The present and future of Randalls

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pseudo3d
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The present and future of Randalls

Post by pseudo3d »

(Spun off from another topic)
architect wrote:
pseudo3d wrote:
architect wrote:
Personally, I predict that Albertsons will pull the plug on the Houston Randalls stores in the next couple of years, unless if they simply value store count at the expense of profitability. The combination or HEB, Kroger and Walmart is simply too much to compete with at the mid-market level, and the high-end/specialty market is being crowded out by Whole Foods, Trader Joe's, Sprouts, Central Market, and the Central Market components that have been introduced at many Houston-area HEB locations. The Austin Randalls stores will be interesting to watch, as I could see these stores remaining open and being served by the Dallas DC if they are profitable enough. I doubt that Safeway would have opened a new store in Lakeway and planned for a new store in Leander if the Austin-area stores weren't turning a profit, unlike the Houston area stores which were clearly on the chopping block prior to the Albertsons sale. If the Austin-area stores do remain open and retain the Randall's name, it would be an interesting case study of a brand growing from one market to another, then shutting down in it's original market. Albertsons could also sell off the remaining Randalls stores to another operator (Kroger could be a great candidate) and use the proceeds to help finance other operations.

As far as the Florida stores go, they could be served by an East Coast DC in the short term if the Randalls DC was shut down. Washington, DC is actually closer in distance to Florida than Houston.
Whoa now. No one said Randalls was unprofitable, which is what you seem to be implying. Right now, the few (relative) locations still seem to be largely holding their own (with one notable store location I can think that will probably close given a variety of factors working against it). The position of going to a market leader is the impossible thing to leap here.

If Albertsons was to sell off the Houston stores (for whatever reason), many would simply close. H-E-B and Kroger both have bigger stores in most of the same areas, and they'd be lucky if they sold them ALL to new operators, plus you'd have the issue of the Louisiana stores.

As for the "mid-line market", while Kroger and H-E-B are both strong, Walmart even has a problem with the market as-is, as Walmart Neighborhood Market never quite caught on like it did in other markets. Their position of 3rd place is a manageable one as long as sales keep improving as per new numbers.

Additionally, I should note that while the Washington DC distribution center may be marginally closer, there's also stores in the Louisiana area on the way, so with that in mind, the Houston division may make more sense.

Finally, I should remind you that the "original" Houston division from Albertsons didn't close because of low store count, it was a variety of factors, and the statement made by arizonaguy ("poor locations, questionable neighborhoods, intense competition, and were built for development that never occurred") is absolutely correct, and I can think of at least one store for each of those problems. Some of those stores were quite nice and presumably profitable but they were dragged down by the rest, and Safeway already long closed their perception of what were the "bad stores".
Actually, prior to the Albertsons sale, the Randalls division was barely turning a profit. Although there are many successful stores in the division, the expense of maintaining an extensive distribution network and marketing campaign for a smaller store base (compared to HEB and Kroger) was dragging down overall profitability. After the Albertsons sale closed, multiple insider sources reported that Safeway was weeks away from announcing the closure of the Randalls division if the sale fell through, in a manner similar to Dominicks. Honestly, the Albertsons sale was the best thing that could have happened in this situation. With the Randalls DC now serving the Lousiana and Florida stores, the division has the potential to add new stores and reduce divisional overhead on a per-store basis.

