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Supermarkets shrink stores and grow online sales

Grocery-anchored centers were the retail stalwarts of the COVID-plagued year of 2021. Non-grocery tenants in that sector posted record sales and developers and investors vied to acquire centers and chains—especially in high-growth Sunbelt states like Florida, Texas, and Arizona. The trend continued through the first half of 2022. Tenants posted record sales of $1.5 billion and the average cap rate for the properties fell to an historical low of 5.9.

The second half has been another story.

During those six months, said a report from JLL, sales in grocery-anchored centers plummeted by 44% to $852 million and cap rates rose to 6.9%. The global retail services company called it the “tale of two halves in the retail capital markets.”

Despite the fact that consumers have quit buying eggs and produce online and returned to stores, supermarket chains have started investing heavily in creating their own online platforms and are active in partnering with grocery delivery operations such as Instacart, Uber Eats, and DoorDash.

Instacart’s second quarter 2022 sales were 39% higher than in the same period last year, and Uber Eats was signed by Meijer to handle deliveries at all of its 500 stores.

Walmart’s new “Text to Shop” app lets customers place orders via text message. Southeastern Grocers, the holding company of the Winn-Dixie and Harveys supermarket chains, has developed for them an e-commerce service that customers can use to make purchases and schedule online pickups. aurbanski@chainstoreage.com

According to eMarketer, online grocery sales in the United States rose from $121 billion in 2021 to $140 billion in 2022 and will continue to rise at an annual $20 billion-plus rate over the next four years.

At the same time, supermarket chains whose store footprints have continued to get larger over the past 40 years are trying out smaller formats—perhaps influenced by Aldi, whose sales floors are typically in the 10,000-sq.-ft. range. The chain was the grocery category expansion leader in 2022 with 49 new locations. Its small-format competitor Lidl now fields 178 stores in the U.S. and continues to expand.

In January, Meijer, whose supercenters range from 150,000 to 250,000 square feet, opened two 90,000-sq.-ft. Meijer Grocery stores in the Detroit suburbs. Schnucks branched out into the convenience store business with a brand called Shnuck’s Express. And Save Mart opened a small-format supermarket in San Francisco.

According to Placer.ai, the cell-tower traffic-tracker, Publix’s small-format chain GreenWise market has logged monthly traffic increases and shopper visits that are longer than those experienced by Publix’s Florida stores.

One big exception to the trend was Texas-based H-E-B. The chain opened 12 stores averaging 100,000 sq. ft., including one in Frisco—its first store in the Dallas-Fort Worth market.

@AlUrbanski (Twitter)