May 2017 — Retail Properties Quarterly —
Page 21
www.crej.comGrocery Update
T
he traditional department
store industry is under siege
as Amazon and fast fashion
brands like Zara and H&M
creatively destroy stodgy
business models at Macy’s, Sears
and numerous smaller apparel
brands that have been household
names for decades.
Traditional grocery stores have
not yet faced the same obstacles,
however many
familiar brands are
now facing chal-
lenges to their his-
toric “dominance
by market share”
playbook, which
has been on auto-
pilot for decades.
Amazon is work-
ing hard to deploy
a grocery strategy,
but to date less
than 1 percent of
total grocery sales
occur over the
internet. Moody’s predicts this will
only grow to about 3 percent over
the next five years. However, as the
chart highlighting same store sales
trends indicates, grocers may have
more to fear from each other than
they do from the internet in the
next five years.
Indeed the era of unlimited
grocery store brand expansion is
waning – perhaps even coming to
a close – as comp sales have fallen
dramatically among all major U.S.
brands. This trend is especially
acute in the Denver market where
years of grocery store expansion
may be headed for a cool down.
The market share and store
count charts comparing 2014 to
2016 Denver grocery locations
seem to indicate that the years of
store sales growth by new stores
are tapering off due to the Albert-
sons/Safeway merger, changing
consumer habits and the natural
foods segment expanding to all
brands.
Target and Walmart continue to
strengthen their organic brands,
and Kroger purchased a stake in
Lucky’s market to compete with
Whole Foods. Whole Foods recently
closed two older-format stores in
the Denver market. Safeway has
closed nine stores in the past year.
Target’s comp sales fell last year,
in part due to declining food sales.
When Target’s grocery store presi-
dent departed the company in late
2016, the CEO announced that the
company had no intention of hav-
ing a full-service grocery business.
The grocery business may be
undergoing creative destruction at
its own hands, yet there are inno-
vations coming that could help
stores grow their sales while not
increasing their store footprints.
Denver, in particular, is becoming
a hotbed for grocery home delivery
and grocery pick up. King Soopers
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Are Denver grocers reaching saturation?Allen Ginsborg
Managing director
and principal,
mountain states,
NewMark Merrill
Cos., Longmont
PNC
A historical perspective of same store sales trends from 2012 to 2016
PNC
Total store count in Denver in 2016 compared to store counts in 2014
Please see 'Ginsborg,' Page 27