Buying groceries in Rock Hill may be different for a lot of people in the next year as two of the industry’s heavyweights move into the market with five new food stores.
Wal-Mart, the industry leader in grocery sales with almost 25 percent of all sales nationwide, plans to build three neighborhood markets. Publix, the nation’s most profitable grocery chain, is moving into two former Bi-Lo stores.
Analysts who follow the grocery industry say the added options will benefit savvy consumers as existing stores and the newcomers offer a wider variety of products and prices. More stores also may help Rock Hill’s real estate market because grocery options are the third most important factor for homebuyers when they choose where to live.
“This is a great time to be a smart consumer,” said Jane Thomas, professor of marketing at Winthrop University.
Wal-Mart’s neighborhood markets, which are like traditional grocery stores with a pharmacy, baker and deli, are planned for the corner of Cherry Road and Dorchester Street near Cherry Park; at the corner of Celanese and Ebinport roads near India Hook Road; and on S.C. 5 across from Northwestern High School. An existing shopping center likely will be torn down to make way for the S.C. 5 store. The neighborhood markets also sell gas.
Wal-Mart also is planning its third supercenter in Rock Hill at the corner of Saluda Street, Mount Holly Road and Albright Road. Plans for the neighborhood markets and the supercenter are under review by the city of Rock Hill.
Publix, meanwhile, recently purchased three stores in York County from Bi-Lo. The former Super Bi-Lo on Cherry Road is undergoing an “extensive remodel,” with the building’s interior completely gutted. Work also is planned on former Bi-Lo stores at the corner of Heckle Boulevard and Herlong Avenue and in the Lake Wylie community. No opening dates have been announced for the Publix stores, though company officials hope to have the Cherry Road location open by March.
The new stories will join at least seven other chain grocery stores and more than a dozen smaller grocers in Rock Hill. The challenge is how all of them will differentiate themselves in the market.
Publix, which is going head-to-head with Harris Teeter for the upper end of the market segment, makes customer service, quality and price its priorities.
Harris Teeter, based in Matthews, N.C., has been the regional market leader in that segment for years, building a strong customer base. Kroger is purchasing Harris Teeter for about $2.5 billion in a deal expected to close in the next week. The Federal Trade Commission approved the deal Friday. Kroger is expected to maintain Harris Teeter as an independent brand.
Wal-Mart, with its emphasis on low prices, is in competition with Bi-Lo, Food Lion, Piggly Wiggly, Target and even drug stores that have added food to their offerings, said David Livingston, a Milwaukee-based supermarket analyst.
To improve its market position, Food Lion has lowered prices on 6,000 items including products in its “My Essentials” value tier in the last two years. Stores were renovated and, in some cases, more people hired to speed up the check-out process.
The changes mean more choices and more chances for shoppers to change their consumer habits, say industry observers.
Traditionally, grocery shopping has been primarily based on convenience, said Thomas, the marketing professor. Which side of the road a store is on can be a major factor in selecting where to buy food.
Yet a study by ICC/Decision Services, a firm that surveys customers’ experiences for various industries, released this past week suggests price, taste and quality are becoming more important than convenience.
Data from the Food Marketing Institute shows that shoppers place a high priority on value, which has resulted in increased sales of private label brands over national brands.
The institute’s 2013 survey shows that low prices, sale items or money-saving specials and high-quality fresh food are driving consumer grocery decisions more than convenient locations, friendly personnel and good customer service
Shoppers who take the time to plan their menus, and study the deals stores are offering, can save money, Thomas said. The variety also means some shoppers will “cherry pick,” traveling from store to store to get the best deals, she said. That’s a major change in consumer behavior when it comes to groceries, she said.
More variety in grocery chains also increases the popularity of an area, said Marianne Bickle, director for the Center of Retailing at the University of South Carolina.
“Your mayor should be doing some horn-tooting about this,” Bickle said. The variety of grocery stores “increases the value of your community,” she said.
