Attention Shoppers: Yoga in Aisle 3
Grocers offer fitness classes, facials, child care to lure consumers away from online rivals
HANOVER TOWNSHIP, N. J.—Shoppers looking to pick up milk and eggs may have other reasons to spend time at their local supermarket: yoga classes or a spa treatment, perhaps.
Under growing pressure from discounters and online rivals, supermarkets are trying to transform themselves into places where customers might want to hang out rather than just grabbing groceries and heading home.
In Phoenix, a Fry’s Food Stores, part of a chain owned by Kroger Co., features a culinary school and a lounge with leather couches perched next to a wine bar. A Kroger store in Hilton Head Island, S.C., offers a cigar section to complement its wine cellar that stocks $600 bottles.
Whole Foods Market Inc. has a putting green outside its Augusta, Ga., location and a spa offering peppermint foot scrubs and facial waxing in a Boston store. Elsewhere, it has bike-repair stations.
A ShopRite store here in Hanover Township, near New York, runs a fitness studio with yoga, barre and Zumba classes and has a cosmetologist on weekends.
“You can’t do fitness online,” said John Sumas, chief operating officer of Village Super Market Inc., a member of the Wakefern Food Corp. cooperative that includes ShopRite. “Getting a significant amount of people to show up to a building is a value in itself.”
Village Super Market’s operating income was $44 million in the fiscal year ended last July, up $30 million from fiscal 2014. Its stock was $28.04 at 4 p.m. on Monday, up 6.4% year to date.
Ana Soriano, a 51-year-old stay-at-home mom from Morris Township, N.J., at first thought the idea of exercise classes at ShopRite was “weird.” Now she’s a regular. “I finish my classes, shop and come home for the kids,” she said.
Supermarkets have long featured bank branches and dry cleaners, but transforming them into village-like destinations is a newer experiment. Most of these enhanced stores appear to be located in affluent suburbs and city neighborhoods—places where shoppers are more inclined to order groceries from e-commerce sites or meals from services such as Blue Apron.
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“It gives our stores that hangout factor,” said Jeff Turnas, president of 365 by Whole Foods Market, the grocer’s new smaller-store format that made its debut in the Silver Lake section of Los Angeles last month.
Not everyone, however, is sold on this idea.
“I’m pretty cautious on it,” said Richard Vitaro, a director in the consulting firm AlixPartners LLP’s consumer-products practice. “There are a lot of smart retailers out there, and I’m not aware of anyone who says, ‘let’s add 20 yoga studios.’ ”
Still, there is pressure to try new approaches. First quarter profits were weak for nearly the entire grocery sector, and even trendy chains such as Whole Foods are struggling to differentiate themselves as Wal-Mart Stores Inc. and other big-box retailers expand natural and organics sections.
Traditional supermarkets also face competition from online grocery services such as Amazon.com Inc.’s AmazonFresh. Jefferies Group LLC estimated last month that online grocery sales could grow to 8% of grocery sales in 2025 from 2.5% today. Moreover, there are threats from European deep-discount supermarkets such as Aldi and Lidl as they expand their U.S. presence.
“Every executive I’ve talked to has said this is the most profound period of grocery changes they’ve seen. The competitive space is much more intense,” Mr. Vitaro said.
‘The competitive space is much more intense. ’
At Whole Foods’ 365 stores, outside vendors lease space as part of a program to offer novel foods and services. Thousands have applied to open in one of the 19 stores in nine states the Austin-based company has signed leases for—all of them targeting younger, more price-conscious shoppers, Mr. Turnas said.
Ace Hardware has set up shops within more than 100 grocery stores as part of a push by the Illinois-company into independent supermarkets in the past three years. Grocers pay a $5,000 fee and purchase $5,000 of inventory to join the hardware cooperative. They must guarantee a certain level of inventory at all times.
Some concepts have fizzled. The Fry’s in Phoenix made its debut in 2010 with a car wash but discontinued that after it didn’t catch on, a Kroger’s spokesman said. The cooking classes, by contrast, have doubled in size since the school opened, and the store offers at least a dozen sessions a week, he said.
Village Super Market took a risk three years ago when it planned a nearly 80,000-square-foot store in Hanover Township, with more amenities than a standard ShopRite, Mr. Sumas said. It cost $25 million to build, at least 50% more than any previous grocery stores Village Super Market has put up, he said.
The store features an oyster bar, a heated open-air dining space and 90 minutes of free child care for shoppers, Mr. Sumas said. The operating profit margin is on par with other stores in his chain of 29 supermarkets, but the volume of business in the Hanover store is more brisk, and its sales growth has been one of the strongest relative to comparable stores, Mr. Sumas said.
Village Super Market in April reported same-store sales growth of 1.7% in the nine months of its fiscal year compared with the same period in the year prior, with sales growth in the Hanover store partially offsetting losses from winter weather and competitors opening in its market.
The 150 customers paying $20 a month for unlimited exercise classes are among his most loyal, he said, adding that he would expand the service to a new store planned in Old Bridge, N.J.
“This was a risk well worth taking,” Mr. Sumas added.
