- Grocery openings declined 28.8% last year as retailers curbed growth and focused more on their existing footprint, according to a report from real estate firm Jones Lang Lasalle. However, investment in grocery anchored shopping centers increased 5.3% over 2016.
- Virginia and North Carolina saw the largest percentage growth in grocery development between 2016 and last year, accounting for 10.4% and 9.4% of new square footage in 2017. This was largely driven by the entry of Lidl, which has built around 50 stores in the mid-Atlantic market and spurred grocers to fortify their competitive positions.
- Perennial grocery growth states California (12.2%) and Texas (9.2%), meanwhile, saw continued grocery development thanks to population growth.
In the over-stored U.S. grocery market, major retailers have all but halted their store growth, choosing instead to invest in store remodels, e-commerce development and other projects focused on their existing footprints.
But there’s still growth happening in the industry’s profitable niches. Grocery-anchored shopping centers, for one, saw brisk growth last year as developers looked to supermarkets to drive foot traffic. These locations can be very lucrative for grocers, but as James Cook, JLL's director of retail research in the Americas, told CNBC, only the top one or two operators in a given market has a shot at being selected.
Which retailers top developers' lists? Whole Foods and Trader Joe’s are highly desired, as are Wegmans and Publix. This April, Wegmans will open a 150,000 square foot store in Massachusetts’ Natick Mall.
Discounters and dollar stores are also expanding. Dollar General is opening around three stores a day currently, and putting considerable pressure on small-town grocers. Aldi is undergoing a massive remodeling push and at the same time opening hundreds of stores in markets across the country. The German chain, which entered the U.S. market nearly forty years ago, is proving particularly disruptive in California, which saw 1.6 million square feet of new grocery space last year.
Another fast grower, Sprouts Farmers Market, is adding around 30 new stores annually. This year, the Phoenix-based chain will push into the mid-Atlantic market, which is thick with grocers — but mostly legacy players that upstarts like Sprouts and newcomer Lidl believe they can unseat.
Since it entered the U.S. last summer, Lidl has grown to around 50 East Coast locations. But the discounter has gotten off to an underwhelming start, and is refocusing its efforts around the tried-and-true model that made it successful throughout Europe. According to a recent report from Planet Retail RNG, “the highly anticipated ‘disruption’ has failed to materialize.”
It’s difficult to say when major chains like Kroger and Walmart might return to robust store growth — if ever. Online shopping, which is transforming the industry at an accelerating pace, offers an opportunity for grocers to connect with consumers outside of physical stores. In some cases — like with Sprouts — it’s helping retailers extend their service area outside the typical boundaries. Instead of bricks and mortars, the future of grocery footprints is increasingly in bits and bytes.