Monday, August 25, 2008

Grocery Economics According to Kimco

At the Wilde Lake Village Board meeting on August 4th, Geoff Glazer, Kimco’s Development Director, laid out the economics of opening a new grocery store. According to Geoff, it costs $6 million to build a typical store (approximately 50-60,000 square feet), another $6 million to install fixtures and an additional $4 million for staffing and inventory. That brings the total to $16 million.

Within a mile and a half of Wilde Lake there is a Safeway at Harpers Choice, Giant at Hickory Ridge and Food Lion at Oakland Mills. The presence of these existing grocers combined with the lack of visibility of the village center (Twin Rivers Road is not a major artery) make it highly unlikely that a grocer would invest $16 million in a new store in Wilde Lake.

Traditional grocery stores are feeling the same competitive pressure as other retailers. They are now attracted to centers that offer much more than the old village center model. A prime example is the Long Gate Shopping Center in Ellicott City where a Safeway shares space with Target, Kohl’s, Barnes & Noble, an Old Navy, Staples, and Michaels.

As painful as it is for some older residents of the village to accept, it is time to accept this reality and move forward with a new model for Wilde Lake.

33 comments:

Anonymous said...

Very good post, WB.

The counter argument from people like Mary Pivar is: but some people in Wilde Lake can't afford cars! Therefore, Kimco should put a grocery store in Wilde Lake! I don't care how much a grocery store costs to build and operate, or how close other grocery stores are! Just build one for the 3 people in Wilde Lake that don't have cars! That what Jim Rouse would have done!

Anonymous said...

Yet other major grocers, instead of opting for placement of grocery stores in more-distant supercenters, see the wisdom in building new, smaller grocery stores at closer-to-residential population locations and have been doing so over and over and over for years. Wal-Mart's Neighborhood Markets, now numbering over 130 nationwide, are being placed in residential areas, not supercenters, and range in size from only 39,000-52,000 square feet. Smaller still, ALDI Süd Stores' (part of Trader Joe's parent German-based ALDI Group) modest 18,000 square foot grocery stores have been spread across the country, now numbering 950 stores in 28 states since 1976, 70 of those having been added in New England in just the past 2 years, and another 50 expected nationwide by year's end. ALDI has stores in Frederick, Baltimore, P.G., and Anne Arundel Counties, too.

ALDI's stores carry a modest selection of high-quality, low-cost products, providing about 1,400 products vs. a larger store's 45,000 products, but those 1,400 products cover about 90% of households' typical needs. ALDI's prices are also up to 40% less than regular grocers. In Germany, ALDI is cleaning Wal-Mart's clock with this smaller store model sited closer to residential areas, where shoppers then don't have to spend the time or money traveling to more-distant supercenters.

So, what would building an ALDI cost? Extrapolating just on square footage alone, it would cost $5.2M. But, ALDI stores not only use smaller buildings, they also stock a smaller selection, and require fewer employees to run, probably driving the startup cost down a substantial amount lower than that.

If major grocers like ALDI and Wal-Mart can make this smaller format neighborhood grocery work to the extent that they keep building new stores of these sizes, it seems like a no-brainer that a grocery of modest size could be found for Wilde Lake.

A coop makes more and more sense, doing a far better job at keeping local dollars local, too, as some other nearby communities have done for decades now.
ALDI Price List - http://tinyurl.com/6rgp7t
Local Co-op Sales Flyer - http://tinyurl.com/66eyjx

There's more than one new model from which to choose Wilde Lake's reality, some of them much better than others at sustaining Columbia's village and village center models.

Anonymous said...

Time and money - you said it (anon 1:15am)

I'd rather be able to shop in my neighborhood rather than pay for gas to drive through traffic, sit at multiple red lights, park far away from the store, walk across long hot parking lots with no trees, wait in 25 minute lines to pay for a few items, and walk back across the lot, get into a hot car, and pay to drive to my distant home.

The European model is where things are going. Yhe old gargantuan super-store concept is a thing of the past.

