By Barry Haydon
Grocery represents the strongest “core need” followed by daily needs retailers and services including medical, fitness and the like that makes a development “built to last.” Right now is an incredibly important time for everyone in the retail industry: e-commerce’s impact on grocery stores has put just about everyone on standby.
We always knew that soft goods were affected by e-commerce, but now grocery and produce is being affected.
We’re lucky in Texas to have some of the strongest grocers in the nation with HEB, Whole Foods and Randall’s.
Setting the tone is Whole Foods who, around the same time as being acquired, rolled out their “365” stores in Austin — a smaller, leaner version of Whole Foods, offering more automation and more personality. Still in its testing phase, it’s been well received in our market and there are plans for others, but one of the most important things they’ve done, is that they haven’t lost their identity. The worst thing that you could do to a brand is to start making it something that it wasn’t born to be.
In the past few weeks, HEB acquired Favor, the on‑demand delivery service coincidentally headquartered here in Austin. This was a huge deal for them and, I think, a great move by HEB to use in tandem with their distribution. Both HEB and Whole Foods have great distribution models to service their respective stores and consumers, but now HEB is able to utilize their stores as distribution locations with Favor and get their groceries delivered to customers.
The question is now becoming how will we purchase anything, including food and groceries, three to five years from now? How’s it going to look? What’s it going to be like?
You may not be feeling the tomato or making sure the avocado’s ripe. I think that’s an interesting thing to consider – part of the reason people go to a Whole Foods, HEB or Randall’s is because of the experience. You go in, you smell the coffee, and you smell the bread. You touch. You feel. When you take that away, then that category is full of apathy.
Instead of you selecting the best tomato, you’re just getting whichever one is given to you. The customer experience becomes someone knocking on the door or you go by and pick up whatever was picked out for you at the grocery store. I think it’s going to be interesting, as it rolls out, how people receive it, how the experience becomes limited or removed and replaced by “how quick did it get there?” and “how much did it cost me?”
It’s hard to believe that just two years ago, we weren’t event thinking about e-commerce affecting grocery, now here we are. In the urban or denser areas of Austin, it comes down to the level of priority on time, value and money for consumers. It’ll likely take some time for consumers to be accustomed or even willing to try something different to meet their needs.
Then you have guys who enter the market, like Lidl and Aldi, through the Northeast US and targeting Texas, paying premium on dirt to build stores while trying to set up distribution. You quickly realize it’s tough to come into the backyard of HEB and Whole Foods, especially when you factor in things like e-commerce’s recent impact on the industry.
Lidl, as of four to six months ago, stopped everything and are trying to navigate their next steps.
Aldi, on the other hand, is interesting. Aldi provides a different experience, a no-frills approach that many consumers are attracted to. They’ve remained pretty active, thanks in part to low overhead.
Then you have your other guys, Natural Grocer, Sprouts – they’re still active. The organic products for the Natural Grocers has worked really well for them. Sprouts has managed to keep their operations going, even after shutting a few stores, but are looking at new sites now and potentially growing. A big thing for these two is that they’re capitalizing on convenience; the way Austin is growing, you need somethings that’s convenient. When you start going to the peripheries, like Bastrop, Dripping Springs, etc., that’s where any growth in the industry has really been; there’s room for another player out there.
To put it another way, HEB is strategic with their growth plans. They’re smart. They’re probably not interested in adding a new location in one of these places that already has one, when they haven’t even made their big push into Dallas or if they’re going to make that big push into Dallas.
Which brings us back to how the most of the dominant players in the Austin market, HEB and Whole Foods, are now — evaluating e-commerce, its impact on their stores what they do next.
Eating is not going away; it’s not a fad. This is an incredibly important time for everyone in retail, especially for those in the grocery business and the direction is going to be dedicated in Texas by what HEB and Whole Foods decide to do.
I expect we’ll soon find out.