pseudo3d wrote: ↑March 5th, 2022, 9:34 pm
Is there a particular reason why large stores don't work in California like they do the rest of the country? The labor prices are probably unfeasible for something like that, and the land value is probably too high for a traditional store with a large parking lot, but even when those were less of an issue, why did it never catch on? Was the failure of Smith's large stores back in the 1990s enough of a problem that no one wanted to try it again?
I don't think there is a great reason. I think it is a matter of the stores just not being operated correctly to drive the volume needed for a large format store. All of these CA grocery chains are very overpriced. There are always discount formats in the background in CA which I think also makes it more difficult for a large format store to maximize its volume. To drive volume in a large store you need to have competitive prices, a wide mix of items, and/or you need to have an outstanding/exceptional perimeter offer. These CA chains offered none of that (that ship on price and variety sailed for good when Lucky went away). There is a reason why you don't see CA grocery chains doing organic expansions outside of CA into new territories with new distribution centers like you see chains such as Hy Vee, Wegmans, and Publix doing. The CA chains can't make it outside CA on any sort of a wide scale with their format/offer. It is too inferior and too overpriced. The competition is too tough.
Safeway never had a clue how to do a large format store and anything over 55,000 square feet was beyond their ability to merchandise. So when the main/dominant grocer in a market is not building large stores, why should anyone else stick their neck out and do it? Same situation with Publix in FL. Safeway has some larger stores sitting around (old Pak N Saves, etc.) but they are oversized, undermerchandised, and have a lot of open space.
Since this is the Raleys thread let's look at Raleys. Raleys over the years in the 80's and 90's built large stores, food and drug combo stores, called a "superstore." Most approached 65,000 square feet, give or take, depending on the location. Raleys capture was always in offering the widest product variety and having the best quality fresh items (I would debate that in the past, but I will call their fresh items above average at present). As a result they always captured the upper middle class customer. As time went on the drug areas just got scaled back more and more. I don't think the scale back of the drug areas lost them one customer- because nobody else in CA had extensive drug departments either (after Lucky went away). Now look at what Raleys builds today and the new builds have been primarily 45,000 square foot models lately (except a bit larger for a replacement in Sacramento).
I'd like to see Kroger try a few Marketplace format stores in middle class suburban areas of CA. They would need to price them the way they price a store outside of CA (not priced like a Ralphs which is outrageous). I think they could be successful. But it won't happen. It is also somewhat debatable if Smiths failed in SoCal or it was larger corporate issues that caused the demise.
But let's say HEB and/or Hy-Vee came in and said we are going to open in CA, we are going to build a distro center and we are going to build 50 80k square foot stores in the market over a 5-year period. First off, good luck getting past permitting on half of those new sites in a 5-year period. Also they would have to make various changes to their buying and merchandising due to CA-specific laws/regulations on various products and product labeling (up go costs). So at this point I think CA has done a great job of making itself a closed market that outside companies simply do not find it desirable or a good use of capital to expand into. As a result CA gets undersized, overpriced stores. But even the established businesses (who are basically protected from being run out by out of state competition due to nobody new wanting to expand into the state) are getting fed up with the business environment there.