In the age of Amazon/Whole Foods, grocery retailers are focusing less on building new stores and more on upgrading existing stores and ramping up their digital and delivery services.
Those were among the highlights of a speech by Joe McKeska, president of Oak Brook, Illinois-based Elkhorn Real Estate Partners, at the 2018 International Council of Shopping Centers OAC Summit in Dana Point, California.
McKeska, whose past jobs include heading real estate operations for retail giants Southeastern Grocers and Supervalu, said the old model of grocery chain growth doesn’t work in the digital age.
"For years, the prevailing strategy for chains to drive growth was through some combination of opening new stores and finding good brick-and-mortar operators to acquire in order to increase economies of scale," McKeska said. "But today, we're seeing less and less focus on new store growth and horizontal integration. Now the direction is vertical—grocers are intently focused on cultivating the capabilities they need to survive in a disrupted marketplace."
That “vertical” integration, he said, includes remodeling existing stores with the aim of “enhancing the shopping experience” and investing heavily in click-and-collect, home delivery and other digital initiatives.
The proof of these changes is in the numbers, McKeska said. Kroger plans to reduce new store capital in 2018-2020 by 68 percent compared to the prior three-year period, he said, and Walmart’s plan to open just 25 new stores in 2018 would be its lowest one-year total in 30 years.