Posts Tagged 'Trader Joe’s'

Is Aldi moving “uptown” too fast?

Here’s a recent comment from RetailWire about Aldi, and its decision to open more stores in upscale suburbs and neighborhoods. I think it’s a smart idea:

Many of the original Aldi locations (at least here in the Milwaukee area) were in lower income neighborhoods often suffering from “food desert” syndrome. The stores filled an important niche, but eventually Aldi started growing into middle-income and more upscale suburbs here. I’m sure the same phenomenon has happened around the country. If Aldi is serious about upgrading its merchandise content, the store experience has to keep pace.

Again, a local parallel: Pick ‘n Save stores (first part of Roundy’s, now a Kroger division) began as bare-bones stores with food displayed in cut-open shipping cartons stacked on empty gondolas. The formula worked for awhile (Pick ‘n Save became the market share leader here) but eventually customers expected a better experience. The same is true of outlet malls — from “piperack” operations to very upscale today.

So Aldi is making the smart move, especially where the trade-area demographics dictate, as long as they don’t simply duplicate their Trader Joe’s formula.

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About that “whole paycheck” perception…

Some of my earlier comments about the Amazon-Whole Foods deal touch on the expected benefits of better e-commerce execution and predictive data science. But let’s not forget that Whole Foods has a price perception problem that Amazon needs to fix. Here’s a recent comment from RetailWire:

I teach a college-level class in retail management. When I surveyed the class about where they shopped, most answered Aldi, or Trader Joe’s, or Metro Market (the Milwaukee brand of Kroger-owned Mariano’s). None of them shops at Whole Foods even though the store is in the neighborhood where most of them live.

There is no doubt that Whole Foods’ “premium price” reputation has kept many shoppers away, as they face more competition in the “organic” arena. I believe the first round of price cuts is just the start, and it simply moved some overpriced key items to the “market price.” Expect more of this from Amazon in the future, but also expect Amazon to build Whole Foods’ base on its potential e-commerce and home delivery upsides.

Groceries are battling too much space too

Excess square footage in general merchandising has been well-documented, especially with 2017’s wave of store closures. The trend hasn’t swamped grocery retail — yet — but don’t be surprised if the advent of online grocery shopping will take a toll. Here’s my comment, from a recent RetailWire discussion:

The grocery business is suffering from the same “overspace” problem that has plagued general merchandisers for years, leading to waves of store closures this year. The retailers in the middle — the old standbys like Kroger — are particularly vulnerable to increased competition from discounters, small-format stores and retailers doing a better job engaging with “foodies” and Millennials. (At least Kroger has a winning concept with Mariano’s in Chicago.)

There is no doubt that shopping behavior is changing. Some shoppers are opting for more frequent but smaller trips for fresher food, while others are bulking up at warehouse clubs. Aldi, Lidl and Trader Joe’s are offering smaller stores with curated assortments, and now Amazon is lurking in the background with its purchase of Whole Foods. As a regular shopper at Kroger’s “Metro Market” chain in Milwaukee, I can tell you that the overwhelming amount of choice (to fill all that space) makes even a simple shopping trip harder than it should be.

While some mid-tier chains are in a better position than others to survive, some industry consolidation is probably long overdue here. Meanwhile, here’s a related post about mall developers looking to fill empty space with food retail:

It’s ironic that we’re talking about food stores taking over vacant mall space today, after discussing excess square footage in the grocery business yesterday. There may be specific malls where it makes sense to add a small-footprint store like Fresh Market, but it’s hard to see how full-line mid-tier stores like Kroger can make this work on a large scale despite its test in Ohio. Presumably the grocery store would be the “last stop” on the shopping trip, if the shopper visits the rest of the mall at all.

The entire issue comes down to mall developers and how they reinvent all that real estate. Southdale (outside Minneapolis) is replacing a JCP store with a three-level fitness center; other malls are adding more dining and entertainment. But pulling off-mall retailers (TJX, Costco) into the fold may be a more viable solution if the price of entry is right.

Target to national food brands: Your days may be numbered

I posted a comment in April about Target’s CEO (Brian Cornell) and his intention to reposition the grocery business toward fewer “commodities” and more specialized categories. This week, Target also announced that it will be taking the spotlight off of some of the best-known national brands in the food business as part of this evolution. While Target is overall starting to deliver better results (and that may be the big picture), most RetailWire panelists agreed with my point of view on this one:

This initiative ties to the “curated” approach that Mr. Cornell announced a month ago. It provides a greater focus on categories like snacks, coffee, craft beer, etc. and less attention paid to “commodity” items. My RetailWire comment at the time — that a “Trader Joe’s” approach to the business can undermine Target’s investment in being a destination food store — certainly applies to this news as well.

If Target makes it harder, not easier, for the grocery shopper to find everything on his or her list, doesn’t that signify a retreat from its investment? At the same time, it may represent a chance to reposition the total store away from food and toward the other areas where it aspires to gain share.

Whole Foods is developing a new format

Whole Foods announced this month that it is developing a new format, under a different brand name. The goal is to appeal to “millennials” (the brass ring these days) with a smaller footprint, more “curated” assortment and lower prices than a typical Whole Foods store. Here’s my commentary from RetailWire:

This announcement raises several questions about the kinds of issues being discussed inside Whole Foods’ headquarters:

1. Is a new concept the best way to overcome what is apparently a price-perception problem?
2. If we are creating a new store for “millennials,” will we lose them to our core business? If so, why are we continuing to open so many stores?
3. Will a “modern, streamlined design” offer the kind of “foodie” appeal and presentation that drove Whole Foods’ growth in the first place?
4. How, exactly, is the new chain different from the highly curated assortment at Trader Joe’s, Fresh Market and other small-footprint competitors?

Whole Foods may in fact develop a concept that impacts the industry as much as its original stores have done, but for now count me as a skeptic.

Target: An about-face on its grocery strategy?

Brian Cornell has made plenty of changes since joining Target, and his latest is a renewed focus on grocery categories that can position the store away from more “basic” food stores. I express some skepticism on this recent RetailWire post:

All of the categories mentioned by Mr. Cornell (snacks, coffee, craft beer, and so forth) represent a reversal of the “commodity” approach favored by Greg Steinhafel and his team. While a niche approach to the grocery business is more consistent with the Target brand, it may not drive enough volume to justify the massive capital investment and space reallocation devoted to food over the past five years or so. The question is whether a modified “Trader Joe’s” approach will compel Target’s customers to do most of their grocery shopping somewhere else.

Whole Foods and Trader Joe’s: It’s not just about “organics”

In a recent RetailWire panel discussion, I comment on the growth of national and regional grocers taking a strong position on organic or “natural” foods. The question is whether “organic” is sufficient as a brand position to take on Whole Foods and Trader Joe’s. But the bigger issue is whether “natural” is even the key to these two chains’ success. Here’s my point of view:

I question the premise that TJ’s and Whole Foods are successful because they are merely “organic grocery” retailers. So chains trying to crowd into that space (which also has plenty of competition from the big national grocery stores) need some brand differentiation in order to succeed. Fresh Market is another growing chain with a smaller footprint than a typical Whole Foods store.

There is not necessarily anything “natural” about Trader Joe’s well-edited assortment of private-brand packaged and frozen foods. Whole Foods is a lot more than its “organic” positioning because of the “foodie appeal” in its fresh meats and produce. So competitors looking to gain share really need to understand why these two chains are excelling.


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