And as a matter of law and practicality, decreasing the probability of driving after drinking, instead allow neighborhood pubs with no parking -would solve a few problems as well.
Really, why do we allow bars with huge parking lots?

The way of the future is to firm up what ranks Columbia in the top places to live, not to abandon the village concept for an outdated gluttonous monstrosity of oversized stores with oversized parking.

Anonymous said...

>>I don't care how much a grocery store costs to build and operate, or how close other grocery stores are! Just build one for the 3 people in Wilde Lake that don't have cars!>>

Agreed. While we're at it, why don't we build a full-scale mall for people in Wilde Lake? The Columbia Mall must be too far for them to walk, and if they can't walk to the mall, they certainly can't walk to any of the other grocery stores in the area! I mean, how dare we ask someone to take PUBLIC TRANSPORTATION anywhere?

Anonymous said...

>>I don't care how much a grocery store costs to build and operate, or how close other grocery stores are! Just build one for the 3 people in Wilde Lake that don't have cars!>>

Agreed. While we're at it, why don't we build a full-scale mall for people in Wilde Lake? The Columbia Mall must be too far for them to walk, and if they can't walk to the mall, they certainly can't walk to any of the other grocery stores in the area! I mean, how dare we ask someone to take PUBLIC TRANSPORTATION anywhere?

Anonymous said...

A trip to the Mall is quite different from obtaining food, some of which is perishable and heavy.

Anonymous said...

And public transportation is unsafe in the US.

susanw said...

The Giant in Dorsey Search is close to the Running Brook neighborhood of Wilde Lake.

Tom said...

Let's address the other big elephant in the room, redevelopment of downtown. I would not be surprised if someone actually said no grocery store is going to locate in WLVC until after they see what stores go in downtown. Unfortunately, this may be the real problem finding a replacement for the Giant. No one is going to spend the $12-16 million if they are not going to see the return on that investment.
Washington Post recently had an article about how 7Eleven has become one of the leading grocery suppliers in the DC region because it is filling the niche for the moblity restricted. This may be the eventual model for WLVC

Anonymous said...

anon 11:51- when was the last time you actually got on public transportation? Any time my travels take me to cities where there is public transit available, I take advantage, even if it is my first time in the city.

Never felt unsafe. and i'm a country mouse.

Tom said...

There are other options other than just public transportation. Among other possibilities the Neighbor Ride and Time Banking volunteer programs are available. Our community is fortunate to have these programs.

Anonymous said...

I would like to know exactly how many people in WL do not have cars. I bet that it is surprisingly few.

Of those X number of people without cars, how do they get around? Walk? Bike? Howard Transit? Is it really that crucial for a grocery store to be in the WL Village Center? Why?

Anonymous said...

Having a car is not the point. Car usage is the point.

Do you really think we're not on the precipice of fundamental change regarding car use & energy sources?

I guess gasoline will have to get to $6/gallon over the course of years before some people will smell the coffee.

Food access nearby home is important and I'm not a bit surprised that a convenience store is taking over in some areas.

Anonymous said...

Yo, FM:

Maybe the reason some posts are showing up twice is because about a week ago the "Publish your comment" button began prompting the cursor to turn into a bar rather than an arrow. Users are likely clicking on the button and then just below the button resulting in two identical posts.

Anonymous said...

Oops, I mean WB rather than FM.

Anonymous said...

A 7-Eleven, where one can pay a hefty premium for convenience, is hardly a substitute for a grocery, especially for communities of modest means. When ALDI's can offer the convenience, but often at a substantial discount to regular grocers, then why would any community choose a 7-Eleven over an ALDI's or a small co-op's healthy fare?

Anonymous said...

>>Having a car is not the point. Car usage is the point. >>

No doubt, which is why it makes sense to carpool, take public transportation, walk, or bike to nearby areas. How are these poor unfortunates who don't have a car getting to work? Are they magically teleported? Or do they just laze around the house on the dole, waiting for other people to send them welfare checks? How do they cash those welfare checks? Teleportation to the bank?

