Versatility is key to supermarket success: NYDM panel says

The supermarket industry is changing fast and landlords are doing their best to keep up, executives said, at a New York Deal Making panel discussion on grocery store trends.

“It’s a tough period,” said Tim Baker, regional vice president of real estate at Albertsons. “We’ve had unprecedented price deflation and a flood of new competition, traditional and non-traditional. It’s a time of consolidation and opportunity.”

To stay ahead of new competitors, Albertsons recently purchased online meal kit service Plated and invested in Hispanic supermarket chain El Rancho, he said. Grocerants, full bars, ethnic foods and services such as click-and-collect and home delivery are also helping the supermarket giant stay relevant, Baker said.

Albertsons has also added Amazon pick-up lockers and Tesla charging stations in addition to traditional fuel stations at some stores.

Locations are changing too. “None of our new stores are in cornfields,” Baker said, pointing out that Albertsons is recently working on or has opened stores at Boston’s TD Garden, at a mixed-use center in Washington, D.C. and at the base of a Chicago residential tower.

For its part, mall landlord GGP is trying to woo supermarkets into some of its malls, said the firm’s senior vice president of big-box leasing Chris Pine. For example, GGP moved a Wegmans store into a former JCPenney store at Natick (Mass.) Mall. The landlord has also opened a Foodland store at its Ala Moana Center in Honolulu. “Department stores are our big opportunity,” Pine said. “That’s the footprint we can play with as we bring in new uses.”

Versatility is the key to helping supermarkets adjust to a quickly changing landscape, Pine said. “Legacy boxes are restrictive,” he said. “You need to give them future flexibility in the lease language.”

Individual properties are also more likely to host multiple supermarkets in coming years, predicted Pine, who has also worked at Whole Foods. “When I worked at Whole Foods we liked co-locating with Trader Joe’s.” Most properties could accommodate experiential grocery retailers such as Stew Leonards and Wegmans, discounters such as Aldi and Lidl, specialty chains such as Trader Joe’s and Sprouts and conventional supermarkets, too.

And as more consumers embrace online grocery shopping, supermarkets need to better coordinate to take more advantage of their neighborhood locations to serve as last-mile delivery points for goods ordered online, executives said. “We’re the last mile,” Baker added. “We have 2,500 ‘last mile distribution centers’ in open-air shopping centers.”