By Heather Haddon
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.
"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.
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.
(END) Dow Jones Newswires
June 13, 2016 19:40 ET (23:40 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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