Giant Supermarkets Seek Advantage of Small Stores

(MoneyWatch)  Giant, the Carlisle, Pa.-division of Ahold USA, is building on the work it has done developing a convenience store operation to expand the range of formats it operates, looking in part at smaller concepts that can help it reach more consumers.

To advance its efforts the company promoted Ron Bagley to director of compact formats, a newly created position. Bagley, whose most recent position was director of operations, merchandising, will report to Steve Lamontagne, vp of format development. In April, the supermarket operator opened Giant To Go, a 4,400 square foot facility, in Lancaster, Pa., combining typical convenience store assortment and services with a more elaborate food presentation including produce, meats, deli and bakery. Consumer using the convenience store are linked to the supermarket operation via the loyalty card they can use in each.

Yet, company spokesperson Tracy Pawelski said Giant To Go isn't all that the company has in the works. It is developing additional concepts involving both new stores and existing supermarkets slated for renovation. "Giant has been looking at how to work with new formats to expand and broaden our company's geographic reach," she said.

Of course, small stores have become more popular with major retailers. Tesco invigorated the trend when it opened up its Fresh & Easy concept, but the growth of Aldi, Trader Joe's and Walmart's Neighborhood Market already had many retailers considering the value of operating compact units, particularly as they could better fit more densely populated markets in terms of scale and cost. The result has been a range of tests including Walmart's smallest store operation, Marketside. Yet, while many of the newest store concepts are under 25,000 square feet, Meijer has developed a 100,000 square foot concept designed to more easily fit dense urban markets, particularly around Chicago, than its 200,000 square foot full-sized supercenters. Kroger has marketplace, which is scaled up from its supermarkets at 100,000-plus square feet, but scaled down from -- and actually based on a small-store format originally developed by -- its Fred Meyer supercenters. With its P-Fresh stores, Target is, essentially, exploring the market for mini supercenters -- one tested by Kmart before its financial troubles and bankruptcy made the experiment untenable -- by adding a full range of perishables to the groceries and frozen and refrigerated food typically available in its supercenters.

Ahold's most visible store initiatives lately have involved shifting the stores in its centerpiece Stop & Shop/Giant-Landover division to everyday low price operations, while simultaneously cutting the number of products in its assortment to focus more heavily on fast moving items and segments. By looking at new formats in the Giant-Carlisle division, Ahold can develop vehicles that use the kind of focused product strategy it has been developing elsewhere but incorporated into a wider range of vehicles. Thus, a small store in Harrisburg might still have an assortment limited to fast moving items/segments but be significantly different from the focused assortment available at a unit in the Reading suburbs. Additional formats provide Ahold with the opportunity to serve customer with efficient stores and still meet a wide range of needs. Being able to scale locations to the size of their communities and the sales volumes they can generate provides cost advantages but also being able to provide different, tailored product selections in stores styled to serve specific population provides additional competitive and customer satisfaction benefits simply operating the same format in a greater or lesser size can't.