Are Grocers the Answer to Retail Woes?

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More than 6,000 retail stores closed their doors for good throughout the United States in 2017, according to research conducted by Business Insider. Among those on the list are plenty of big names in the retail industry that have been in business a long time, such as Macy’s, Sears, Radio Shack, and more. In the face of declining sales year after year and less traffic from customers, many retailers are faced with no other choice.

Fortunately, industry experts and insiders agree that it is not all doom and gloom for the world of retail. And the new breath being breathed into the industry may, quite possibly, come from an unlikely source -- grocery chains.

Grocery lending a helping hand

The expansion of grocery chains over the coming years will likely spur major construction, forsaking the overall trend in current retail development, analysts predict. And it goes beyond new construction -- grocery-anchored retail centers are also incredibly appealing to commercial real estate investors. Steve Jellinek, a Vice President of commercial mortgage-backed securities research with Morningstar Credit Ratings, explains the appeal of these centers in four simple words: people need to eat.

Of course, it’s more complicated than that, since people also need clothes and shoes to wear, or mattresses to sleep on. But commercial real estate experts agree that grocery stores can play a crucial role in helping retail shopping centers and malls gain more foot traffic and new customers -- reviving retail in a way that few would have predicted even just a few short years ago. “Food retail is one thing helping struggling malls survive,” says June Williamson, an architecture professor at the City College of New York, who co-wrote “Retrofitting Suburbia.”

Take, for instance, Kroger. The chain, the largest grocer in the United States, with almost 4,000 locations recently purchased a space in Kingsdale Shopping Center (Upper Arlington, Ohio) that used to be a Macy’s for more than $10 million, not long after the store announced it would be closing the 45-year-old location. Similarly, 365 by Whole Foods (a smaller, more affordable alternative to the well-known grocery chain) purchased space in the Bloomington, Indiana College Mall (Indiana Public Media).

Wegmans was a leader in the trend, having operated a store out of Montgomery Mall in Pennsylvania and in Hunt Valley mall in Baltimore County, Maryland. “Because our business model is predicated on high volume, we need a lot of customers to shop in our stores. While we don’t specifically seek out shopping malls, we consider them if they meet the things we’re looking for,” Valerie Fox, a Wegmans spokeswoman, has said of moving into Natick Mall, their latest venture into shopping malls.

Looking towards the future

In the long run, with great retail locations at a premium throughout the US, mall vacancies offer a real and viable avenue to growth for supermarkets. For grocers that know how to operate large, high volume stores (such as Wegmans and Kroger), the right location in the right mall can mean a substantial increase in sales -- and mall operators, simultaneously, are discovering that supermarkets can get people out of their homes and into shopping malls.