May, 2016

Fruits of Thought

What Is The Future For A Supermarket?

The Golub family and the Schenectady, NY-based Price Chopper organization are reimagining their stores and created the new concept, Market 32 — named after the year the organization started in business. The stores are beautiful, and you can learn a lot about them and the thought process behind them as they are honored with this month’s Retail Sustainability Award cover story.

There are always multiple motivations in these types of efforts. On the other side of the state, Rochester-based Wegmans is a powerful organization, admired around the world for its stores, and it is rapidly growing up and down the East Coast. With stores now in Boston, it is easy to imagine Wegmans looking to fill in the space between Boston and Rochester, and that would involve opening stores in the capitol region of New York — Albany, Schenectady and Troy — long known as Price Chopper’s home and heartland. 

There are long-held rumors that the Golub and Wegman families — who have known each other for generations — intentionally minimized overlap, but with changes in retail, these things can’t endure forever. So Market 32’s upscale look and feel could be a preemptive act, hoping to establish a new image and positioning in New York’s capitol region before Wegmans moves in.

Though Price Chopper’s change in design and the way the stores are promoted are significant, it is the change in name that is so dramatic it raises questions as to the future direction of the industry. Naming a store “Price Chopper” is making a very explicit claim and promise to consumers. In fact, the retail stores of the Golub Corporation were originally called “Central Market,” and famous for offering S&H Green Stamps, which essentially were loyalty points that consumers received in the form of stamps. 

It wasn’t until 1973 that the Price Chopper name was adopted as the company dropped Green Stamps and slashed prices.

Now Price Chopper has been moving away from discounting for years, and this new concept comes across as positively upscale — although it is worth noting that one of the frustrations of Wegmans is that its beautiful perishable and foodservice departments elevate the shopping experience so much that customers identify Wegmans in surveys as far more expensive than it actually is.

This decision to change names is Price Chopper’s conclusion that going upscale is what shoppers will want in the future. The decision-making process, though, has to include defining who the Price Chopper customer will be in the future and, here, we may see the direction of the industry.

For years, supermarkets have been going upscale to differentiate themselves from Wal-Mart. The consultants’ advice to become the “anti-Wal-Mart” was paid heed, so the emphasis was on high service, organics, foodservice — all areas where Wal-Mart was weak. In effect, retailers began to “compete” with Wal-Mart by not competing with Wal-Mart and finding different, more upscale consumers. Safeway, for example, closed many stores in areas with lower demographics and renovated its remaining stores with its upscale “lifestyle” format — wood floors, warm d×™cor and subdued lighting, etc.

With dollar stores moving heavily into perishables, and with Aldi being one of the fastest growing grocers in America, along with Lidl about to explode across the country, surely the name change is saying supermarkets in general do not expect to be able to compete on price with these formats. So they expect to lose the most price-sensitive clientele or all clients at moments in their life when they are highly price-sensitive.

Refocusing on the less price-sensitive clientele may thus be a brilliant strategy, but it may also pose its own challenges. The New York Times ran a piece following the Chapter 11 bankruptcy filing of Fairway Group Holdings. The title of the article: “No Longer a Market Like No Other, Fairway Fades.”As always, in these situations, the bankruptcy was caused by many specialized factors including a rapid expansion that could not be sustained. 

But The Times headline was onto something. There was a period when Fairway was something extraordinary, but if you look at chains such as Whole Foods Market, or independents such as Eataly, chic concepts such as Mariano’s, epicurean concepts such as Trader Joe’s, new concepts such as Anthony Bourdain’s proposed Food Hall on Pier 57 in Manhattan, even expanded organic and local offerings at every store in the country, it is really hard to be extraordinary and fabulous anymore.

Our cover story focuses on sustainability, and Market 32 is a tip of the hat to the mindful executive team behind the inclusion of sustainable practices in the rebranded stores. It is also a salute to the engaged and informed consumer, to the idea that consumers will make choices based on more than quality and price.

Of course, there are many other chains that claim their products and services represent something uniquely good and worth supporting. And more are coming. The competition will be tough.

Market 32 stores, though, are not typically located in trendy high-tech corridors, near universities or in high PhD demographics. As such, the emphasis on sustainability is a bet that tomorrow’s consumer will care beyond these zip codes, that the mainstream is shifting, and we can expect an engaged and knowledgeable consumer to be the mainstream shopper at the supermarkets of tomorrow.

The Market 32 concept thus represents a leap of faith in consumers — and in our country. If they are right, it would be good for everyone.                                                       pb