Wednesday, September 23, 2015

Are Supermarkets About to Get Sandwiched?

The pressure seems to be coming from all sides: online groceries, non-traditional formats, home delivery, and other trends are pushing traditional supermarket chains to work a lot harder to hold on to market share - and it’s not going to get any easier.

At one time it seemed that Grocery was the one retail category that was going to avoid the internet sales onslaught. Supermarkets were supposed to be insulated from the proliferation of online retailers that were diverting sales from other brick-and-mortar retailers.

After all, the concept of groceries arriving by mail seemed preposterous. When we consumers shop for food, we’re searching for instant gratification. When the cupboard is bare, we simply jump in car and hit the market, right? What happened to music and books and electronics could never happen to the grocery business - or so one thought.

But the buzz lately suggests things are about to change. In just the past month, several announcements have been made indicating that a number of formidable companies are getting into the grocery delivery business.

Would you order your weekly groceries online if they’d show up at your door a couple of hours later for a $3.99 delivery charge? Or would you rather fight the traffic and then line up at the supermarket check-out? Well that’s the choice Target is offering shoppers in select markets right now via

And it’s no shock that Amazon should show up wanting a share of food dollars. It’s reported that the mega-online retailer is constructing an 11,700 square foot test location in Sunnyvale, California that will allow grocery shoppers to order online and pick up at the new facility’s drive-thru lane. After a review of the pilot program, Amazon intends on opening additional locations in Silicon Valley.

Later this year tech giant Google will be testing fresh food and grocery delivery in San Francisco and another U.S. city, going head to head with Amazon and Instacart. This will be in conjunction with Google Express, a current service that already delivers merchandise, including dry food, to online consumers.

A recent survey conducted by 72 Point Inc. indicates that more grocery shoppers are increasing their online shopping. Over the past year, online shoppers have increased grocery spending by 29%, and they now do approximately 19% of all grocery shopping online. Those are telling statistics; momentum is building in online food shopping.

However, the data indicates reluctance toward purchasing fresh produce online, with 23% of online grocery shoppers avoiding fresh produce purchases all together. A majority of those that have purchased produce online in the past year indicated that they’ve been disappointed at least once in quality and freshness. It’s apparent that online grocery shopping needs some fine-tuning as it moves forward.

Unlike some sectors of brick-and-mortar retail that have been severely impacted by internet sales, it’s evident that grocery is still a different breed, and should remain one of the most viable components among physical stores. At the same time, online grocery shopping is gaining in popularity. For an aging population, and for urban dwellers who opt for life in the city without a car, online grocery shopping certainly offers an attractive alternative to traditional supermarket grocery shopping.

For a long time, the small corner market was about as competitive as it got for the traditional supermarkets. But in the past 25 years, the explosion of wholesale clubs, dollar stores, and supercenters, and now the intrusion of lower-price foreign chains such as Aldi and Lidl, have all been fighting for “at home” food expenditures, resulting in the continual erosion of market share from the guys we knew best. Now, with Instacart and other initiatives, it appears that things are about to get even tougher for the traditional supermarket.

Bob Sheehan, Vice President of Research

The 2015 KeyPoint Reports for Eastern Massachusetts/Greater Boston and Southern New Hampshire are available now at Click on Research Reports. 
The KeyPoint Report for Greater Hartford, CT will be available within the next few weeks.

Company News

New Leasing Business: Bristol Farms Plaza, a 150,000 s/f center in Bristol, CT anchored by Big Lots and a new Hobby Lobby; Charter Oak Mall, a 225,400 s/f center in East Hartford, CT; and Dexter Place, a 16,000 s/f in Central Falls, RI anchored by Dollar Tree. All have multiple leasing opportunities, and all are being handled by VP of Leasing Don Mace. New Employee: Eddie Miller joined the One Loudoun office in Ashburn, VA as Site Engineer. Eddie has extensive facilities management experience, most recently at Stoladi Property Group in Alexandria, VA.

National News

August retail sales rose by 0.2%, according to the US Commerce department. Among retailers reporting monthly comp-store sales, L Brands was up 6%, Gap was down 2.0%, Rite Aid was up 1.6%, and Costco was up 1%. See our sales reports below...Macy's will offer same-day delivery in 8 new cities, including Boston. Macy's is teaming with Deliv to offer the service beginning this month in an effort to compete with e-commerce retailers like Amazon. The company tested out same-day delivery in 8 markets last fall.

