Fred Meyer announces Portland store closure

[Super S]

I think something has gone deeply wrong at Fred Meyer. Somehow during the past 10-15 years, as Kroger was growing the food business significantly, the general merchandise side of Fred Meyer languished. I think they have some long-term problems with mix, price, and promotion on the general merchandise side. For a Supercenter to work properly, you need a pretty good mix of sales on the food as well as the general merchandise.

Fred Meyer never bothered to sell general merchandise online and as far as I know even today the Kroger Clicklist in Fred Meyer Stores does not offer Fred Meyer General Merchandise but only offers groceries. Why?

So this is where we are today. Closing a store in a maybe not so high income area that has been in the area for decades, and it appears Wal Mart is doing just fine nearby, as well as WinCo. Things like Spokane and South Medford where general merchandise gets significantly cut down so food can have wider aisles and far larger facings of the same exact items they had before, with a few new items thrown in for good measure but nowhere near as many new food items as the amount of GM that was cut, full line stores in other areas that have such a shrink problem they are locking up items like jeans, etc.

Kroger should have put just as much effort into growing General Merchandise in the past 10-15 years, as they did on growing food. Fred Meyer's GM offering is (well, in some cases was...) far better than competitors. Instead it seems there are just excuses about the business moving online (could have been countered had Fred Meyer been selling items online), business moving to places like Home Depot/Lowes (probably couldn't have stopped this 100% but could have stopped it to some extent at least on small weekend type project business), etc.

Fred Meyer does have better quality in the GM mix. But I agree that the GM side is slipping a bit. The automotive department seems to be gradually scaling back. Not to a level like Target but I have noticed certain lines disappearing and things like batteries and filters are scaling back. Hardware is more basic, although they still have paint and some even offer Miller Paint. Sporting Goods seems strong. But the GM side is often understaffed. It is very common at the Longview store to only have one register open on the GM side with a long line (and no self checkout) while the food side is staffed well.

I have to agree though that it is a bit odd that they only offer online sales in food, especially when the competition is already doing this. Even Kmart.

[babs]

I can answer some of your questions.
Fred Meyer never bothered to sell general merchandise online and as far as I know even today the Kroger Clicklist in Fred Meyer Stores does not offer Fred Meyer General Merchandise but only offers groceries. Why?
It's because the only area of the country where Fred Meyer is a household name is Oregon, Washington, Idaho and Alaska. That's it. Fred Meyer doesn't carry any unique products. It's the same stuff you find at many other stores. They are not a national brand like Walmart, Kohls, Amazon, JC Penney, etc... The return needed to justify the investment needed for eCommerce is questionable when you have such a small population to serve. And where would you put the DCs? Just in the NW, or around the country, taking a chance that sales will catch on nationwide? That's the reason why they haven't launched eComm online. They couldn't make a business case for it.

So this is where we are today. Closing a store in a maybe not so high income area that has been in the area for decades, and it appears Wal Mart is doing just fine nearby, as well as WinCo. Things like Spokane and South Medford where general merchandise gets significantly cut down so food can have wider aisles and far larger facings of the same exact items they had before, with a few new items thrown in for good measure but nowhere near as many new food items as the amount of GM that was cut, full line stores in other areas that have such a shrink problem they are locking up items like jeans, etc.
First of all, this is chainwide. You might want to visit stores outside of South Medford and Spokane. FM has downsized Home in nearly all stores and expanded grocery. They've always made most of their money in Food, not home. They increased the number of food skus by thousands adding more wine, organic/natural foods, and other categories that are growing exponentially. It's a response to the market.
As for the store that's closing, it's a tough area. Crime is rampant in the area. Safeway and Albertsons have pulled out of the area. There are no higher end stores like Whole Foods or New Seasons in the area. Budget stores like Walmart and Winco are thriving. That should tell you about the demographics of the area.

Home Depot/Lowes (probably couldn't have stopped this 100% but could have stopped it to some extent at least on small weekend type project business), etc.
Pretty hard to compete with a home improvident store that sells in huge volume in stores that are as large as FM. I don't see any scenario where FM could have been successful in selling lumber, sinks and toilets against the big giants. There's no one that has done it successfully so why would FM have been different.

This isn't to say FM is doing everything well. Financially Kroger has been doing well for the past 20 years and they are happy with the performance of FM and they consider it a jewel in their portfolio. I do get frustrated with FM over the pricing games they play with their customers, the apparel department is uncompetitive. Their clothes are ugly and insanely expensive. The home department has always been spendy and the quality is junk. I'm a cyclist and would never buy any bike accessories at FM. This department needs help and perhaps downsizing it is an admission that they just need to focus on doing fewer things better.

