Integration of Albertsons and Safeway

[storewanderer]

The cheap remodels seem to be an ongoing theme with many grocers in recent years. Safeway lifestyle remodels were more compete than most but were still on the cheap side using paper thin floor tiles, sometimes keeping old tiles in center store, re-surfacing old checkstands, etc. I too wonder, why do a remodel that is cosmetic (re-colors the walls) but keep the physical areas like the floor and ceiling tiles so beat up? It would seem to me it might make more sense to keep things like the floor and ceiling tiles maintained first since those are basic upkeep elements and not exactly cosmetic in nature... but what do I know?

[SamSpade]

The Starbucks kiosks generally do well and have even been added in a couple locations I know of just recently this year by the combined Safeway/Albertsons. I highly doubt they will be removing Starbucks kiosks unless maybe they are locations where those kiosks simply are not profitable. I don't think Jamba Juice was ever much of a draw and was surprised to see it in the few stores that had it.

Ralphs operates a few Coffee Bean kiosks still. Ralphs did not remove service coffee from many (any?) stores that I am aware of, just replaced Coffee Bean in most of them with Starbucks. Also Coffee Bean remains the brewed coffee sold at Ralphs in stores without service coffee. This whole situation was due to a Kroger tie up with Starbucks that got Coffee Bean displaced (mistake, in my opinion). I believe Tully's in Arizona Frys was replaced under that same tie up. But I don't think Tully's was really a great product or a known product in Arizona and as such never did very well whereas Coffee Bean is a good product, fairly popular and well known in SoCal, and seems to have a loyal following.

Tully's has mostly been replaced (or closed) in NW stores; but some QFC stores still sell Seattle's Best from their bakery (yes, a Starbucks product) with a loyalty card tie in for free beverages that is a good deal. Some Fred Meyer stores, especially in Portland, but in a few cases elsewhere, offer Peet's instead of Starbucks.

[pseudo3d]

Stopped by my favorite Albertsons (in Phoenix at 51st Avenue and Cactus Rd.) today to get some items and get some photos for observations here. It's my favorite because it has by far the friendliest employees I have encountered in an Albertsons store.

This store received the updated interior decor package last year (which re-added the 2nd entrance that was removed in a prior renovation and moved pharmacy to the NW corner of the store (from an awkward interior position near the (at the time) only entrance.

However, the renovation didn't touch the flooring or the ceiling tiles. Nor was anything done about the mis-mash of shopping carts. Also, this renovation was done just before the merger was finalized.

When I was at the store a couple of weeks ago there were several missing / water damaged ceiling tiles. However, they seem to have replaced most of those (although "dirty" ceiling tiles still remain).

However the shopping carts and flooring at this store is still atrocious. Also the layout on this store is, to put it mildly, "strange":

Mis-mash of shopping carts:

They might also want to put a new set of blinds in that window. That looks really bad on a prominent front window.

I don't get it. Why do such a cheap remodel in the first place?

Also, this isn't the only store in the Phoenix area that looks bad (but is probably the worst).

Again, despite the fact that it looks awful, the store seems to do decent volume.

The remodels done are very uneven. If you look at the Acme Style posts for this décor (they call this "Quality Built", because of the homages to the "House That Quality Built", not that they are high quality) that the Devon Acme store was built with a more deluxe package than the others, which got cheaper packages.

[Super S]

The cheap remodels seem to be an ongoing theme with many grocers in recent years. Safeway lifestyle remodels were more compete than most but were still on the cheap side using paper thin floor tiles, sometimes keeping old tiles in center store, re-surfacing old checkstands, etc. I too wonder, why do a remodel that is cosmetic (re-colors the walls) but keep the physical areas like the floor and ceiling tiles so beat up? It would seem to me it might make more sense to keep things like the floor and ceiling tiles maintained first since those are basic upkeep elements and not exactly cosmetic in nature... but what do I know?

