Kroger exits Raleigh-Durham market amid intense competition
- Kroger announced Wednesday that it will close all 14 of its stores in the Raleigh-Durham, North Carolina, market by Aug. 14. The company said about 1,500 employees will be affected, more than half of whom are part-time.
- Kroger’s regional brand Harris Teeter, which has about 30 stores in the market, is not affected by the plan. Eight of the affected Kroger stores will be converted to the Harris Teeter brand. Kroger said it has also reached an agreement with Food Lion and Crunch Fitness to acquire one location each.
- In a statement, Jerry Clontz, president of the company’s Mid-Atlantic division, said the market is highly competitive, challenging and ever-changing. “We have not been able to grow our business the way we would like in this market," he said. "Many retail analysts say the Raleigh-Durham market is over-stored.
Kroger's decision to close 14 stores in the area commonly known as the Research Triangle was no doubt a difficult one, but the presence of its Harris Teeter banner makes the decision just a bit easier. Kroger bought Harris Teeter in 2013, and at that time analysts were skeptical about Kroger benefiting from the deal, citing the challenge of “being enormous and local at the same time.”
At least in the Triangle area, that has proven to be true. Harris Teeter is headquartered in the state and has been around since 1960. Its culture is very much focused on local values and products, even tagging itself as “your local neighbor.” The grocer is a market share leader in key markets like Charlotte. But, as is the case in the entire grocery industry, that market share is threatened by an abundance of new or growing players. Last summer, the Triangle Business Journal reported that close to 30 new grocery store locations were in the works for the market. Those plans included Publix, Walmart, Wegmans, Sprouts Farmers Market and Lidl, as well as remodels from Food Lion and Aldi. The entry and expansion of German-based Aldi and Lidl, in particular, is throwing a wrench into the market. Both have reputations for offering high quality products for lower prices and both are focused on the Carolinas as part of their U.S. expansion plans.
To legitimately compete in such a hot market, Kroger would have to invest in store remodels and pricing with no guaranteed advantages. It would also likely have to invest in marketing to gain brand traction against regional favorites such as Food Lion and Harris Teeter. As part of its corporate efficiency plan, Kroger likely cut its losses to focus on its technology, pricing and labor efforts in its stronger markets.
Kroger isn’t alone in cutting its losses in this intense market. Just this week, Lidl backed out of plans to open in Cary, North Carolina – also in the Triangle. According to the News & Observer, Cary’s demographics – 162,000 people and a median income of more than $91,000 – have made the area a “magnet for grocery stores.”
Though the news isn’t good for affected employees, it is for Triangle area shoppers who will most certainly benefit from the competition and the ensuing price wars. Conversely, the grocers left standing will have to navigate such pricing pressures on already-thin margins while also finding differentiators to excite customers who have plenty of choices.
- The News & Observer Kroger to close all its stores in the Triangle; 1,500 workers affected
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