The biggest challenge for Randalls is clearly the Houston market. If Albertsons can figure out a way to invest in the remaining store base and differentiate themselves from the competition (particularly through better pricing, and eliminating annoying marketing tactics such as the Remarkable Card for sales), it could be a great turnaround story. Grocers can be immensely successful with a smaller store count if the stores are high-traffic and are also able to grow traffic on their own, reducing marketing expenses. The DFW Market Street locations are a great example, as their success and growth in the market has largely been by word of mouth. I have my doubts that Albertsons will be able to pull of such a feat considering their past history, but I certainly hope that they are able to, even just as a way to maintain the Randalls heritage. I just anticipate that the division has fallen too far to be able to make a rebound which dramatically improves profitability, especially considering that Safeway "watered down" many of the things that truly set Randalls apart from the competition. Also, just for curiosity, what is the poorly-performing location you are referring to? There are several locations in the Houston area I know of which could be considered questionable, but there are also plenty that still seem very successful.
Oh yeah, the Randalls division (at least the Houston market) was definitely going to be screwed prior to the merger, and a lot of people would've lost their jobs if that was the case. The original Randalls as grown through the "New Generation" stores up to 80,000 square feet and featuring a lot of fresh items was actually inspired by Wegmans (this isn't speculation—Wegmans really was cited in growing Randalls, and H-E-B's Central Market was based on an earlier H-E-B prototype from the early 1990s which they said was inspired by Wegmans and Randalls New Generation stores). All the while Wegmans continues to be much loved. Some tactics to make Randalls more Wegmans-like (after all, the new president of Randalls was once with United, and Market Street was able to pull off a Wegmans model clone decently) would be a boon, though unless they wanted to only focus on the suburbs, they would need to create a class of clearly second class stores like H-E-B and Kroger operate.

Getting rid of the shopper's card for sales would be the first step in trying to repair the store. It would give them an advantage over Kroger and help propel sales, thus increasing profitability without a ton of investment.
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Re: The present and future of Randalls

Post by architect »

pseudo3d wrote:(Spun off from another topic)
architect wrote:
pseudo3d wrote:
Whoa now. No one said Randalls was unprofitable, which is what you seem to be implying. Right now, the few (relative) locations still seem to be largely holding their own (with one notable store location I can think that will probably close given a variety of factors working against it). The position of going to a market leader is the impossible thing to leap here.

If Albertsons was to sell off the Houston stores (for whatever reason), many would simply close. H-E-B and Kroger both have bigger stores in most of the same areas, and they'd be lucky if they sold them ALL to new operators, plus you'd have the issue of the Louisiana stores.

As for the "mid-line market", while Kroger and H-E-B are both strong, Walmart even has a problem with the market as-is, as Walmart Neighborhood Market never quite caught on like it did in other markets. Their position of 3rd place is a manageable one as long as sales keep improving as per new numbers.

Additionally, I should note that while the Washington DC distribution center may be marginally closer, there's also stores in the Louisiana area on the way, so with that in mind, the Houston division may make more sense.

Finally, I should remind you that the "original" Houston division from Albertsons didn't close because of low store count, it was a variety of factors, and the statement made by arizonaguy ("poor locations, questionable neighborhoods, intense competition, and were built for development that never occurred") is absolutely correct, and I can think of at least one store for each of those problems. Some of those stores were quite nice and presumably profitable but they were dragged down by the rest, and Safeway already long closed their perception of what were the "bad stores".
Actually, prior to the Albertsons sale, the Randalls division was barely turning a profit. Although there are many successful stores in the division, the expense of maintaining an extensive distribution network and marketing campaign for a smaller store base (compared to HEB and Kroger) was dragging down overall profitability. After the Albertsons sale closed, multiple insider sources reported that Safeway was weeks away from announcing the closure of the Randalls division if the sale fell through, in a manner similar to Dominicks. Honestly, the Albertsons sale was the best thing that could have happened in this situation. With the Randalls DC now serving the Lousiana and Florida stores, the division has the potential to add new stores and reduce divisional overhead on a per-store basis.

The biggest challenge for Randalls is clearly the Houston market. If Albertsons can figure out a way to invest in the remaining store base and differentiate themselves from the competition (particularly through better pricing, and eliminating annoying marketing tactics such as the Remarkable Card for sales), it could be a great turnaround story. Grocers can be immensely successful with a smaller store count if the stores are high-traffic and are also able to grow traffic on their own, reducing marketing expenses. The DFW Market Street locations are a great example, as their success and growth in the market has largely been by word of mouth. I have my doubts that Albertsons will be able to pull of such a feat considering their past history, but I certainly hope that they are able to, even just as a way to maintain the Randalls heritage. I just anticipate that the division has fallen too far to be able to make a rebound which dramatically improves profitability, especially considering that Safeway "watered down" many of the things that truly set Randalls apart from the competition. Also, just for curiosity, what is the poorly-performing location you are referring to? There are several locations in the Houston area I know of which could be considered questionable, but there are also plenty that still seem very successful.
Oh yeah, the Randalls division (at least the Houston market) was definitely going to be screwed prior to the merger, and a lot of people would've lost their jobs if that was the case. The original Randalls as grown through the "New Generation" stores up to 80,000 square feet and featuring a lot of fresh items was actually inspired by Wegmans (this isn't speculation—Wegmans really was cited in growing Randalls, and H-E-B's Central Market was based on an earlier H-E-B prototype from the early 1990s which they said was inspired by Wegmans and Randalls New Generation stores). All the while Wegmans continues to be much loved. Some tactics to make Randalls more Wegmans-like (after all, the new president of Randalls was once with United, and Market Street was able to pull off a Wegmans model clone decently) would be a boon, though unless they wanted to only focus on the suburbs, they would need to create a class of clearly second class stores like H-E-B and Kroger operate.

