Next to the Dollar King, across the parking lot from the Beauty World, on the southwest corner of Kingsley and Audelia, in a shopping center that has seen better days, one of the world’s corporate giants is issuing a challenge to its competitors.
Later this spring, a Wal-Mart Neighborhood Market – the retailing giant’s version of a grocery store – will open in the former Minyard’s location at Audelia and Kingsley. And when it does, Lake Highlands will be thrust into the forefront of a retailing struggle that more than one expert says could decide the future of the American supermarket.
It’s Grocery Store Wars!
“Lake Highlands is definitely going to be a battleground for these companies,” says Edward Fox, an SMU professor who heads the school’s J.C. Penney Center for Retail Excellence. “Kroger, Albertson’s, Safeway – they’re all worried about what Wal-Mart will do to their business, and Lake Highlands is one of the places where these companies are going to fight it out with Wal-Mart.”
Kroger is opening a new store at Greenville and Forest Lane. Albertson’s is opening soon in the renovated Northlake Center. HEB’s Central Market, under construction at Greenville and Lovers Lane, is targeting Lake Highlands residents. Even Whole Foods and Tom Thumb (owned by Safeway), which aren’t opening new stores in the immediate area, say they’re not going to sit idly by.
All of which, as any Lake Highlands resident knows, is more than a little ironic. Just five years ago, some of the same chains were closing stores in the neighborhood. Remember Kroger at Skillman and Kingsley? Food Lion at Abrams and Royal?
“I think some chains have really honed in on what their target markets are,” says Larry Sears, a former president of the Merriman Park North Homeowners Association who helped lure Whole Foods to Skillman and Kingsley when Kroger left.
“They’re becoming more sophisticated in their methods, and I think they finally understand the numbers are here, that we have the buying power that they want.”
National trends, local fights / What’s happening in Lake Highlands is part of a nationwide consolidation in the grocery store business. The biggest national chains, such as Safeway, Kroger and Albertson’s, are buying well-known regional companies in an attempt to increase market share, take advantage of economics of scale, and boost sales. Safeway, for example, not only owns Tom Thumb, traditionally the market leader in the Dallas area, but Randall’s in Houston. Kroger owns Ralph’s, the Tom Thumb of the Los Angeles area, while Albertson’s runs Jewel-Osco, the market leader in and around Chicago. Currently, the top three chains (which also are the three largest in the country) each have about 20 percent of the market in the Dallas area.
In addition, Wal-Mart and Target have been massing at the edges of the industry, the former with its Super Wal-Mart and Sam’s Club, and the latter with Super Target – each of which includes grocery stores as a key part of its design.
“What happens to you if you stand still in the grocery store business? It kills you,” says Bob Rissing, a senior real estate manager for Albertson’s who helped put together the Northlake deal. “I think, if you look at what everyone is doing and try to make sense of it, that’s what you’ll see. None of the big players want to stand still.”
So why Lake Highlands, and why now?
Part of the answer is real estate. All of the strip centers abandoned or bypassed for new construction in suburban cornfields in the mid-1990s look much better today. Prices for choice suburban locations, which used to be significantly less expensive than those in urban neighborhoods such as Lake Highlands, aren’t any more. And, since a 60,000- to 70,000-foot grocery store (the typical size for most new construction) can cost as much as $8 million to build, the real estate needs to be near customers who can foot the bill. And Lake Highlands fits that description as well.
Says Kroger spokesman Russell Richard: “It’s probably a coincidence that we’re all opening at more or less the same time, but the Metroplex is a very competitive market, especially since all of the national players are here.
Everybody is out for a piece of the pie.”
Dueling concepts / The evidence, retailers say, is in their stores – or at least that’s what they hope neighborhood residents will discover. Each chain offers something different, and the winner here could very well be the winner elsewhere in the country.
- Wal-Mart: Lower prices, fewer frills. The retail giant, Fox says, wants to transfer what it learned from its superstores to grocery stores. Its neighborhood stores are smaller, about 40,000 square feet, with fewer items and less variety. Their biggest asset, just as at other Wal-Marts, is price. Generally, supermarkets heavily discount key items to bring customers in, and make up any losses on other products (which is one reason why the same can of soup can be a different price at three stores). Wal-Mart doesn’t do that; rather, it says its prices are consistently low on every item.
- An upscale approach: Kroger’s Signature Stores. The Signature stores, with everything from a drive-thru pharmacy to a Nature’s Market featuring organic produce, take nearly the opposite approach from Wal-Mart. The concept is similar to Tom Thumb’s Simon David stores, and the tenants in Signature strip centers often are just as upscale. Some Signatures even include a reading area, such as a Barnes & Noble or a Border’s.
- Albertson’s: Strip center anchor and one-stop shopping. The Northlake store, Rissing says, is typical of the idea – a full-service grocery store, complete with Starbuck’s, and a gas station and convenience store at the other end of the parking lot. Shoppers will need to make just one trip for everything from gas to groceries.
- Gourmet superstore: Central Market. General manager Bob Brandt says his store draws customers from 15-20 miles away to sample its produce, wine and specialty items. A typical grocery store, offering a smaller product selection, has a 3-mile market area. This means HEB officials see Lake Highlands and its demographics as desirable as those in the Park Cities – “high-end, middle-of-the-road shoppers,” Brandt says. But that’s not the only similarity between Central Market and a superstore such as Home Depot or Wal-Mart. It’s about 15 percent bigger than other grocery stores, and it will employ 450 full- and part-time people.
A plethora of riches / Add to the mix the Super Target at Skillman and Abrams, Whole Foods’ planned renovations and expansions this year, and Tom Thumb’s on-going search for new sites, and it might mean more grocery stores than neighborhood residents could possibly shop in.
“I think there is a recognition that Dallas is a great market,” says Nona Evans, the southwest regional director of marketing for Whole Foods, which she says is opening a store in the Park Cities, expanding its Lower Greenville location and monitoring the need for improvements at Skillman and Kingsley this year. “There is an opportunity to do so many interesting things, and I think something like Eatzi’s (gourmet market in Oaklawn) is a manifestation of that. Now that the real estate has opened up, there are a number of choice sites in the metropolitan areas.”
Throw in the DART rail expansion, which has stimulated residential development along its route from Mockingbird and Central to Forest and Greenville, and an economy that hasn’t slowed down here as much as elsewhere, and the conditions are ripe for building on those sites.
That some of them are in Lake Highlands is only a surprise to retailers, says Susan Mead, a lawyer who specializes in land use issues and has worked with the City to attract retail development.
“Retailers have finally figured out that not everyone is in their car driving to Oklahoma,” Mead says. “They are finally realizing that the income levels they want are in cities. And one of the first things you see is that the first retailer who figures it out is going to do well enough to attract more retailers, and then you’re going to have more retailers than you can shake a stick at.”
Which will make it a whole lot easier the next time someone needs to buy a loaf of bread – or even a piece of lemongrass.
