Small Format Grocery Stores Combating Food Deserts

Written by  //  November 28, 2011  //  Posts  //  Comments Off on Small Format Grocery Stores Combating Food Deserts

sobeys urban fresh

The growing popularity of “small format grocery stores” in North America may offer a solution to the food deserts discussed in the last article.  The supermarket industry has been characterized over the past few decades by a proliferation of increasingly larger format suburban stores.  Generally, grocery companies were simply following the path of their customers who were fleeing inner cities on mass.  This trend left the remaining, inner city residents in so called food deserts.

The condo boom in major cities has forced the supermarket industry to rethink their expansion strategies.  As thousands of households piled into downtown Toronto and Vancouver, a large market void was identified by entrepreneurs.  Pioneering brands like Urban Fare opened in Vancouver’s Yaletown, followed by subsequent stores in Coal Harbour and at the base of the Shangri-la.  Despite the density of nearby affluent households, operating a profitable store within the restrictions of a downtown environment and providing the right mix of products to finicky customers is challenging.

Other brands have now jumped into the small format market, such as Sobey’s Urban Fresh which first opened in 2003.  The store targets working professionals who have limited time to cook, but appreciate local food, product variety and organic produce.  Sobey’s has learned to be adaptable in store sizes, offering “convenience formats” starting at only 4,500 sf up to larger stores of 30,000 sf.  Other brands in this market are Toronto’s Longos, Rabbas and Kitchen Table.  IGA has also explored some very interesting mixed-use projects with varying degrees of success.

Perhaps in a sign of the times and perceived growing opportunity, two other major entries are shaking up the market.  Shoppers Drug Mart has introduced grocery products into many of its stores, a major move considering they have over 1,250 stores in Canada – many in downtown urban environments.  Even Wal-Mart is throwing their hat into the ring with the launch of express stores in the US as small as 15,000 sf.  Wal-Mart is also creating “Urban 90” in Canada which is a more typical supermarket size rather than a true “small format” (but still small for Wal-Mart!).  To do this, Wal-Mart has acquired 39 unwanted former Zellers stores from Target and has begun the first conversions.

What does all this mean for Canada and efforts to revitalize downtown areas?  Essentially what we are seeing is companies testing out concepts in safe markets and figuring out how to operate and market these new investments.  As these small format stores become more successful, companies will begin looking at operating new stores in less obvious markets – such as downtown mid-sized cities.  We may be several years out, but it’s important that redevelopment projects in these areas begin discussions early to make sure these uses can be accommodated.  This means understanding access and servicing requirements, basic store layout needs, and location and visibility preferences.  It might also mean finding financial inducements such as subsidized rent to keep these stores afloat in the first few years of operation.  At the end of the day, the overall financial success of a large mixed use development in untested markets is very much tied to the success of a nearby and walkable grocery store.

Supermarkets are not generally known for being highly progressive in terms of outlook.  I can point to multiple stores which are now “getting” it, but there are examples such as Safeway who are incredibly risk adverse when it comes to new initiatives.  This conservative model has provided a safety net in the past, but a lack of innovation may hurt them in the long term.

To understand where we are going as a society, I believe we need to look at urban environments such as cities in Japan where a history of high transportation costs, congestion, and incredible densities have created very different grocery distribution systems.  Cities like Toronto are already on their way towards such a model as gas costs increase, congestion has reached unprecedented levels, and more condos are under development than virtually any other city in the world.  In Japan, convenience stores provide one of the primary distribution systems for grocery products.  Most residents have at least one convenience store within close walking distance of their home and often multiple options are available.  In total, 40,000 convenience stores can be found in Japan, most of which are open 24 hours.

Japanese convenience stores sell a range of pre-made food products, a selection of everyday groceries, beverages, and alcoholic drinks.  These small but efficient stores also have a pharmacy section and sell cosmetics.  Other services often found include; ATM’s, Copier / Fax, Ticket Reservations, Digital Camera Prints, Bill Payment Services, and Delivery Services.  Essentially, these stores provide the average resident with the everyday services and food products needed to supplement more periodic trips to larger grocery store formats.

The following map plots the distribution of convenience stores across Tokyo.  Convenience stores determine their trade areas by looking at the density of residents within a 5 minute walking distance often cluster near transit stations.

Source: The Japan Architect 63: Urban Design Strategies for Shrinking Tokyo

Twenty years from now, perhaps on a smaller scale Toronto’s commercial urban form and grocery distribution system will more closely resemble Tokyo’s convenience store based system.

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Reurbanist

Reurbanist is a multi-disciplinary firm that blends land use economics with urban planning and economic development. At its core, Reurbanist believes that great urban places that are compelling and vibrant must find success at both a fiscal and social level. Stronger cities and urban destinations translate into improved job growth, municipal tax revenue, and a higher quality of life for residents.

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