Getting rid of the shopper's card for sales would be the first step in trying to repair the store. It would give them an advantage over Kroger and help propel sales, thus increasing profitability without a ton of investment.
Thanks for moving this to another thread, good idea! Looking back, it is interesting to see how much the Randalls division has fallen since it was first taken over by Safeway. Prior to this point, both it and Tom Thumb were considered upper-tier mainstream brands, definitely a step above your average Kroger/Albertsons level store. Like you said, the best comparison today would be Market Street, or some of the higher-end HEB locations. Also, both brands had a local heritage that helped to build customer loyalty, an advantage that Safeway unfortunately squandered. Tom Thumb has been able to remain somewhat strong due to the fact that is is an older chain with many long-running locations in dense, established parts of Dallas. Randalls has some locations like this, but overall is more suburban-oriented (just like Houston as a whole). In addition, Kroger has been established longer in Houston vs. Dallas, having entered the market through Henke & Pillot in the 1950's. As a result, even many of the Randalls locations in more dense parts of Houston face stiff competition from a nearby Kroger.

At this point, the only way I see the Houston stores being successful over the long term is if Albertsons decides to remarket these stores towards a higher-end customer base, much like Market Street. Many low-end mainstream items could be eliminated (which often have the lowest profit margins), which would open up shelf space for high-end and specialty items. The key would be ensuring that product selection is complete enough that Randalls could still serve as an everyday grocer, while distinguishing themselves from the competition (much like Market Street). An effective marketing campaign would also be critical, along with building new stores in recent-growth suburban areas if the concept proves successful. Most of Randalls' physical store base is in good condition, the biggest challenges are simply in marketing and pricing.
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Re: The present and future of Randalls

Post by storewanderer »

I wonder if Market Street would work in Houston? Or stores that are Market Street in everything but name...

That is a super small division and the fact that the new Albertsons broke it out says something, says it needs focus.
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Re: The present and future of Randalls

Post by klkla »

I would be interested in knowing if they're profitable. They had narrowed down the locations to just their best performing stores and I was under the impression they were making good profits. Is there any reliable data out there that suggests they are now no longer profitable ?
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Re: The present and future of Randalls

Post by pseudo3d »

architect wrote:
pseudo3d wrote:(Spun off from another topic)
architect wrote:
Actually, prior to the Albertsons sale, the Randalls division was barely turning a profit. Although there are many successful stores in the division, the expense of maintaining an extensive distribution network and marketing campaign for a smaller store base (compared to HEB and Kroger) was dragging down overall profitability. After the Albertsons sale closed, multiple insider sources reported that Safeway was weeks away from announcing the closure of the Randalls division if the sale fell through, in a manner similar to Dominicks. Honestly, the Albertsons sale was the best thing that could have happened in this situation. With the Randalls DC now serving the Lousiana and Florida stores, the division has the potential to add new stores and reduce divisional overhead on a per-store basis.

