade 1,300 U.S. stores, including some in the Triangle.
Meanwhile, Harris Teeter has added fuel centers selling gasoline at select locations. And Harris Teeter and Food Lion, in a nod to the competition emerging on another flank from the likes of Amazon and meal delivery companies such as Blue Apron, recently added home delivery services, including for beer and wine.
The invasion of new grocery brands began in 2014 when Florida-based Publix, the nation’s largest employee-owned grocery chain, opened a store in Cary. Since then it has opened three other stores – in Apex, Wake Forest and a second Cary site. Publix plans to open a third Cary store later this year, and also intends to open stores in Raleigh and Durham in 2018. But the Durham site, which must be rezoned, faces opposition.
More to come
Publix spokeswoman Kim Reynolds said the chain is still looking for other sites in the region. “I expect more announcements will come down the road,” she said.
Arizona-based Sprouts, which touts its selection of affordable natural and organic foods, entered the market in mid-March when it opened a store along Falls of Neuse Road in North Raleigh. The 270-store chain, which is expanding in North Carolina and Florida this year after entering Georgia, Alabama and Tennessee in 2015, has no definite plans for a second Triangle store but “growth in the southeast continues to be a priority for Sprouts,” spokeswoman Erin Miller wrote in an email.
Next up is Germany-based Lidl, one of the biggest supermarket chains in the world with more than 10,000 stores worldwide.
Lidl intends to open a store in Wake Forest this summer, on the heels of five North Carolina stores scheduled to open June 15 – in Sanford, Rocky Mount, Greenville, Kinston and Winston-Salem. It’s all part of Lidl’s aggressive plan to open 100 U.S. stores in its first year of operation here, and there have been rumblings that other Triangle stores may be on the way.
Underlining its commitment to the wider region, Lidl has opened a nearly 1 million-square-foot distribution center and regional headquarters in Alamance County.
Then there’s Wegmans, which hails from Rochester, N.Y., and has inspired a cult-like following. It has unveiled definite plans for four stores – one in Raleigh, two in Cary, one in Chapel Hill – but hasn’t yet announced construction time lines or opening dates.
“We’re also considering other sites in the Raleigh/Durham market,” noted Wegmans spokeswoman Valerie Fox, who added that the company is “very choosy about our sites.”
Some Triangle consumers are eager to try out new brands.
Justin Johnson, 28, an antiques dealer who lives in Wake Forest, said he showed up for the grand opening of the new Sprouts store in North Raleigh at the recommendation of his girlfriend.
“I heard they had good prices and a good organic section,” said Johnson, who agreed with that assessment and has been coming back to the store once or twice a week ever since. “We eat mostly organic.”
Elizabeth Culver, 47, a retired social worker who moved to Raleigh from New Jersey two years ago, also has become a fan of Sprouts.
“I like the fruits and vegetables,” Culver said. “I think they are the freshest (of) all the supermarkets.”
That said, she also knows Wegmans and can’t wait for it to come to town.
“My daughter took me to Wegmans in New Jersey and I fell in love with it,” she said. “I’ll probably become a Wegmans shopper.”
Geography plays a crucial role in the new brands’ arrival, as Wegmans has been expanding to the south while Publix has been making its way north. Sprouts and Lidl likewise are expanding across the region.
“A lot of the retailers are looking at ways to expand their geography,” said Roger Beahm, executive director of the Center for Retail Innovation at Wake Forest University’s School of Business. He noted that most grocery store chains are regional.
At the same time, however, the Raleigh market is highly desirable. Last year retail sales here rose here at the second-highest pace in the nation at 6.3 percent, more than double the national average of 2.5 percent, according to commercial real estate firm Marcus & Millichap. The firm projects that retail sales in Raleigh will rise even faster, 6.5 percent, in 2017.
Two of the new brands entering the market, Sprouts and Lidl, offer smaller stores than traditional supermarkets – as do chains such as Aldi, Fresh Market and Trader Joe’s. Even Walmart has gotten into the act with its small-format Walmart Neighborhood Markets.
“Consumers are looking for a whole different kind of shopping experience,” said Lempert.
Smaller stores mean fewer products on the shelves. But, said Lempert, many consumers who are pressed for time have discovered that they don’t need the 40,000 products offered by traditional-sized stores. Instead, they’d rather breeze in and out of a store that may not sell a wide array of different types of olive oil but has selected a few that are highly appealing.
Many of these smaller stores also rely heavily on their own brands. For example, at Lidl stores, about 90 percent of the products will be the store’s “premium private label,” said spokesman Will Harwood.
Quality store brands can be a major selling point with consumers.
“You can buy the national brands at any of the retail grocery stores, but you can only get the private brand ... at that particular store, Beahm said.
Publix and Wegmans are in many ways more traditional supermarkets, but both are seen as well-run, formidable competitors with top-notch customer service. Wegmans also has distinguished itself with its “grocerants,” which are restaurants within the store that offer dining on-site as well as take-out meals.
“I wish every market (had) a Wegmans and a Publix across the country,” Lempert said. “It would be a much better place.”
Existing supermarket brands that want to thrive despite the competition will need to invest in sprucing up their old stores as well as building new ones.
“The ones that can’t afford to invest in new brick and mortar will close older, less profitable stores and just keep open the ones that are maintaining profit margins,” Beahm said.
That, he noted, is a no-win proposition over the long-term.
Grocery store market share
Here’s a rundown of the 2016 market share numbers for the top grocery stores/food retailers in the Raleigh market, which for this survey is defined as Wake, Johnston and Franklin counties.
SOURCE: Chain Store Guide