Even when Wal-Mart does something small, it promises to have a big impact.
By introducing its smaller Neighborhood Market grocery stores in Colorado Springs to go with its Supercenters, the world’s largest retailer isn’t just increasing its presence in the region, but is putting its foot down on the throats of competing groceries, local commercial real estate experts say.
Wal-Mart has nine Supercenters in the Pikes Peak region with full lines of groceries to go with general and speciality merchandise; the retailer’s growth over the last 10 to 12 years has propelled it past King Soopers, Safeway and Albertsons to become No. 1 in
grocery sales in the Springs area, some of the experts say.
But with one of its Neighborhood Market stores now open, a second under construction, two more on the drawing board and possibly more on the way, Wal-Mart is putting even more pressure on its competitors — which could force them to more aggressively market themselves while re-examining their locations with the possibility of closing older stores or opening new ones.
“Wal-Mart’s coming here not to just play around, it’s coming here to win,” said John Egan, a broker with NAI Highland Commercial Group, a Colorado Springs brokerage. “It’s coming here to get that dollar from that customer going to Safeway, for example. They’re not just doing it for the heck of it.
“Their Goliath concept has done well, but I don’t think that’s capturing all the dollars or the people who are still going to Safeway, people still going to King Soopers,” Egan said. “I think Wal-Mart has that sort of market mentality, like, ‘Well, that’s a dollar being spent somewhere else. Let’s figure out how we can capture it’.”
Wal-Mart’s rollout of its Neighborhood Markets is part of the evolution of the grocery store landscape in the Pikes Peak region, which has seen comings, goings and downsizings over the last 10 to 20 years.
Safeway and King Soopers have closed a handful of stores; Albertsons has nearly halved its presence to four locations; Cub Foods and Grocery Warehouse have left; and a single Rancho Liborio store, which catered to Hispanics, closed in May after four years.
Sav-a-Lot, a no-frills grocery, continues to operate a single store on the Springs’ south side. Meanwhile, Whole Foods and Sprouts Farmers Market are targeting audiences that want healthier and somewhat higher-end products; Whole Foods has two locations locally and Sprouts has one.
Beyond stores considered as traditional grocers, Target has two super stores in the Springs with large selections of groceries, while 7-Eleven and Walgreens are offering more food items for on-the-go consumers.
But Wal-Mart’s expansion has been perhaps the biggest change in the Pikes Peak region.
The Bentonville, Ark.-based retailer entered the Springs market with traditional discount stores, then expanded them into Supercenters while also building new ones.
Its roughly 200,000-square-foot Supercenters include five in the Springs and one each in surrounding Monument, Fountain, Woodland Park and unincorporated Falcon. Wal-Mart plans a 10th Supercenter in a new shopping center on the south edge of the Springs.
Wal-Mart’s Neighborhood Market stores — 40,000 to 52,000 square feet, on par with traditional groceries — have full lines of food to go with health and beauty products, pet supplies, household items and pharmacies.
The first Neighborhood Market opened in August in a former King Soopers store northeast of Platte Avenue and Murray Boulevard. A second is under construction on South Academy Boulevard, near Chelton Road, and targeted to open early next year.
Wal-Mart also has said it plans to remodel a former Albertsons at Academy and Austin Bluffs Parkway, while building a fourth Neighborhood Market northeast of Union Boulevard and Lelaray Drive. Both stores will open in 2013.
Wal-Mart officials weren’t available for comment for this story.
The Neighborhood Markets are in or border on established parts of the Springs that have seen closings in the last 10 to 15 years by Safeway (Academy and North Carefree Circle; Union and Briargate boulevards), Albertsons (Academy and Palmer Park boulevards; Austin Bluffs and Academy; and Academy and Dublin boulevards) and King Soopers (Platte and Murray; Palmer Park and Circle Drive).
Wal-Mart no doubt looked at the dense numbers of households in these areas, said Marty Johnson, a Springs broker with CB Richard Ellis. And despite lower household incomes in some of those established areas, Wal-Mart probably saw an opportunity to fill gaps left behind by the other chains.
“It was an area of town that became underserved, and they’re backfilling some of that area,” Johnson said.