The biggest challenge for Randalls is clearly the Houston market. If Albertsons can figure out a way to invest in the remaining store base and differentiate themselves from the competition (particularly through better pricing, and eliminating annoying marketing tactics such as the Remarkable Card for sales), it could be a great turnaround story. Grocers can be immensely successful with a smaller store count if the stores are high-traffic and are also able to grow traffic on their own, reducing marketing expenses. The DFW Market Street locations are a great example, as their success and growth in the market has largely been by word of mouth. I have my doubts that Albertsons will be able to pull of such a feat considering their past history, but I certainly hope that they are able to, even just as a way to maintain the Randalls heritage. I just anticipate that the division has fallen too far to be able to make a rebound which dramatically improves profitability, especially considering that Safeway "watered down" many of the things that truly set Randalls apart from the competition. Also, just for curiosity, what is the poorly-performing location you are referring to? There are several locations in the Houston area I know of which could be considered questionable, but there are also plenty that still seem very successful.
Oh yeah, the Randalls division (at least the Houston market) was definitely going to be screwed prior to the merger, and a lot of people would've lost their jobs if that was the case. The original Randalls as grown through the "New Generation" stores up to 80,000 square feet and featuring a lot of fresh items was actually inspired by Wegmans (this isn't speculation—Wegmans really was cited in growing Randalls, and H-E-B's Central Market was based on an earlier H-E-B prototype from the early 1990s which they said was inspired by Wegmans and Randalls New Generation stores). All the while Wegmans continues to be much loved. Some tactics to make Randalls more Wegmans-like (after all, the new president of Randalls was once with United, and Market Street was able to pull off a Wegmans model clone decently) would be a boon, though unless they wanted to only focus on the suburbs, they would need to create a class of clearly second class stores like H-E-B and Kroger operate.

Getting rid of the shopper's card for sales would be the first step in trying to repair the store. It would give them an advantage over Kroger and help propel sales, thus increasing profitability without a ton of investment.
Thanks for moving this to another thread, good idea! Looking back, it is interesting to see how much the Randalls division has fallen since it was first taken over by Safeway. Prior to this point, both it and Tom Thumb were considered upper-tier mainstream brands, definitely a step above your average Kroger/Albertsons level store. Like you said, the best comparison today would be Market Street, or some of the higher-end HEB locations. Also, both brands had a local heritage that helped to build customer loyalty, an advantage that Safeway unfortunately squandered. Tom Thumb has been able to remain somewhat strong due to the fact that is is an older chain with many long-running locations in dense, established parts of Dallas. Randalls has some locations like this, but overall is more suburban-oriented (just like Houston as a whole). In addition, Kroger has been established longer in Houston vs. Dallas, having entered the market through Henke & Pillot in the 1950's. As a result, even many of the Randalls locations in more dense parts of Houston face stiff competition from a nearby Kroger.

At this point, the only way I see the Houston stores being successful over the long term is if Albertsons decides to remarket these stores towards a higher-end customer base, much like Market Street. Many low-end mainstream items could be eliminated (which often have the lowest profit margins), which would open up shelf space for high-end and specialty items. The key would be ensuring that product selection is complete enough that Randalls could still serve as an everyday grocer, while distinguishing themselves from the competition (much like Market Street). An effective marketing campaign would also be critical, along with building new stores in recent-growth suburban areas if the concept proves successful. Most of Randalls' physical store base is in good condition, the biggest challenges are simply in marketing and pricing.
Problem is, "higher-end" usually means "more expensive" and for a time, predominantly around 2005, Randalls stores were very expensive. Even today, the Randalls stores tend to have higher prices on items than Kroger or H-E-B. Not all items (even during non-sales), but complaints of pricing has been one of the major complaints of the chain.

The best way would probably be to go back to their roots and look at Wegmans is doing and trying to make their own spin on it. The fact that Market Street exists and has pulled this off better should make their job that much easier...though they can't do that to all their stores, and what Kroger and H-E-B have managed to do is market their stores better to lower-end neighborhoods, which Randalls doesn't do as well and should.
klkla wrote:I would be interested in knowing if they're profitable. They had narrowed down the locations to just their best performing stores and I was under the impression they were making good profits. Is there any reliable data out there that suggests they are now no longer profitable ?
If it wasn't profitable, Albertsons would've cut it off when they bought it or at least shuttered stores last year. For market exits (and other closures), it only makes sense if the company either finds it's more worthwhile to sell off the assets rather than keeping it open or if it's losing money hand over fist, and I don't think either apply to Randalls, especially since only a handful could actually be considered desirable to another company.
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Re: The present and future of Randalls