Accelerating News

Arooga's Grille House & Sports Bar is headed to Florida and Georgia with 50 restaurants, which will more than double Arooga's national footprint. Arooga's currently has 10 corporate locations in Pennsylvania, and it opened its first franchise location in Uncasville, CT, adjacent to the Mohegan Sun Resort...Stein Mart plans to open 9 new stores in the third quarter, as well as 6 new stores in spring 2016 and at least 6 new stores in fall 2016...Kirkland’s plans approximately 40 new stores, and 10-15 store closings, for the fiscal year. Kirkland's has over 320 US stores in 35 states...Online footwear retailer Sole Society on opened its first brick-and-mortar store in Santa Monica. CA...Macy’s unveiled its new off-price banner, Macy’s Backstage, with the opening of 3 NYC-area stores, with locations in Brooklyn, Queens and Long Island. Three additional area stores are slated to open by year end...Online retailer ThinkGeek is partnering with its new owner, GameStop, to open a new store format focused entirely on collectibles. The first ThinkGeek store will open in the Florida Mall in Orlando in September, and additional stores are planned...Dick’s plans to open 5 new stores in September, 2 in Alabama, 2 in Ohio, and 1 in Arizona. Dick’s will have 630 stores across the US with these opening...Ulta expects to open 100 stores in 2015...Burlington Stores Inc. plans to open a net of 25 new stores by the end of the fiscal year, including 22 store openings and 1 closing in the third quarter....Arhaus plans 13 new stores by the end of 2016. The company has 57 stores across 23 states nationwide...Five Below Inc. plans to open a total of 70 net new stores during fiscal 2015, including 16 net new stores in the third quarter. If the company hits its growth target, by year end it will have 436 stores, with a longer term plan for 2,000 locations...Boston-based fitness retailer City Sports is set to open a new location in Virginia this month. City Sports Mosaic will be the 26th City Sports location and the first in the state. City Sports already has stores in Washington, DC and Maryland...Best Buy will set up outlets in 10 Macy's stores in November on a test basis. The Best Buy shops will occupy about 300 s/f and will be staffed by Best Buy employees...Dave & Buster's revised its FY15 store count guidance upwards to add 8 to 9 new stores, up from a projected 7 to 8 new stores, with a goal of 200 stores across North America....Robert Redford’s Sundance Catalog is expanding its retail footprint. The company will open a store in Edina, Minnesota this month, one of 2 locations to open east of the Rocky Mountains in 2015. The company plans to continue its growth over the next several years with additional stores targeted across various locations nationwide. The company currently has 3 locations...Taco Bell  is opening its new Taco Bell Cantina urban concept in Chicago and San Francisco this month. The concept will serve alcohol and attempt to capture Millennials in downtown areas. The move is part of the 6,000-unit chain’s commitment made in 2012 to add 2,000 units to its portfolio by 2022. The new urban locations are slightly smaller and don’t have a drive-thru...Buona, The Original Italian Beef, which has 16 stores in the Chicago area, to sell its first franchises at the end of 2016. There are also plans to open 4-5 company-owned stores each year for the next five years...Verizon Wireless is rolling out Verizon Experience stores at 250 Best Buys around the country. Rival AT&T, meanwhile, is opening its own dedicated stores at 250 Best Buy locations, many of them the same ones where Verizon is setting up shop.Verizon has already begun rolling out the Verizon Experience stores at Best Buy and said it plans to have nearly 100 locations by the end of the month. The company expects that number to increase to 250 locations by the end of 2015.

