Significant Retail Store Closings Reveal Grocery Chains That Don't Know How to Compete

Significant Retail Store Closings Reveal Grocery Chains That Don't Know How to Compete, and One Grocery Chain With No Competition - Trader Joe’s (SWY, WMT, TGT, COST)

By Barbara FarfanOctober 27, 2013

A significant number of newest additions to the 2013 Store Closing Roundup list have come from the grocery retailing segment in the past couple of months. Bi-Lo, Dominick's, JustSave, Lowes, MainStreet Market, Save Mart, Sweetbay, Fresh & Easy, Ralph's, Shaws, and Safeway(SWY) are some of the grocery retail brands that have been closing stores, and announcing store closing intentions.

But store closing numbers alone don't come close to telling the story of the Merger-Acquisition-Buy-Sell-Open-Close-Brand-Rebrand (MABSOCB&R) activity that's been happening in the grocery segment of the U.S. retail industry. Here's a roundup of some of the more MABSOCB&R significant activites in 2013:

·         Safeway is closing 72 Domincik's Grocery stores in the Chicago area. 

·         Safeway sold its Canadian stores to Empire Co. for $4 billion. 

·         It is rumored that Cerberus wants to acquire the Safeway chain for the $4 billion cash from its Canadian sale, and that Cerberus is working on making a successful bid for Safeway. 

·         Cerberus purchased Jewel-Osco, Acme, Shaw's Star Market chains, and a 30% stake in Supervalu. 

·         Cerberus-owned Jewel-Osco purchased three of the 72 Dominick's stores that were slated for closure by Safeway, and may purchase as many as 30 more. 

·         With acquisitions, Cerberus has almost completely reassembled the Albertson's chain that was split up in a 2006 leveraged buyout. The parent company for that chain is now New Albertsons Inc. 

·         New Albertson's Inc. purchased United Supermarkets, Market Street, and Amigos supermarkets based in Lubbock, TX. 

·         Bi-Lo purchased Piggly Wiggly and will rebrand 22 of those Piggly Wiggly stores to the Bi-Lo brand in South Carolina and Georgia. 

·         Bi-Lo purchased Sweetbay, Harveys and Redi's supermarket chains from Delhaize group. Sweetbay stores will be rebranded Winn-Dixie stores, and Reid's stores will be rebranded into Bi-Lo stores. Harvey's will remain harvey's for now. 

·         Publix purchased seven Bi-Lo stores. 

·         Publix sold its Pix convenience store chain to France-owned Circle K convenience stores. 

·         Spartan Stores bought Nash Finch military commissary operations. 

·         Kroger acquired Harris Teeter Supermarkets for $2.44 billion. 

·         Tesco-owned Fresh & Easy sold 150 stores to Yucaipa Cos. and closed 50 other Fresh & Easy stores.

·         Belle Foods filed Chapter 11 and sold 43 stores to Associated Wholesale Grocers, Homeland Stores, and Rouses Markets. Many of those stores will continue operating with their existing Belle Foods, Piggly Wiggly, Southern Family Markets and Food World brands, under their new ownership.

That's a grocery retailing-go-round that could make anyone dizzy. The grocery chains that are closing stores, filing Chapter 11, and selling off underperforming pieces of their chain will tell you it's because The grocery chains that are closing stores, filing Chapter 11, and selling off underperforming pieces of their chain in 2013 will tell you it's because things have become too competitive now that mega chains like Wal-Mart (WMT), Target (TGT), and Costco (COST) are focusing so much effort on the grocery part of their marketing mix. As always, this is the easy excuse that says more about the innovativeness of the grocery retailing leadership team than the competitive grocery retailing environment.

Every segment of the U.S. retail industry is uber competitive, and the mega chains in any retailing segment don't win by default just because they open their doors. It's when smaller chains offer nothing remarkable that they find themselves at the mercy of the great and powerful megachains. If consumer perception is that every grocery store offers more of the same, that's when grocery retailers have made it easy for their customers to be megachain price defectors.

My favorite example of this - and many consumer's favorite example of this - is Trader Joe's. While Safeway, Suprvalu, Piggly Wiggly, and Harris Teeter are downsizing, closing stores, and selling off pieces, Trader Joe's (owned by Aldi) is expanding at a rate that can't even keep up with consumer demand. The reason why Trader Joe's store demand is outpacing Trader Joe's store supply is the "Trader Joe's difference." It's a difference that's real, a difference that's perceptible, a difference that Trader Joe's customers love, and a difference that grocery shoppers without easy access to a local Trader Joe's covet.

Some friends of mine who live in New Zealand recently made a month-long trip to the U.S., on a whirlwind tour, driving umpteen thousand miles to more states and cities than I could keep track of. They brought back suitcases filled with purchases because compared to New Zealand everything is a bargain in the U.S. They were unpacking and showing me some of their prized acquisitions - jewelry, clothing, shoes, artwork, etc. Imagine my surprise when, among these prized U.S. souvenirs they pulled out a jar of Trader Joe's Fudge Sauce.

Of all the places they could have shopped and all the items that could have taken up precious space and weight in their international luggage, this treasured Trader Joe's item made the cut. I found that to be a remarkable Trader Joe's accomplishment.

The "Trader Joe's difference" is its remarkableness. Everything about Trader Joe's is uniquely Trader Joe's - the look of the proprietary Trader Joe's brand labels, the smells of the samples, the taste of the unique micro niche products, the unique package sizes which create palatable price points, the sound of the lively interactions between the employees and customers. The sum total of all that is not a branding illusion, but rather a distinctly remarkable Trader Joe's experience of sights, sounds, smells, and tastes that is unique from any other grocery retailer in the U.S. (and obviously in the world). Customer love that Trader Joe's "feeling."

The Trader Joe's chain is proof positive that the old maxim "Don't Compete - Create" is practical leadership advice for retailers in the grocery retailing segment, and any retiling segment for that matter. Trader Joe's isn't having trouble competing with Wal-Mart, Target, Costco, Whole Foods, or any other large or small retail chain in town because Trader Joe's has no competition. No other chain offers what it offers. And as long as Trader Joe's continues to be unique and keep in touch with the needs and opinions of its customers, it will continue its impervious journey down the path of success and growth while other grocery retailers continue their unremarkable journey down the path to MABSOCB&R.

If you give your customers not much that's remarkable while your doors are open, they're not going to have all that much to miss when you're gone. It's kind of a self-fulfilling prophecy, don't you think?