Post by wnetmacman »

Here's where the problems lie in Houston right now for Albertsons:
1. They failed there before. We all remember when Albertsons left Houston in 2002-2003, due to a very poor execution on their part. How many former Albertsons stores are now Kroger, Food Town or HEB?
2. They are operating two types of stores out of one division. The Houston division (or Southern, if you want to be proper) also handles stores in Southern Louisiana and Florida, which are all Albertsons stores. No card required, but the Randalls signs are all over the store (Lucerne in Louisiana?). All the notices in the stores have both logos.
3. Neither type is attracting regular business, only promo shoppers. The prices they're advertising are just that, advertised prices. Their regular prices on everything not on sale is horrendous, at best. They ran a sale in Lafayette late last year for 12 pack soft drinks 5 for $10 with no minimum purchase. The only part of the stores busy were where they were setting out the 12 packs!
4. Not enough CapEx on anything. The only expense they're putting into the stores is to put up the new decor. No repairs, no maintenance. Old equipment is left to rot and run. In Lafayette, the sign on the Ambassador at Congress store is falling off the building!

In the long run, I don't see this working well. Maybe they'll sell some stores off, but I fear most will close.
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Re: The present and future of Randalls

Post by pseudo3d »

wnetmacman wrote:Here's where the problems lie in Houston right now for Albertsons:
1. They failed there before. We all remember when Albertsons left Houston in 2002-2003, due to a very poor execution on their part. How many former Albertsons stores are now Kroger, Food Town or HEB?
This is irrelevant. Like Safeway's second coming with Randalls, it all depends on execution. The 2002 pull-out was due to a variety of factors. Let's look at the four again, "poor locations, questionable neighborhoods, intense competition, and were built for development that never occurred". Like I said, I can think of specific locations for each of them.

7530 Westheimer Road, #2705, one of the first stores in the Houston market, opened in late 1995. It was located on the corner of Voss and Westheimer and was a great location due to the high traffic count of Westheimer and the general wealth in the area. After 2002, it was never a grocery store again. Why? It never became another store was because including Kmart and Walmart (both Supercenter), there was a Whole Foods, a Food Fair (maybe--not sure if it still existed in 2002 but one had been located across the street), an H-E-B, a Kroger Signature, and a Randalls Flagship all within a mile radius when it closed.

1630 Spencer Highway, #2742. Located in South Houston proper, I don't know what they were thinking when they built this store because while the area needs grocery (and there IS a new-ish Kroger a mile east) it was the wrong neighborhood for an Albertsons and you bet they didn't market it properly. It closed in 2002 and was picked up by H-E-B in 2003. H-E-B had done a good job with the 2002 opening of the Gulfgate store by marketing it to minorities including a large selection of imported goods from Mexico and aguas frescas, but within two years H-E-B shuttered it and converted it to the then-prototypical Mi Tienda. The fact that an Albertsons even existed there is a bit of a mystery.

5620 West Tidwell, #2768. The location probably would've been alright (next to lots of homes to the east and apartment complexes, intersection of two major thoroughfares) if it wasn't for one factor...a railroad that divided the property. As a result, you couldn't turn left out of the north entrance (if you look at Google Earth today, you'll see that you can't turn left at all out of the north entrance anymore) without almost immediately going onto the tracks, you couldn't turn left out of the south entrance at all (or turn in left), leaving the only route for anyone to use (including trucks) was the right side entrance, where the store was virtually invisible (not that the store was particularly visible from the front). This store I believe did open as an Albertsons if briefly and was turned over to Kroger, though even Kroger couldn't turn it around and closed it within a few years. Today it's a preparatory school.

7121 Broadway, #2745. Exciting things were happening in Pearland in the early 2000s as a wave of new development was building west of "Old Pearland" closer to 288. There was a Home Depot, a new Kroger, a huge new shopping center, and all manner of new homes. Albertsons must have thought it picked up a pretty sweet spot at Reid and Broadway. After all a Kroger was to the west, and in addition to being the closest supermarket to Old Pearland, it should be better in the future, right? After all, Reid was going to expand north and maybe even connect with the Beltway. Wrong. Today, the center with Food Town seems to be in the middle of nowhere with an overdeveloped shopping center on a stub road to the north and to the south, a side road with some of the same rural homes on it that were there since the 1960s.

