Kroger Bringing Marketplace to Home Town
By George Anderson
Kroger plans to introduce its Marketplace concept to the Cincinnati area by the end of the summer, reports The Enquirer.
The larger multi-department concept, with stores running in the 80,000 to 105,00 square-foot range, dedicates up to 40 percent of its floor space to general merchandise including furniture, housewares, outdoor living products, consumer electronics and toys.
The newest Marketplace locations will not have Fred Meyer jewelry stores like other multi-department stores in Ohio.
“Fred Meyer doesn’t make sense for every location,” said Art Wulfeck, a spokesperson for Kroger.
Jerry Vogt, Marketplace district manager, said the company is actively scouting for available space to expand the concept in the Cincinnati-Dayton-Northern Kentucky region.
“We need flexibility to get large, and in some places we can’t do that because of physical limitations,” he said.
Mr. Vogt said Marketplace stores in other areas have been well received by consumers.
“We have two Marketplace stores up and running in Columbus. They are doing pretty good,” he said.
The Marketplace concept, he told The Enquirer, is not about responding to Wal-Mart or any other competitor.
“Our motivation is to see how we could take one-stop shopping to the next level,” he said. “But this is an internal initiative rather than responding to any mass merchandiser.”
Moderator’s Comment: What is your assessment of the Kroger (Fry’s and Smith’s) Marketplace concept? What is your assessment of Kroger from a corporate
point-of-view? –
George Anderson – Moderator
All grocers that have entered into the general merchandise space say “it is not a reaction to Wal-Mart.” OK, maybe it is not explicitly Wal-Mart, but no one can argue that Wal-Mart capitalized on this phenomena and Target was a fast follower.
The reality is that this is a way of leveraging the traffic you already have as well as gaining more of a share of the consumers wallet. But, all of us should realize that this too will come to an end because there are only so many people and locations that can be supported. So, now the question becomes “What can I do next?” The lifecycle of a retail concept is becoming shorter and complacent retailers will be gone in a flash. (I would use Albertsons as an example).
Kroger is an “excellent” food merchant, rather upscale, with diverse assortments in household, health, floral and beauty aid products that fit in a grocery sack(s). They supplement this environment with banking and other consumer-related services that aren’t bulky. That’s Kroger’s current core competence and they’re extremely good at it.
Now Kroger, with non-food expertise in-house and an expanded focus, is toying with becoming a “good” Fred Meyer-kind of merchant adding furniture, electronics and other durables — items that don’t fit easily in a Kroger sack. While Kroger reports initial success with its currently modest furniture offerings, usually in a center aisle, few things are harder to put up with strategically than the annoyance of a good example.
Kroger can, of course, become a good durable goods merchant, but a Kroger “good” could become the enemy of the current Kroger “best.” Yes, Meijer’s, Target, Wal-Mart, Super Kmart and others have stores in the Kroger trading area that are already selling “everything” so the demand is there but so is possible saturation.
A question that Wal-Mart’s Lee Scott might pose to Kroger’s Dave Dillon is: Can, Kroger, a rather upscale grocery chain compete successfully in the long term with a powerfully-structured, low-cost, multi-product, growth-possessed discount chain such as Wal-Mart that can sell the exact or similar durables for less? I guess we will just have to wait and see.
Meanwhile I would suggest that Kroger examine how to leverage its proven food expertise into currently-profitable specialty retailing that is allowing Whole Foods, Trader Joe’s and other similar innovative food retailers to flourish.
I assume that the entire point of this venture is to find avenues where Kroger can increase profits. Kroger had a strong push in improving supply chain management three years ago, and now they seem to be trying to see what changing product mix and format will do.
In my view, this is a classic example of an organization that executes its core business slightly less weakly than its competitors, doesn’t know they have executed weakly but thinks they have wrung as much profit as is possible from their core, and then decides to explore other avenues. We have studied Kroger in-depth for many years and continue to calculate customer service at about 65 points out of 100, efficiency at 62 out of 100, market-fit at about 59 out of 100.
There is so much more Kroger could do to make its core business so much more effective and profitable. Unfortunately, the dynamics I refer to in the stats above will not change with their new ventures — these are System-wide dynamics, and mean that Kroger, no matter the format, will continue to execute weakly.
This marketplace format will selectively be offered in cities and their suburbs that meet the demographics. Obviously, just the niche food outlets, it has its place in certain markets.
Kroger has spent some valuable time and dollars to refine the Fred Meyer version to successfully work East of the Mississippi.