Behind neighborhoods and schools, the grocery store market is often a key factor for families in deciding which house to buy, said Rock Hill real estate agent Pam Morrell.
‘Survival of the fittest’
Industry observers said the changes Rock Hill is experiencing are no different than other areas of the country. It is as simple as “retailers need to grow,” said Bill Bishop, an industry observer and founder of “Brick Meets Click,” which examines retailing and how technology is changing the way people shop.
“It’s the market working in a constructive way,” he said.
When grocery chains see opportunity, the response is often to saturate the market.
“It’s a rough, cruel game, and it’s survival of the fittest,” Livingston, the analyst, said. He compared Publix and Wal-Mart actions to football. “It’s a blitz; you send everyone in at once,” he said.
The question, said Thomas of Winthrop, is “who is still standing after five years?”
While the grocery market changes seem sudden, they have been in the works for years, industry observers say. Grocery retailers are experts at demographic analysis, and Rock Hill and York County’s growing population caught their eye.
“We look at where are the population centers are, where communities are growing, where the traffic is, the distance between other stores, ours and our competitors,” said Bill Wertz, a spokesman for Wal-Mart.
Wertz said the number of neighborhood markets planned for Rock Hill was not aggressive, merely a response to the market. At a recent Goldman Sachs Annual Global Retailing Conference, Wal-Mart CEO Bill Simons announced that his company will expand its smaller stores – neighborhood markets and Walmart express stores – from 290 to 500 in the next 18 months.
The neighborhood markets, Wertz said, “allow people to get their groceries quickly while enjoying low prices and convenience.”
Publix has been studying the regional market for some time and made its debut locally in Indian Land and Fort Mill in 2012. Some of the stores’ patrons have driven from Charlotte, said Thomas.
The company has moved regional offices to Charlotte. In addition to the York County locations, Publix purchased four stores from Bi-Lo in Mecklenburg County, N.C.
In competing against Harris Teeter, Publix faces an established local retailer undergoing some changes. John Stanton, professor of food marketing at St. Joseph’s University in Philadelphia, said consumers may see more of Kroger’s private labels on Harris Teeter shelves.
Kroger executives have said they anticipate saving between $40 and $50 million in Harris Teeter expenses by combining purchasing power and improving distribution and other logistics.
But analysts say not to look for many major changes when the sale is finalized.
“I don’t see them doing a lot to fix something that’s working just fine,” said Chuck Cerankosky, a managing director at Northcoast Research who follows the grocery industry.
Grocers attract other businesses
All of the grocery retailers are competing to get a share of a very lucrative market, estimated at more than $600 billion.
According to the Food Marketing Institute, consumers visit a grocery store an average of 1.7 times a week and spend about $35 per visit. The average weekly sales at each grocery store are about $318,000, according to the institute.
According to the U.S. Department of Agriculture, the weekly cost for groceries ranges from $37 per person for thrifty shoppers to more than $290 for a family of four with school-age children.
The potential benefits of grocery competition are more than items in a shopping cart.
When working with grocery retailers, developers look for businesses that will complement the grocery stores. That’s why businesses such as barber shops and hair salons, dry cleaners, sub shops and other small retailers cluster with a grocery store, said developer and real estate agent Skip Tuttle of Rock Hill.
The only difference Tuttle said he sees is that Wal-Mart likes to have many of those ancillary businesses located within its stores.
A new Walmart neighborhood market and Publix on Cherry Road could have additional benefits, he said. Commercial real estate ages and needs to be refreshed periodically. At some point, buildings need to be replaced, Tuttle said. He said the former Super Bi-Lo site on Cherry Road is an example. It once was the site of an indoor mall. After the Galleria was built on Dave Lyle Boulevard, the old mall building was torn down for Bi-Lo and other retail stores.
The Wal-Mart and Publix projects on Cherry Road, located less than a mile apart, should help push commercial evolution along that corridor, he said.
Not only does that evolution update buildings, it also brings more tax revenue for local governments and schools, Tuttle said.
Don Worthington • 803-329-4066 The Charlotte Observer contributed to this story