Anonymous said...

The fact that people have already chosen convenience stores over grocery stores in some areas should give a clue regarding the direction we're heading.

Price per item is obviously not what people are focused on.

Anonymous said...

"Having a car is not the point. Car usage is the point.

Do you really think we're not on the precipice of fundamental change regarding car use & energy sources?"

So let me get this straight: you want Kimco, or someone, to build a $16MM grocery store in the Wilde Lake VC because you are concerned about global warming? Isn't that what you are saying?

Do you live in a straw bale house?

Anonymous said...

A "straw bale" house? How did you know?

Just kidding.

My petrol and electric use at home is astoundingly paltry. In fact, if there were a disaster followed by a harsh winter, I envision my neighbors all asking to hold up at my place. It's fairly self-sufficient.

But I'm not even sure that is what you meant, and I'm sensing that you're spoiling for an argument rather than a substantive discussion, based on the cryptic stab about straw.

The village concept is far from dead. In fact it's being copied, revived. It's terribly off target to constrict something like food availability.

Anonymous said...

You have dodged my question. Do you, in fact, want a grocery store in Wilde Lake to primarily to combat global warming?

Isn't that what the "Having a car is not the point. Car usage is the point" comment means?

Anonymous said...

It's a good idea to perpetuate the village center concept, and neighborhood availabity of food is part of that concept.

The village center concept not only supports the environment, but is being copied and garnering national praise for Columbia for a myriad of reasons.

But no, not primarily to "combat global warming". More self sufficiency, and following the trends and employing what works for people.

Anonymous said...

Well, no one wants to follow trends and do what works for people more than Kimco. That's how they get paid.

Anonymous said...

The question of whether a Giant, Safeway, Wegman's, Harris Teeter or other grocery store wants to come to Wilde Lake relates to demographics and marketing criteria. They probably have similar models for Columbia and know exactly where they want to be located. Oakland Mills has had trouble retaining an anchor grocery store. Would Oakland Mills have had this problem if Owen Brown had never opened? I think you're right. Sometimes the area can be saturated and the demographics will simply not support a store the village center may want. Since bulldozing Wilde Lake village center and replacing it with additional housing and offices isn't preferable, perhaps the community should be considering a scaled down version with services like Aldi suggested above. An anchor store could be a preschool day care instead of a grocer store and create a flow of traffic for other merchants. A vibrant village center doesn't have to be automatically defined by a grocery store. It seems that a little creativity could change Wilde Lake to better reflect its current realities instead of forcing a model on it that existed in 1968. I would be curious to hear what the marketing people at Aldi would say about Wilde Lake.
HH

Anonymous said...

What would a store like ALDI think of a Wilde Lake location?

Let's start with Wilde Lake Village Center's distance to nearby major stores (by road).
NW to Harper's Choice Safeway - 1.0 mi
S to Hickory Ridge Giant - 2.3 mi
NE to Dorsey's Search Giant - 3.3 mi
E to Oakland Mill's Food Lion - 3.3 mi
and one local grocery (David's) and 2 convenience stores (Running Brook 7-Eleven, Hickory Ridge Quik-Mart)

ALDI in Northeast Baltimore distances to nearby major groceries (again by road):
S to Giant - 1.4 mi
W to Safeway - 1.6 mi
E to Super Fresh - 1.8 mi
N to Super Fresh - 2.9 mi
and dozens of other local groceries and convenience stores

ALDI in Northwest Baltimore distances to nearby major groceries (by road):
NW to Food King - 2.3 mi
E to SuperFresh - 2.7 mi
E to Giant - 3.0 mi
NW to Safeway - 3.1 mi
and dozens of other local groceries and convenience stores

ALDI in East Baltimore distances to nearby major groceries (by road):
S to Safeway - 1.1 mi
SE to Mars - 1.7 mi
SE to Whole Foods - 2.5 mi
and dozens of other local groceries and convenience stores

ALDI in SW Baltimore distances to nearby major groceries (by road):
NE to Safeway - 2.4 mi
N to Super Fresh - 2.6 mi
W to Safeway - 2.8 mi
W to Giant - 2.9 mi
and dozens of other local groceries and convenience stores

ALDI in Pasadena distances to nearby major groceries (by road):
NW to Metro Food Market - 0.3 mi
NW to Weis Market - 0.6 mi
NW to Shoppers Food Warehouse - 1.1 mi
S to Safeway - 3.5 mi

If the biggest beef claimed is proximity to other major grocery stores, from the distances listed above, an ALDI or similar modest grocery store or co-op would find the Wilde Lake Village Center spot just right.

