Shopping Center Business

MAY 2017

Shopping Center Business is the leading monthly business magazine for the retail real estate industry.

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GROCERY STORES 270 • SHOPPING CENTER BUSINESS • May 2017 this sector is Whole Foods Markets. As has been well documented, Whole Foods has struggled as of late. It is closing 29 stores and has backed off its goal of growing to 2,000 stores or more. Whole Foods is also rolling out its 365 stores that are more price focused while still heavily natural foods oriented. It used to be that people would drive several miles to go to a Whole Foods because it was one of the few options available to purchase high quality and a large variety of natural and organic groceries. Because of all the new entrants like Sprouts, and because tradi- tional grocers have added a significant amount of organic and natural foods, consumers no longer have to travel as far as they used to for that type of offer. Ac- cordingly, Whole Foods is now focusing on its core customer in order to get them to shop more frequently and spend more. They recognize that the days of getting people to travel a distance to shop with them are mostly over, given the multitude of additional natural and organic options consumers have in closer proximity to their homes. SCB : Should grocery retailers be rethink- ing their real estate? How can they make their real estate portfolios better? How can they work with landlords to get to a better portfolio? MCKESKA : Because of the rapidly chang- ing nature of the grocery retail industry there will be winners and losers. The grocery retailers who are going to be the most proactive by investing in their busi- ness ‚— including testing out new formats and concepts, investing in technology and digital, and growing their e-commerce ca- pabilities — will be the ones most likely to be successful. Walmart and Kroger are doing a lot of work to create 'click-and- collect' locations at their stores and are aggressively testing and rolling out new technology. Traditional grocers over- all need to be proactive and aggressive when looking at their real estate foot- print to identify opportunities to invest in those markets and assets that are strong performing so as to profitably maintain and grow their position in these markets and trade areas. By the same token, they may have to make some tough decisions relative to restructuring or pruning mar- kets and/or assets when necessary. They need to be proactive by planning and act- ing well in advance of a decision being forced on them, such as chronically poor performance or a critical real estate event occurring. SCB : Who are the formidable players in the grocery business today? MCKESKA : There are a number of strong regional players, like H-E-B, who are ex- panding aggressively. I mentioned Lidl earlier, as well as Sprouts, who are both aggressively opening new stores. Trader Joe's and Aldi are also still expanding. Aldi also has a program to remodel the majority of its stores over the next few years, which will expand the sales area for its fresh foods offering. Publix is also aggressively expanding into new markets as they move up the Eastern Seaboard. The number of new grocery stores over- all, however, is slowing dramatically as ev- idenced by recent announcements from

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