Compounding all that was a weak local and national economy (not that today is a whole lot better) and more importantly, the difficulties that Albertsons faced when trying to digest ASC, all at the same time.
2. They are operating two types of stores out of one division. The Houston division (or Southern, if you want to be proper) also handles stores in Southern Louisiana and Florida, which are all Albertsons stores. No card required, but the Randalls signs are all over the store (Lucerne in Louisiana?). All the notices in the stores have both logos.
The Houston division and the Southern division were different after the merger, and "officially" they still are. The Southern division is the Dallas Albertsons and Tom Thumb stores. The fact that they are on different systems (Safeway vs. SuperValu/LLC) is still problematic.
3. Neither type is attracting regular business, only promo shoppers. The prices they're advertising are just that, advertised prices. Their regular prices on everything not on sale is horrendous, at best. They ran a sale in Lafayette late last year for 12 pack soft drinks 5 for $10 with no minimum purchase. The only part of the stores busy were where they were setting out the 12 packs!
Yes, everyday prices are still too high, but there is regular business at the stores...not enough as there should be, though.
4. Not enough CapEx on anything. The only expense they're putting into the stores is to put up the new decor. No repairs, no maintenance. Old equipment is left to rot and run. In Lafayette, the sign on the Ambassador at Congress store is falling off the building!
I can verify a lack of capital expense at the Houston division, even (especially?) at Randalls. To date, I'm not sure of any Randalls remodeled under Albertsons.
In the long run, I don't see this working well. Maybe they'll sell some stores off, but I fear most will close.
Only #3 and #4 are real issues. #1 is irrelevant and #2 is post-merger difficulties, though they should've made the Texas Division (the old Tom Thumb/Randalls division under Safeway) integrate with the ABS systems before trading stores with the existing Southern division. The worse thing I could see happening for the Houston Division is to obliterate it by creating a Southeastern Division for the Florida and Louisiana stores and by getting rid of the Houston stores and kicking the Randalls stores in Austin back to the old D-FW division. The long run is if they get sales up and make the stores worth keeping (as well as building stores), it can work. After all, ACME was saved from the brink, wasn't it?
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Re: The present and future of Randalls

Post by wnetmacman »

pseudo3d wrote:This is irrelevant. Like Safeway's second coming with Randalls, it all depends on execution. The 2002 pull-out was due to a variety of factors. Let's look at the four again, "poor locations, questionable neighborhoods, intense competition, and were built for development that never occurred". Like I said, I can think of specific locations for each of them.
I'm going to outline why each of these should have worked, and then I'll explain why it's relevant:
pseudo3d wrote:7530 Westheimer Road, #2705
With all that competition nearby, that store should have been able to work; at the very least, to try to take some of that business. You can't survive if you can't beat the enemy. Sam Walton's rules; if you can't beat them, do something they can't or won't, but don't blame them for your failure.
pseudo3d wrote:1630 Spencer Highway, #2742.
I believe this is more about marketing to the neighborhood. It is a highly Hispanic neighborhood; a conventional store (and especially ultra-bland Albertsons) just can't make it.
pseudo3d wrote:5620 West Tidwell, #2768.
True, the railroad situation isn't the best, but if you have what people want, it will not be a problem. The Kroger Family Center in Lake Charles has a railroad that runs down the middle of the street to it; it's still going after 40 years.
pseudo3d wrote:7121 Broadway, #2745.
Zoom out on your map with this one. Look at the Kroger parking lot down the road. Full. Look at the neighborhoods around the store. It's in a decent place, but as is typical for Albertsons, too much of a cookie cutter.
pseudo3d wrote:Compounding all that was a weak local and national economy (not that today is a whole lot better) and more importantly, the difficulties that Albertsons faced when trying to digest ASC, all at the same time.
When you take into account that Randalls wasn't in that good of shape to begin with, the fact that they're responsible for all of Houston and Louisiana scares me. I'm seeing the results of it here first hand. Randalls has made some of the many myriad of mistakes (locations, neighborhoods, misreading the competition (Kroger, HEB and Walmart), and have built in places they shouldn't have. Safeway never managed it well, sanitizing stores by removing what made them more local. Kroger and HEB are both masters of localization, and serve Houston well.