But Wal-Mart isn’t done and likely is looking to faster growing, higher-household income areas incomes for additional Neighborhood Market stores, said broker Mark Useman, of Sierra Commercial Real Estate.
“Everybody buys groceries,” Useman said. “I know they’re looking around the north side. Eventually, they’ll land some place.”
Wal-Mart’s expansion is having ripple effects, some experts say. CB Richard Ellis’ Johnson suspects Safeway — facing stiff competition from Wal-Mart — closed its Academy and North Carefree store as a result of Wal-Mart’s plan to bring a Neighborhood Market to nearby Academy and Austin Bluffs.
Expect to see even more jockeying for position among the grocery chains — both in terms of store locations and their marketing strategies, real estate industry members say.
Because it has four stores remaining, Albertsons appears to be the most vulnerable from the competition posed by Wal-Mart, Johnson said.
“Wal-Mart is taking grocery sales away from the whole market, but the one that’s suffering the most in our market is Albertsons,” Johnson said.
Albertsons’ stores in the Springs are owned by Albertsons of Boise, Idaho. The company doesn’t discuss its competition, said spokeswoman Christine Wilcox. But she said the company has no plans to close more stores in Colorado Springs and is always on the lookout for new store opportunities.
Safeway, based outside San Francisco, also doesn’t comment on its competition, said Denver spokeswoman Kris Staaf.
The chain remains focused on its core mission of providing high-quality products, customer service and value for its shoppers, yet also believes it must be open to innovation because of the changing grocery store landscape, she said.
Safeway’s “Just for U” program, launched about six months ago, uses the chain’s website and smartphone app to offer additional savings to customers for items they buy the most. Special deals and digital coupons are loaded onto shoppers’ club cards via the program.
“Retailers need to be innovative, and they need to look at how does the landscape look moving forward?” Staaf said. “By offering these programs like ‘Just for U,’ that’s a great opportunity for us to really tailor and tap into existing customers based on previous shopping trends in a way they want it delivered, as well as look at potential new customers.”
Staaf said she had no information about new stores for Safeway, although the company is always looking at potential sites. Safeway has 13 stores in the area, from as far south as Fountain to as far north as Monument. But it has none on the Springs’ north side since it closed its Union and Briargate store in 2007.
“They need to do something, they have holes in the market they need to fill,” Useman said of Safeway’s lack of stores on the north side.
King Soopers, part of Cincinnati-based Kroger, has 10 stores in the area; there’s also one City Market store, which is part of Kroeger. King Soopers has added locations over the last decade in some of the fastest-growing parts of the Pikes Peak region — the Springs’ north and northeast sides, and northern El Paso County.
King Soopers officials couldn’t be reached for comment.
Other than its two store closings in older areas, King Soopers has shown it’s not retreating when it comes to competition from Wal-Mart and others, said Egan, of NAI Highland Commercial. King Soopers’ newer stores are larger and offer several services beyond groceries, such as Starbucks coffee counters.
There are rumblings in local commercial real estate that King Soopers is looking for another site in northern El Paso County, as well as Falcon northeast of the Springs, Egan said.
Whole Foods, based in Austin, Texas, and Phoenix-based Sprouts are less likely to be affected by Wal-Mart’s growth because they target more health-conscious shoppers and, in Whole Foods’ case, higher-income households.
“People looking for the Whole Foods experience are willing to pay more to get what they want,” Useman said.
Whole Foods has been rumored for years to be looking for a southwest Springs location; company officials declined to comment. Sprouts officials, meanwhile, didn’t return a call, but the chain is expected to open more stores in the Springs.
“I don’t think they came here to open one store,” Useman said.
The store originally was a Sunflower Farmers Market when it opened in 2009; Sunflower merged with Sprouts this year. When Sunflower opened here, the company’s founder said he envisioned more Springs locations.
While shoppers watch the chains jockey for position in the wake of Wal-Mart’s growth, they should expect to see more and better deals, several experts said.
“Shoppers benefit because it’s healthy competition,” Johnson said. “The pie is getting bigger because of an expanding population, and it benefits us as consumers to have more options.”