[pseudo3d]

Pretty hard to compete with a home improvident store that sells in huge volume in stores that are as large as FM. I don't see any scenario where FM could have been successful in selling lumber, sinks and toilets against the big giants. There's no one that has done it successfully so why would FM have been different.

Full sinks and toilets aren't what storewanderer is talking about (doing a full bathroom remodel isn't exactly a weekend project), it's more along the lines of what an Ace Hardware (which are on average 8,000 square feet) would have, and Ace does well in certain areas even when bigger stores exist. (Maybe Fred Meyer could outsource the hardware department to Ace Hardware, and have a store-within-a-store like what some independents are doing these days).

[storewanderer]

I think the better approach on general merchandise is to have better items. Fred Meyer had the base for having "better items" in general merchandise over the years (a better offering than Wal Mart or Kmart, for instance, going back at least a few decades).

So what has happened here is general merchandise competition got better, new competitors came along, but the Fred Meyer GM area did not make the necessary changes. They just kept doing "the same thing." Instead of paying more attention to what the category focused stores offered on GM, they kept acting like their main GM competition was Wal Mart and Target. This as you point out has led to a bit of an iffy strategy. While clothing has branded items, they don't get much movement. While Sporting Goods should have better items than Wal Mart, it doesn't in all categories (as you point out bike stuff is the same at both stores, and I will add, dollars more expensive at Fred Meyer). The furniture category seemed to get them some top line growth 10-15 years ago but people only need so much furniture so unless you keep attracting new customers you eventually tap that market out.

Meanwhile as you point out the Fred Meyer Food area has responded to the new food competitors that have come along by adding more wine, more nutrition, etc. These areas were already areas that Fred Meyer did well for the past 30 years but they built on their strengths.

That is where there seems to be a failure. GM did not keep up with competition, food is trying to keep up. I believe there is still time to fix the GM side so the stores can maintain their competitive advantage of a solid grocery and deep general merchandise offering together under one roof. Certain areas of food end up like a fad business and when you chase categories and the customers that stores like Whole Foods and New Seasons focus on, you are just waiting for the next new fad competitor to come in and take your customers. The customers who chase food fads always jump to "the next new store" that opens.

As far as online sales go, Kroger could have cross marketed online sales of its various banners that customers do know. You wouldn't offer clothing at Fredmeyer.com in Ohio but maybe you could offer clothing at Kroger.com there. Similar to this weekend's promotion of "spend $20 on food, get an extra 50% off Christmas Merchandise/Candy (equates to a 75% discount off regular price at Smiths)" they could have done similar types of offers to drive some traffic to a website offering general merchandise. I'm not saying it would have been a home run but did they even try? Even if they didn't make much money, they would still be capturing sales and building a better volume/buying bracket base for their GM business. I doubt websites like Dollartree.com, Riteaid.com, etc. really sell much either but they are still there, fulfill orders from a single warehouse, and still offering the option of online sales to their customers.

[Brian Lutz]

One thing I've noted is that at least in Washington Fred Meyer stores tend to be very close to Home Depot stores. I can name at least three right offhand (Redmond, Issaquah and Snohomish) where a Fred Meyer store is either next door to or sharing a parking lot with a Home Depot. The Kirkland Fred Meyer used to have a HomeBase (now defunct home improvement chain) store right behind it, which eventually got turned into a (now also defunct) Costco Home store before the City of Kirkland eventually bought the property and put its municipal court / city jail there.

Interestingly, when the Issaquah store first opened they had a much larger tool and hardware department than they have now (even stocking a small quantity of lumber) but this didn't last long.

[storewanderer]

Historically Fred Meyer had lumber and I think even had things like kitchen cabinets, etc. I am not advocating they go back to having all of that, but at least some depth of mix for hardlines would be a good idea...

[Super S]

Historically Fred Meyer had lumber and I think even had things like kitchen cabinets, etc. I am not advocating they go back to having all of that, but at least some depth of mix for hardlines would be a good idea...

Not only lumber, but also water heaters and bathroom fixtures. Home Depot, and later Lowe's had enough of an impact that Fred Meyer scaled this way back and had a couple of huge clearance sales. Fred Meyer had estimate desks in their stores as late as the mid 90s as they also offered installation services to some extent.

When you think about it though, the current mix is more in line with Walmart and Kmart. Fred Meyer still has way more depth than Target though.

[storewanderer]

Their depth is probably better than Kmart or Wal Mart at this point in a lot of stores, they have some pretty impressive depth in the home improvement category. Maybe the category doesn't move well but I think it is fairly well marked up and it doesn't require a reset/major clearance sale every 3 months. Low labor.

Things like Spokane Test and South Medford move them to more of a Target-type assortment. Probably still a little better than that though...