Read on for further rebuttal/response.
pseudo3d wrote:The Houston division and the Southern division were different after the merger, and "officially" they still are. The Southern division is the Dallas Albertsons and Tom Thumb stores. The fact that they are on different systems (Safeway vs. SuperValu/LLC) is still problematic.
My mistake on that one; Houston is running two different types of stores: Randalls (more Safeway-like) and Albertsons in southern Louisiana. The two run differently.
pseudo3d wrote:Yes, everyday prices are still too high, but there is regular business at the stores...not enough as there should be, though.
Any businessman will tell you you cannot survive on promos alone. If all you're selling is the low (or loss) margin items, you're going to lose money in the long run. If you can't sell the non-sale items, you don't make the profits. Other competitors make you purchase a minimum; Albertsons usually doesn't on big sale items (such as my aforementioned 5/$10 soft drinks).
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Re: The present and future of Randalls

Post by architect »

wnetmacman wrote:Here's where the problems lie in Houston right now for Albertsons:
1. They failed there before. We all remember when Albertsons left Houston in 2002-2003, due to a very poor execution on their part. How many former Albertsons stores are now Kroger, Food Town or HEB?
2. They are operating two types of stores out of one division. The Houston division (or Southern, if you want to be proper) also handles stores in Southern Louisiana and Florida, which are all Albertsons stores. No card required, but the Randalls signs are all over the store (Lucerne in Louisiana?). All the notices in the stores have both logos.
3. Neither type is attracting regular business, only promo shoppers. The prices they're advertising are just that, advertised prices. Their regular prices on everything not on sale is horrendous, at best. They ran a sale in Lafayette late last year for 12 pack soft drinks 5 for $10 with no minimum purchase. The only part of the stores busy were where they were setting out the 12 packs!
4. Not enough CapEx on anything. The only expense they're putting into the stores is to put up the new decor. No repairs, no maintenance. Old equipment is left to rot and run. In Lafayette, the sign on the Ambassador at Congress store is falling off the building!

In the long run, I don't see this working well. Maybe they'll sell some stores off, but I fear most will close.
For sake of argumentation, Point 1 is irrelevant. Past performances do not always guarantee future outcomes. However, I definitely agree that based off of past history, Albertsons has the tendancy to run stores into the ground due to poor execution, much like Safeway. Although the Randalls store base is stronger than the Albertsons Houston stores ever were, turning these stores around will require more finances and energy than Albertsons currently has or has traditionally been willing to spend. Point 2 is also somewhat of a moot point, because if each store format is executed properly, then a division can effectively manage multiple brands. The United Division is a great example, being able to make business work well despite having multiple formats to manage. Points 3 and 4 are both major issues, and are especially noticeable in Houston where HEB and Kroger are investing heavily in the market, both in renovations and new stores. Also, like pseudo3D said, both of these competitors have been able to master the localism that Albertsons generally struggles with. The key to turning around Randalls will be in improving both pricing and presentation, and ensuring that potential shoppers are aware of these changes through effective marketing.
pseudo3d
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Re: The present and future of Randalls

Post by pseudo3d »

