Grocers Work to Get Small Stores Right

Retailers scale back store size to offer speed and convenience.
September 12, 2019

ALEXANDRIA, Va.—In a large field northeast of Des Moines are two signs touting the future development of “The Shoppes at Prairie Crossing: A mixed use development.” Eventually, the area will have a strip mall, a hotel, condos, restaurants and numerous other establishments, but for now, the only current tenant is Hy-Vee Fast & Fresh, the Midwest grocer’s updated take on a convenience store.

According to Grocerydive.com, the brightly lit, 10,000-square-foot location sells donuts, chips and candy bars, as well as fresh meals, produce and some upscale offerings, like a $75 bottle of Cody Road Rye Whiskey. Shoppers can also pick up their online grocery orders in bright red Aisles Online lockers outside.

It’s a cutting-edge store sitting near a field by itself, and Antonio Romeo, the store’s director, describes the move as an opportunity to get established before the neighbors arrive. “We’re just a little early out here for everything that’s going to happen. It wasn't by accident,” he said.

To attract shoppers, Fast & Fresh features four aisles of wine and spirits, a walk-in beer cave and 12 local craft beers on tap that consumers can fill up in their Hy-Vee branded growlers and crowlers. New products, including brews, are posted on Facebook when they arrive.

The grab-and-go section includes Hy-Vee meal kits like ciabatta steak sandwiches and chicken cavatappi with vegetables, and pre-packaged meals of goulash, lasagna, beef enchiladas, sweet potato and kale chicken bowls, grilled salmon with long grain rice and cheesecake. 

The store’s Mia Pizza station, with its wood-fired oven, does more in sales than the same concept housed in 14 other traditional Hy-Vee stores, including a 95,000-square-foot flagship store located 26 miles away. Hy-Vee credits aggressive promotions with attracting pizza fans. That includes buy one, get one pizza coupons sent to everyone within a three-mile radius shortly after Fast & Fresh opened.

Fast and Fresh isn’t the only slimmed-down concept Hy-Vee is testing. A short drive will take you to HealthMarket, a store that offers kombucha, cauliflower pizza crust, probiotics, fresh produce and lighter offerings from major brands like Ben & Jerry's. In downtown Des Moines, Fourth + Court, which opened in 2017, caters to young shoppers and empty nesters alike, many of whom live in the three-story apartment building above the store.

Amid low margins and a competitive squeeze that promises to keep tightening, traditional grocers like Hy-Vee are trying to take back control with experimental formats that address weaknesses in their legacy stores—namely, speed and convenience.

Among other grocers looking to expand their business into more convenience store like locations, Publix recently reignited its Greenwise format, with three locations now open and eight more scheduled to open. Giant has also touted the early success of its urban format, Giant Heirloom Market, in Philadelphia, while Roche Bros. in the Northeast has moved into population-dense areas with its Brothers Marketplace format, now at four locations.

According to Neil Saunders, managing director with Global Data, a data analytics and consulting company, today’s grocers are cognizant of trends and they want to be cautious when introducing a new concept. He pointed to Tesco, which quickly ramped up its Fresh & Easy format rather than testing it in one or two markets first. The U.K.-based retailer soon found that its British-style ready meals, store locations and heavy assortment of Fresh & Easy-branded products didn't resonate with U.S. shoppers. The experiment, which cost Tesco more than $1.6 billion, resulted in the company leaving the U.S. in 2013.  

"Retail is testing, trying out new formats, looking at things that might work," Saunders said. "I think that will [slow down] over the next three or four years and we’ll actually start to see a more concrete roll out of some of these formats, not all of them being experimented at the moment will work.”

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