Target, Meijer, and even Sam’s Club and Costco have some home work to do. Hmmmmmmmmmmm
I always worry about the phrase ‘taking it to the next level.’ That’s a scary phrase. It typically and most likely means that you’re venturing off target. Its entirely possible for retailers to reinvent themselves, however venturing into the ‘everything for everyone’ concept is likely a misstep.
I admire Kroger, however, this could be a serious mistake.
I agree with Steve, it has a lot to do with needs states. I would hope that Kroger did their homework and showed just cause that their typical consumers usual pattern is multi-location shopping trips so they would be willing to cut down the number of stops if Kroger provided the necessary merchandise. If not, we’ll know soon enough.
I live in Arizona and we have had these types of grocery stores for a long time starting with Smitty’s. Fry’s Food and Drug is very successful here and I am sure they will do well where ever they go.
I saw one of the Marketplace stores in Columbus last year at Graceland Shopping Center. The location was terrible because it sat so far off of High Street. This one was about 120,000 square feet and had a Fred Meyer Jewelry, Starbucks, Donato’s Pizza, etc., but it was struggling badly; forced to degrade itself by offering double coupon to generate traffic. Perhaps others have fared better. For the most part, it was a distant “also ran” compared to a Wal-Mart Supercenter and Meijer. I think Kroger’s assessment of these stores is a bit exaggerated.
Overall, Kroger is doing an excellent job in maintaining market share in several markets around the USA. They have benefited from the collapse of many chains. It is very rare that Kroger gets kicked out of a market the way Safeway, Albertsons, A&P, and Winn Dixie have.
Kroger has taken time to absorb the merger with Fred Meyer and has experimented with incorporating a broader range of products into existing stores, experimented with different formats of stores, and variations of the Fred Meyer concept. The experimentation has presumably generated a good amount of knowledge of consumers and locations so that they should be able to understand what formats work in which locations. If so, they will not need to directly compete with Wal-Mart’s general format because they will be able to enter the format into the the marketplace that consumers want. Time will tell if they have this knowledge and are making informed decisions.
Data reported at last July’s IIR conference suggests that Wal-Mart superstore shoppers buy groceries or buy general merchandise, but not both on the same trip. If true (I think it was from Todd Hale at ACNielsen), then the rationale for this Kroger format goes away – they are not making it more convenient for consumers.
Every business tries to develop a core competency which should be its driving force. Kroger is great in grocery. They aren’t great in nonfood. No grocery chain is great in nonfood. If Kroger believes that nonfood offerings must be co-located to optimize profits, it might be better off creating a co-venture with a strong nonfood company that wants to grow. Perhaps they’d be better off teaming with Target or H&M.
I think as you see the channels merge with offerings; Natural with House wares, Mass with Food, Food with Mass, and Electronics with Lifestyle offerings and so forth, the issue will be who can provide the most convenient value proposition. Kroger has shown that it can execute and create an environment in various formats across the county to provide this experience. I see them doing very well.
The most salient point in the column is “‘Fred Meyer doesn’t make sense for every location,’ said Art Wulfeck, a spokesperson for Kroger.” The one thing Kroger has needed to do better is not produce cookie-cutter stores regardless of the market. During the last six months, I have walked into Kroger stores in Atlanta, southern Ohio and Dallas and they all looked the same. Even the Ralph’s I visited in San Diego earlier this month looked eerily similar. If the company can move away from a standard store template and toward an approach that customizes the store layout for each market, the new concept could work.
How does the Marketplace concept fit Kroger’s target market and positioning strategy? From the article, it sounds like someone said, “let’s try something.” How will the marketplace provide Kroger with a differential advantage relative to other retail options in its markets? What significant value added will it provide for customers?
Wal-Mart created a “plain vanilla” format which gives competitors an opportunity to develop creative flavors. I don’t see how this concept is either new or a creative alternative to what is already available.
Perhaps the Kroger spokesperson was being coy when he said the two current Marketplace stores are “doing pretty good.”
While I personally like to see innovation – a new way of doing old things, I see little innovation in this endeavor.
Seems as if Kroger is not the only retailer to be trying new concepts at their stores. Many retailers are trying new ideas; they are attempting to listen to their customers. Whether it works or not, whether it is accepted or not, will depend on the customer perception. Will Kroger begin to not only “upgrade” the store concept, but also upgrade their customer service? The Marketplace alone won’t keep the customer coming back. Kroger will need to give the best experience possible, measure it and keep improving it for it to be a complete success.