Northgate Executive: Expect Major Remodels, Expansions

Posted by Kristen Cloud

Date: March 31, 2017

Tom Herman says Northgate Gonzalez Markets has big plans. The chief experience officer for the 41-store Southern California chain reveals that the company intends to undertake “major remodels and expansions” this year.

“Our strategy right now is we’re going back into some of our older facilities—either they’re smaller or older and can’t do the kind of volume that we want them to do, or don’t have the space to accommodate all of our fresh departments. We’re going back into those and doing major remodels and expansions. New store openings—I don’t know if we’re going to have one this year, but we’re going to have a couple of major remodels, including two stores in our San Diego market.”

Herman spoke with The Shelby Report’s Bob Reeves during the grand opening Wednesday of Northgate’s La Habra flagship unit at 1305 W. Whittier Boulevard that replaced the chain’s old market on La Habra Boulevard, which closed permanently Tuesday evening.

Q: Tell us about the old store, the one that this one replaces.

Herman: The store that’s been replaced was opened in 1986 by Don Miguel (González), one of our founders and co-president. It was store No. 2. The first store is a little store on Anaheim Boulevard that we actually replaced about six months ago when we opened the new store in Anaheim. So, store No. 1 got replaced with a new mercado, and that was about a 15,000-s.f. store. This store that opened in 1986 was an old Alpha Beta. It’s always been a very successful store. It’s been a great store for us, but it was between 18,000 and 20,000 s.f., so we pretty much outgrew it. This new store here is a 50,000-s.f. mercado. It’s got all fresh foods, all prepared foods, food to go, hot bars, cold bars, a full line of pretty much everything. Our old store didn’t have a bakery or Tortilleria, and we have a scratch bakery and a made-from-scratch Tortilleria here as well.

It look like you have a lot of room in the Tortilleria, too. You’re built for volume.

Yes. This store is really built for fresh foods. It’s super differentiated and is great margin for us; it’s great pricing when you manufacture yourself in a high-volume environment.

And that brings the authentic Hispanic family into your stores.

Yes, and there’s a lot of take-home. We have a lot of dine-in space as well, as well as (a dining space) outside that really turned out nice; at night, it’s all lit with heaters and everything.

What kind of comments are you getting from customers?

This has been under construction for almost a year; with the rain and everything it’s been a little bit of a challenge. The community has been super excited about us being here. This center here was an old Hughes and an old Ralphs and it sat empty probably for eight years. We redeveloped it, the whole center, and really revitalized the area. The customer response has been outstanding.

Are you anticipating to do double the business?

Yes we are.

You’re shuttling people from the old store as well, right?

We are. We have a shuttle every half hour taking customers from our old location to the new location, and we’ll continue as long as customers need it. The old store had a shuttle service, and we changed to Lyft for the new store. It really works well; it’s a lot quicker. What happens is a customer comes in, and if they spend $50 or more and live within three miles of the store, we’ll order up a Lyft and have a Lyft take them home. It’s a little more effective (than the shuttle we operated).

How do you communicate that to your customers?

We do it through social media and, in most locations, we have a place for Lyft parking. Really, it’s the customers who were used to using the shuttle that we’ve introduced to Lyft. They actually like it better because, as soon as they’re ready to go, we order up a Lyft. Usually it’s there within five minutes, (whereas previously) they had to wait for (the shuttle) to come back.

In this area here, what is the customer demographic?

I would say in this whole trade area of La Habra, at least 60 percent of the consumers are Hispanic—a very good market for us.

Tell us a little bit about the center store because it looks beautiful; it’s stacked really high.

Let’s say you went to Albertsons—they probably have twice as much, three times as much, space for center store, but we probably do more volume. It’s a much more curated assortment and it’s more specialty. Our whole strategy is about differentiation. It’s about unique items that (customers) can’t find somewhere else, and then what we call the pedestrian items, mayonnaise or whatever, we price it at everyday low prices. But we make great margin because our customers buy so much other stuff that they don’t buy somewhere else.

If someone saw this store they might think it’s a specialty store, like Whole Foods, but our pricing is better than a lot of competitors. Only 40 percent of our business is center store, 60 percent of our business is fresh—and that’s flipped for most retailers.

And our pricing is really sharp. I bet you that are prices are 20 percent lower (than traditional retailers). I mean, we’re lower than Walmart with a basic basket. Now, our basic basket is what our customers buy the most, so maybe it’s not what sells the most at Walmart, but we’re always cheaper on our items. Our customers love it.

Talk to us about your service meat counter. It is amazing. Clearly Northgate is known for its meat.

It’s about 60 feet long. That’s one of our competitive edges…meat, cocina and then produce. Meat is something that we’ve always hung our hat on and that’s really how store No. 1 started. Store No. 1 started as a liquor store. They got robbed a couple of times and they said, ‘Forget this liquor. This is not fun.’ Then they started doing meat and they taught themselves how to do meat.

Here in the U.S. people didn’t use all those cuts of meat but, even in Caribbean countries, African American countries, Hispanic, they use everything. They like to say, ‘We’ll sell everything but the squeal when it comes to a hog.’ They’ve always made that the signature department. And it’s seafood, too. Honestly, Mexican shrimp is the No. 1-rated shrimp there is. We do only the highest quality seafood, too.

If you look at conventional supermarkets, whether it’s Ralphs or Albertsons, at one time they had huge meat departments. They had huge bakeries where they did a lot of cooking and baking in their stores. They did all those things and, through the years, they’ve just gotten rid of them. And that’s what our customers are looking for and that’s why you see, when you go into our stores, almost everybody we hire now has to be bilingual because we wanted to make it friendly; there’s a lot of fourth-generation Hispanics who don’t speak really good Spanish and there’s a lot of anglos who don’t speak Spanish, so they need to communicate with our associates.

I notice a TV over the meat department.

It’s (Spanish-language) television. It’s a little gathering area because, sometimes there are long lines (at the meat case). During soccer season, there are always soccer games on. There are 13 brothers and sisters who come up with these ideas (like the meat department TVs). They’re true entrepreneurs. If an idea doesn’t work we do away with it, if it does we roll it out to more stores.