Anonymous said...

The only problem with the village center grocery stores is that there was no competition.

Space should be available for >1 convenience sized grocery, >1 hair salon, etc.

The way Kimco makes it's money is through development, whether residential or other - so that claim doesn't hold water.

Anonymous said...

Get a clue 9:36. Development that no one wants is not profitable for Kimco.

Anonymous said...

Thank you for this post. There are plenty of grocery stores nearby to Wilde Lake for consumers. There is also David's Market in Wilde Lake for staples and excellent produce, organic/natural products, etc. I do not understand why people don't understand times have changed and the original village center concept needs revising in 2008.

Anonymous said...

Chris weighs in, albeit a bit belatedly:

1. It takes (at least) TWO to make a deal, a buyer and a seller, where in this case the seller/lessor is Kimco.

2. What the WLVB's discussions miss entirely is the concept that one must have a WILLING buyer/lessee whose business model will fit the seller/lessor's business model.

3. Throwing out names of possible lessees says nothing about whether a LESEEE thinks the Village Center is a financially viable location. Citing other locations is of little benefit because that's only one factor influencing the viability of a location.

4. Insisting on having a grocery store is gambling with someone else's (Kimco's) money.

4a. Question: are those who are so hot for a grocery store willing to put their own money and/or credit at risk?

4b. Oh, by the way, public financing is gambling MY money.

5. An "anchor" is much more than a simply a store that attracts traffic -- it is a highly credit worthy, steady source of revenue (rent) that a developer can leverage (i.e., borrow against) to finance the development. This last point is repeatedly lost on the WLVB.

6. Reality: redeveloping the Village Center will require lots of money. Unless, that is, you want a crappy backwater of cheap construction that has the lifespan of gnat.

7. I don't think I ever heard the WLVB answer a question I once posed: If Kimco proposes spending $30-40 million on redeveloping the Village Center, what's the debt service on $30 million (assume a 6% per year interest rate, 15-year amortization)? Ignoring other costs and making a return on investment, the answer will at least give an indicator of minimum revenue required to make it so.

8. Walk to the grocery store? Give me a break. Those who know me know that I am hardly one to shy away from physical activity, but even I wouldn't walk to the grocery store. Even biking there I can carry only a very few items. Let's stop being delusional about walking to the grocery store.

Here ends my rant.

Anonymous said...

12:32AM
I'm impressed with the effort you expended to provide the distances to different stores.
Would you also have statistics on households and income levels living within those distances?
HH

Anonymous said...

I think that the more and more that HC officials allow big shopping centers to build on the fringes of Columbia, the more we will see the village center's use and reason diminish. Don't get me wrong, I like the more shopping options we are getting, like the Best Buy, Target, and the Wegmans (speaking of, when is this thing ever going to get built????) The VC are relics of the past any way.

Anonymous said...

>>Let's stop being delusional about walking to the grocery store.>>

Why not? Many people do. When I lived a mile from a Giant, I walked to my grocery store.

It never fails to crack me up how people will drive for 20 minutes to get to a gym so they can walk on a treadmill for a half-hour.

Anonymous said...

Anon 6:22, EXACTLY right.

Don't even get me started on the nonsensical statements about needing one or two gargantuan groceries just about need satellite parking.

Each day in other countries the citizens pick up fresh produce on the way home while WALKING.

We who are not in walking distance, however, shop once weekly and throw away tons of rotted produce.

Spoiled, in more ways than one.