Decelerating News

The Great Atlantic & Pacific Tea Co. (A&P) is seeking to dispose of its remaining 153 locations, in addition to its original plans to close 25 stores and sell 118. The properties consist of Food Emporium locations in Manhattan; A&Ps in Connecticut, New York and New Jersey; Food Basics in New Jersey, New York and Pennsylvania; Pathmarks in Delaware, New Jersey, New York and Pennsylvania; Superfresh locations in Delaware, Maryland and Pennsylvania; Waldbaum's stores in New York; and Best Cellars/Wines & Spirits in Connecticut, New Jersey and New York...Stage Stores plans to close 90 stores. Houston-based Stage Stores runs 850 department stores in 40 states under the Bealls, Goody’s, Palais Royal, Peebles and Stage names...Hudson Trail Outfitters Ltd., one of Washington’s oldest retailers, is closing its remaining 4 stores, blaming the changing retail landscape...Sears Hometown & Outlet Stores Inc. plans to close 40-50 underperforming stores by the end of the year, on top of 63 underperforming locations closed in the first half of 2015...Surf and skateboarding shop Quiksilver, which operates some 700 retail stores, is seeking bankruptcy protection...Haggen, the Washington-based grocer which not long ago acquired 146 stores being divested by Albertsons, is seeking bankruptcy protection...Macy's plans to shut as many as 40 more stores in early 2016, picking up the pace of its closings. The chain has yet to identify the stores it will shutter. Over the past 5 years combined, the company has closed 52 stores and opened 12 new ones. It also plans to open 6 new Macy's Backstage locations to sell discounted merchandise, sometimes in the locations of stores it closed.

New England News

Denali opened its newest store at Westfield Trumbull, CT. Denali, along with the Trailblazer stores, forms a family of independent outdoor retail destinations in southern CT and RI. Denali’s addition to Westfield Trumbull marks Trailblazer and Denali’s 6th location, with stores in Branford, Uncasville, 2 locations in New Haven, and in Wakefield, RI...Popular Irish pub James’s Gate in Jamaica Plain has closed this month after 19 years...Ahold USA, parent of Stop & Shop, opened Bfresh, a small-format store, this month in a former Staples on Harvard St. in Allston. The 10,000 s/f store is a pilot for Ahold, although no additional stores are planned at this time...H&M is bringing its edgier, more modern and higher-end COS clothing chain to Boston’s Back Bay. A 2,960 s/f COS store will open this month on Newbury St., with two levels of women’s and men’s fashions, the third US store for the brand...The Dedham Institution for Savings has asked regulators to allow it to establish a branch in South Boston at a former Bank of America location, a move that would give the 184-year-old institution its first branch in the city. Currently the bank has 3 branches in Dedham and 5 in the city's southern and western suburbs. The bank is working with architects and contractors to design the space, and hopes to open in the next 6- 12 months..Athletic-wear firm Yogasmoga plans to open its first Boston-area retail store at the Prudential Center by December. The brand will also open stores in Westchester, NY; Short Hills, NJ; and Corte Madera and Walnut Creek, CA. The brand will operate 12 stores by year-end and projects opening 25 stores in 2016...Forever 21 has leased about 20,000 s/f across three floors at 449 Washington St. in Boston’s Downtown Crossing. Forever 21 operates more than 730 stores worldwide.

August Retail Sales Report

Notes: figures gathered from individual company websites, press releases, and Federal filings.  Not all companies report all figures; results not reported will be marked “n/r”. Quarterly results will be updated when available; quarterly figures are shown in italics. Figures from companies not calculated to one decimal point automatically received an ending digit of 0. 

Commerce Department Monthly Sales

Retail sales rose 0.2% last month, according to the Commerce Department. Excluding automobiles, gasoline, building materials and food services, sales increased 0.4%. Strong gains in auto sales were offset by a drop in the value of sales at service stations due to declining gasoline prices.

Source: U.S. Department of Commerce -

Treasury Yields

Treasury Yield Sources:;

Consumer Confidence Index

The Conference Board Consumer Confidence Index®, which had declined in July, rebounded in August. The Index now stands at 101.5 (1985=100), up from 91.0 in July. The Present Situation Index increased from 104.0 last month to 115.1 in August, while the Expectations Index improved to 92.5 from 82.3 in July.

Source: The Conference Board -

Purchasing Managers Index

Manufacturing expanded in August as the PMI® registered 51.1%, a decrease of 1.6 percentage points from the July reading of 52.7%, indicating growth in manufacturing for the 32nd consecutive month. The August PMI reading is the lowest since May 2013 when the PMI registered 50.1%. A reading above 50% indicates that the manufacturing economy is generally expanding; below 50% indicates that it is generally contracting.

Source: Institute for Supply Management - Manufacturing Report on Business -