(Note in case anyone calls me out on it, the Gulfgate store didn't close within two years, but the South Houston store did. Typo on my part. Sorry).
wnetmacman wrote:
pseudo3d wrote:This is irrelevant. Like Safeway's second coming with Randalls, it all depends on execution. The 2002 pull-out was due to a variety of factors. Let's look at the four again, "poor locations, questionable neighborhoods, intense competition, and were built for development that never occurred". Like I said, I can think of specific locations for each of them.
I'm going to outline why each of these should have worked, and then I'll explain why it's relevant:
pseudo3d wrote:7530 Westheimer Road, #2705
With all that competition nearby, that store should have been able to work; at the very least, to try to take some of that business. You can't survive if you can't beat the enemy. Sam Walton's rules; if you can't beat them, do something they can't or won't, but don't blame them for your failure.
pseudo3d wrote:1630 Spencer Highway, #2742.
I believe this is more about marketing to the neighborhood. It is a highly Hispanic neighborhood; a conventional store (and especially ultra-bland Albertsons) just can't make it.
pseudo3d wrote:5620 West Tidwell, #2768.
True, the railroad situation isn't the best, but if you have what people want, it will not be a problem. The Kroger Family Center in Lake Charles has a railroad that runs down the middle of the street to it; it's still going after 40 years.
pseudo3d wrote:7121 Broadway, #2745.
Zoom out on your map with this one. Look at the Kroger parking lot down the road. Full. Look at the neighborhoods around the store. It's in a decent place, but as is typical for Albertsons, too much of a cookie cutter.
pseudo3d wrote:Compounding all that was a weak local and national economy (not that today is a whole lot better) and more importantly, the difficulties that Albertsons faced when trying to digest ASC, all at the same time.
When you take into account that Randalls wasn't in that good of shape to begin with, the fact that they're responsible for all of Houston and Louisiana scares me. I'm seeing the results of it here first hand. Randalls has made some of the many myriad of mistakes (locations, neighborhoods, misreading the competition (Kroger, HEB and Walmart), and have built in places they shouldn't have. Safeway never managed it well, sanitizing stores by removing what made them more local. Kroger and HEB are both masters of localization, and serve Houston well.

Read on for further rebuttal/response.
pseudo3d wrote:The Houston division and the Southern division were different after the merger, and "officially" they still are. The Southern division is the Dallas Albertsons and Tom Thumb stores. The fact that they are on different systems (Safeway vs. SuperValu/LLC) is still problematic.
My mistake on that one; Houston is running two different types of stores: Randalls (more Safeway-like) and Albertsons in southern Louisiana. The two run differently.
pseudo3d wrote:Yes, everyday prices are still too high, but there is regular business at the stores...not enough as there should be, though.
Any businessman will tell you you cannot survive on promos alone. If all you're selling is the low (or loss) margin items, you're going to lose money in the long run. If you can't sell the non-sale items, you don't make the profits. Other competitors make you purchase a minimum; Albertsons usually doesn't on big sale items (such as my aforementioned 5/$10 soft drinks).

As for a rebuttal to your rebuttals, for all we know 2705 might have been profitable. Some of the stores were profitable and they were picked up by others. It's harder to justify a store that no other competitor wants because they have their own stores nearby or otherwise can't afford it (if Fiesta were interested, I think the asking price was too high, as it was in a center only 7 years old). Likewise the Venture in the same center became an Academy because both Target and Kmart had stores of their own. 2742 was in a location so different that it would've been hard to even market an Albertsons unless it was a wildly different store. It was at this time that H-E-B realized that a "one size fits all" store wasn't going to work (Pantry stores were no longer built and on their way out) even if they were marketed differnetly and ended up actually putting some locations planned at the time on ice until years later (present day) when they opened as Joe V's Smart Shop. Companies generally don't want to have wildly different D-class stores that are marked the same as A-class stores, because of the perception of "most" stores being that way. Such lower-class stores definitely damaged my perceptions of Kroger and Albertsons for years, lemme tell you. 2745 is a bad location. If you actually drove down the distance of Broadway you'd know. It reminds me of a particular shopping center in Bryan-College Station that struggled because it was too much in the "middle", being too far north for College Station and too far south for Bryan. The Kroger to the east is a better location because it's closer to Old Pearland. To make it to the Albertsons, you'd have to drive past other supermarkets to get there (in either direction), and there was almost nothing there that developed where Albertsons would've been the closest. 2768 and the Kroger in Lake Charles are different. The Kroger has great visibility and the railroad (which runs parallel) is less of an issue since the parking lots have a crossing then go onto the main road, not trying to squeeze around it. Secondly, while the Kroger in LC is a spur, the one in Houston was a busy mainline. And remember...Kroger really did try to make that location work, but in the end failed because the location flat out sucked, and there was nothing they could do about it.
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