I have seen some remodels in which floor tiles were completely replaced, but ceilings were mostly untouched. One in particular I remembered was an Albertsons where I used to live in Boise, where they added on to the front of the store in the 1980s. They continued the suspended ceiling to the new part, but left the panels which were a different pattern in place in the old part. If you looked up you could see a clear line between old and new. (I never understood this since suspended ceilings are for the most part standardized and these are drop-in panels which are very easy to change.) Floor tiles in the same store were completely replaced. That I kinda understand since they wear due to carts, people walking on them, etc.

Kmart actually painted the suspended ceilings during most of their 1980s-1990s remodels which looked ok unless they also painted over the big air vents, speakers, and everything else, which I saw in some locations. But they usually left the old floor tiles which looked terrible.

[pseudo3d]

The floor tile in this one is distinctive of a décor package that Albertsons was using at the time, with the stars...in the back, you can see the "Beverage Boulevard" flooring. Would've been nice if they did change the flooring, perhaps a polished concrete floor.

[klkla]

The cheap remodels seem to be an ongoing theme with many grocers in recent years. Safeway lifestyle remodels were more compete than most but were still on the cheap side using paper thin floor tiles, sometimes keeping old tiles in center store, re-surfacing old checkstands, etc. I too wonder, why do a remodel that is cosmetic (re-colors the walls) but keep the physical areas like the floor and ceiling tiles so beat up? It would seem to me it might make more sense to keep things like the floor and ceiling tiles maintained first since those are basic upkeep elements and not exactly cosmetic in nature... but what do I know?

It has to do with the budgeting process. The first thing to decide is what effect a remodel will have on sales and profit. Profit being the most important factor. Once that has been figured out you can decide what the budget will be, based on the company's desired return on invested capital. In a case like this it looks like they determined a budget around $500,000 was appropriate (enough to create a little excitement with a new look but not enough to make any structural changes). Ideally you want to do it all but you have to start checking things off the list until you get to that budget. In Arizona where property is relatively cheap and barriers to entry by competitors are fairly low this is a low-risk strategy (In case Walmart or Sprouts builds a store down the street in a year or two as an example).

[pseudo3d]

The biggest question is what to do with the club card in former Safeway stores. Looking at the ads for Randalls, they're pushing it in almost everything, while "no card" signs still hang at some Albertsons. Right now, MyMixx seems to be gaining ground in digital couponing for the NAI stores, but it's not universal. Integrating Safeway cards into the MyMixx system could help everyone, with digital coupons for those that want it, a largely non-card system for those that don't, and Albertsons keeping the vast database of shopper information that Safeway built up. You'd think that the stores that still use it should ease off on the card...

[pseudo3d]

The division offices is another question worth asking. I can confirm that the Vons Arcadia division closed and was combined with Albertsons Fullerton offices in SoCal. The Southwest division uses a large campus that Safeway bought for accounting (which I assume would be held over, since SuperValu did the accounting before) with the Albertsons division being co-located with the distribution center. The Northern California division (former Safeway HQ) now has vacated 300k square feet. No news on any others...

[BillyGr]

The biggest question is what to do with the club card in former Safeway stores. Looking at the ads for Randalls, they're pushing it in almost everything, while "no card" signs still hang at some Albertsons. Right now, MyMixx seems to be gaining ground in digital couponing for the NAI stores, but it's not universal. Integrating Safeway cards into the MyMixx system could help everyone, with digital coupons for those that want it, a largely non-card system for those that don't, and Albertsons keeping the vast database of shopper information that Safeway built up. You'd think that the stores that still use it should ease off on the card...

Not sure why there is that big of a deal with stores having cards. They allow for a bunch of things (the coupons on card, using that # for several rebate options like SavingStar and similar) and many stores have even used records from the cards to notify shoppers when they have purchased something that is later recalled.

[storewanderer]

They will have to integrate loyalty cards at some point and make a decision. The combined company has talked up the Safeway loyalty program and Just 4 You program in the IPO filing so I expect those things will be staying in place in the combined company.

They also blamed the Safeway gas stations on lower margins. It will be interesting to see if or how they address that. Those stations are already high priced (especially if you pay their .10/gallon credit card surcharge).