Future of supermarkets is looking large
sacramento.bizjournals.com
More warehouse stores, specialty markets and further reliance on technology can all be seen in the crystal ball
Jennifer Kerr
From the July 12,
In Steven Spielberg's futuristic "Minority Report" movie, animated store displays in 2054 scan shoppers' eyeballs, address them by name and ask about their recent purchases.
It's the current supermarket "loyalty cards" taken to their logical and ultimate use.
Science fiction likes to predict a bleak high-tech and soulless lifestyle. Will the supermarket of the future be like that? Or will Sept. 11 security concerns prompt a return to "comfort food" and cozy neighborhood markets?
Of course, no one knows for sure and supermarket officials are cautious about predicting what will happen in their industry that is so essential to everyone's life.
"It's hard to say, really, what will be in the future. It's really up to the customers and what they're telling us they want and need," said Nicole Townsend, spokeswoman for Raley's Inc., the West Sacramento-based chain of 149 Northern California and Nevada supermarkets.
The very first Raley's in 1935 correctly anticipated the future -- grocer Tom Raley added a parking area to his store and called it "the nation's first drive-in market."
Cars were the high-tech wave of the 1930s; future technology could be anything from smart shopping carts that tally your total as you shop to increased online shopping.
Today, supermarkets appear to be heading in two opposite directions. On the one side are the "super" warehouse stores, getting bigger and promising cheaper prices for their selection of packaged goods. On the other are the smaller markets specializing in gourmet and world foods, catering to people who want something fresh and different.
On the super side, Sacramento already has warehouse-style stores such as Costco, with three local stores, and FoodsCo, a branch of the Kroger Co., based in Cincinnati, which is planning to open new area stores this month.
There soon could be even more. Wal-Mart Stores Inc. announced in May that it will be opening 40 of its Supercenters in California over the next four to six years.
Only one location has been chosen so far -- La Quinta near Palm Springs, set to open in 2004, said Peter Kanelos, Wal-Mart's community affairs manager for California, Alaska and Hawaii. He said the others are likely to be distributed in a pattern similar to the current 125 regular Wal-Marts, which include eight in the Sacramento area.
The Supercenters not only stock general merchandise, but also 30,000 grocery items, everything from frozen foods to milk. There are currently 1,100 of the Supercenters in 44 other states and they make supermarkets nervous.
"With the introduction of Supercenters, we generally see a decrease in grocery prices everywhere we've gone," said Kanelos.
Since the Benton, Ark.-based retailer opened its first Supercenter in 1988, Wal-Mart has become the nation's top grocery seller with an estimated $80 billion a year in food sales.
That success has Target Corp. rethinking its strategy. Last month, Target officials revealed that a plan to open 30 to 40 supercenters annually throughout the country could result in a company that's $45 billion larger in the next decade than if it stuck to its current style of discount stores. Target has not said publicly whether it is committed to that plan, however.
Taking on Wal-Mart: Supermarket officials don't like to talk directly about the Wal-Mart threat, but they say that's exactly what they are doing. Some supermarkets are broadening their offerings -- adding things such as lawn chairs and gasoline -- while others are stressing friendliness and personal service.
"We're really neighborhood stores," said Raley's Townsend. "Many people have shopped in our stores for generations."
She said Raley's tries to adapt to customers' changing needs, such as adding coffee bars in stores, cup holders on shopping carts and offering classes on health-related topics.
One big trend that most supermarkets have adopted in a big way is offering more prepared foods -- items that shoppers can take home and eat for dinner.
"Today people are busy working or carting their children to soccer practice or ballet lessons and they're looking for convenience," said Townsend.
A consumer survey released in May by ACNielsen U.S., a market information company based in Chicago, found that people are shopping less frequently in traditional grocery stores and increasing their trips to supercenters such as Wal-Mart.
ACNielsen's Todd Hale said regular supermarkets "have to create a unique reason for shoppers to choose them," such as fresh produce or interesting prepared foods.
Darrell Corti, president of Corti Bros. of Sacramento, agrees. He believes things will be different in the future with "the demise of the style of living that was sort of the dot-com style."
"There will probably be, I hope there will be, a return to people cooking more unprepared foods," said Corti. "We probably will see more people get down to sort of basic cooking."
He said a lot of foods once considered exotic, such as prosciutto or Parmigiano-Reggiano, are now "mainstream."
One unexpected trend in the last decade, he said, has been the rise of farmers' markets, where farmers sell their produce, nuts and even fish directly to customers. There are 10 farmers' markets each week around Sacramento, open somewhere every day but Monday. Five stay open all year.
"You find people going out there not so much to buy things because they are fresh, locally grown and all of those good things. They go because they can find something they can't find in the store," Corti said.
Another growing trend is the increase in stores selling products from other countries, such as Asia and Latin America, he said. His own store now stocks products for Argentine, Chilean and Bolivian customers it never before carried.
Going high-tech: The supermarket of the future, of course, will have improved technology. However, the high-tech and economic slowdowns could curb grocery companies' enthusiasm for spending large amounts of money on expensive equipment.
Wal-Mart's Kanelos said the company will be investing in technology that makes "things more efficient, faster and helps you keep up with the customers' demand."
He said the new Supercenters in Los Vegas have devices such as foot-level cameras at checkout so cashiers can see what items shoppers have on the bottom of their carts.
Many supermarkets are already using wireless technology to communicate among various sections of their stores. Raley's sets up wireless remote checkstands around the store during rush periods to speed up checkout.
Wireless devices could in the future allow stores to create electronic shelf labels, which could be updated as prices change and could signal the office when the shelf is empty. They could be used to create mini-billboards on shopping carts based on the customers' past shopping history as stored in their loyalty-card database. Stores could also send messages about specials to customers' cellular phones and personal digital assistants, or PDAs.
Shopping carts of the future could automatically tally the cost of items as they're plunked in so the shopper instantly knows the total. Customers could also soon have their own hand-held devices they could use to scan bar codes of groceries as they finish them to create a quick shopping list.
Online grocery shopping will also be part of the future, said Mark Marymee, director of public relations for GroceryWorks, the Pleasanton company providing online services for Safeway. GroceryWorks is owned 50 percent by Safeway and 35 percent by United Kingdom grocery giant Tesco.
Safeway's new online arm was tested last fall in the San Francisco and the Portland, Ore., areas and launched in January in those areas. The Sacramento area was added in March.
Customers go online and make their choices. Their lists are sent to nearby Safeway stores, which deliver the groceries to their homes for an additional $9.95 fee.
"We're finding a lot of families with kids are utilizing our service," Marymee said.
The Safeway model didn't have the huge capital startup costs of Webvan, the online grocery shopping company that failed a year ago, he said.
Marymee said future innovations could include allowing customers to store their usual list online and sending customers a reminder -- like a bell -- that it's time to reorder.
"We think it's going to continue to grow as more and more people see the convenience," he said.
Corti said the events of last Sept. 11 are making predictions of the future even more difficult than usual. Instability and insecurity could curb technology and expansions and keep people close to home.
"I just wish I had a crystal ball," he said.
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