Supervalu Kills Bigg's Hypermarkets, But Their Influence Remains

The last American hypermarket is going the way of the dodo, a victim of a retail animal native to the United States: the supercenter.

Yet the influence of the hypermarket -- big stores that combine department stores with supermarkets -- still is being profoundly felt across U.S. retailing. From Walmart (WMT) supercenters, to Kroger (KR) marketplace stores to Target (TGT) P-Fresh outlets, the hypermarket concept is expanding even as the last are departing.

Supervalu (SVU) announced that it is selling six of its biggs hypermarkets, all in the Cincinnati market, to Remke Markets, of Erlanger, Ky., and is closing five. A native American hypermarket operation, biggs was independent before being acquired by Supervalu and the last hypermarket operation of consequence still running. Remke is likely to shift biggs operations closer to those of traditional supermarkets, shrinking or forgoing departments that make hypermarkets distinct, particularly apparel. Supervalu, by the way, will continue to supply the stores through its distribution division. Supervalu already supplies products for Remke's supermarkets.

Craig Herkert, Supervalu's CEO, recently promised to put more emphasis on the company's distribution arm, which today generates less in sales than its stores but remains a significant operation. He said in a recent conference call that Supervalu wants to work more closely with the independent supermarket chains it supplies through the distribution division to leverage their knowledge of local conditions. He also is consolidating the company's retail business, so far in small measures. The company recently announced it is scaling back its Shaw's/Star Market operation in New England by selling off 16 supermarkets operated in Connecticut, a peripheral market for that Supervalu division.

Hypermarkets differ from supercenters by having food take up more than half their retail space and including elaborate perishable food departments. Supercenters devote more than half their space to general merchandise and most have compacted grocery and perishables operations relative to supermarkets. Supercenters predated hypermarkets in the United States. Fred Meyer, Meijer â€" no relation â€" and Schwegmann, an operation that folded more than a decade ago, were the original supercenter operators.

Yet, hypermarkets had a big impact when their European operators Carrefour and Auchon launched them in the United States in the 1980s. They had limited success and both companies eventually retreated from the U.S. market, but Walmart tried out its own version, Hypermarket USA, and Kmart launched the first of the supercenters from the big three discount store chains in the wake of their arrival. Walmart closed Hypermarket USA as it began its supercenter operations. Target followed with its own supercenters thereafter and developed P-Fresh, which ads full perishables operations to an extended grocery assortment in a traditional discount store, over the past two years.

As the 1990s progressed, supercenters became the fastest-growing grocery store type, at least in terms of sales generated, in the United States. Still, the widely publicized hypermarket launches helped prepare U.S. consumers for the idea of picking up socks, throw pillows and steak at the same store. Since hypermarkets appeared, retailers of all sorts have been experimenting with ways to combine food and general merchandise. Even specialty stores that might seem unlikely dabblers, such as Bed, Bath & Beyond (BBBY) carry food today and, that chain later thought to add non-food consumable products such as beauty care that now have a prominent place at its locations.

Indeed, hypermarkets of a sort have lately had a revival. Many supermarket operators, including Wegmans and Giant Eagle, have developed supermarkets that incorporate expanded general merchandise with elaborated perishable food in recent years. Kroger developed its marketplace stores with expertise derived from Fred Meyer, which it purchased in 1998, but in a lay out that is in some ways closer to a hypermarket. Kroger just expanded its marketplace stores to Texas even as Giant Eagle and Wegmans have been adding the big, mixed assortment stores they have developed

So, biggs may be passing from the scene, but its offspring continue to make an impact on retailing and are even challenging the ascendancy of the supercenter. And so the struggle continues into a new generation.