Supermarket Store Openings and Closings Reach 10-Year Lows As More Retailers Invest In Specialty Services At Existing Properties, According to Oct 29, 2002 SCOTTSDALE, AZ — October 29, 2002 — The rate of supermarket store openings in the U.S. recorded 10-year lows last year due largely to the sluggish economy, but store closing rates also reached decade lows as more food retail companies focused on expanding services at existing stores, according to a new Food Marketing Institute (FMI) study. Details of the report, Facts About Store Development 2002, were unveiled at FMI’s annual Retail Store Development Conference being held here.Still challenged by scarcity of land, the industry is evaluating alternative site solutions and limiting the size of new construction, according to the report. The typical store opened last year covering 46,750 square feet, up from 44,072 in 2000, but still considerably smaller than the high of 57,064 square feet recorded in 1998.New store openings — at 3.5 percent — reached a decade low, but still outpaced closings, which also recorded a 10-year low — 2.3 percent.Though major remodeling rates (2.1 percent) also hit the lowest point in 10 years, more retailers are undertaking minor remodeling projects and enhancing in-store service options. The survey finds that retailers are accommodating changing consumer demographics and lifestyles by adding new services such as pharmacies, banking centers, take-home prepared foods, gasoline pumps and dry cleaners.New Store Development TrendsThe conventional supermarket was the most popular format for new stores in 2001. This was closely followed by limited assortment stores and superstores.The selling area for a typical new store increased proportionally with the increase in store size in 2001 — 33,500 square feet of the building was used as sales floor (vs. 29,678 square feet in 2000). Not surprisingly, stores under 30,000 square feet use most of the space they have available (80 percent) while stores over 50,000 square feet have the space for larger backrooms and areas for service departments. These stores dedicated 69 percent of the store to sales space.Total construction costs, which includes equipment, fixtures, décor and building costs combined, increased slightly in 2001 to $108.00 per square foot. The typical building costs actually decreased to $58.00 per square foot in 2001, from $64.26.Store Remodeling TrendsAlthough major store remodeling rates have slowed in recent years, the percentage of companies participating in store remodeling has actually increased from 22 percent in 1997 to 38 percent in 2001.Over three-quarters of stores remodeled (77 percent) in 2001 were expansions — the highest percentage seen in the past decade. The median number of square feet added in 2000 was 10,000. The median size of a store in 2000 before its remodel was 31,500 square feet.Twenty-four percent of survey participants said they remodeled in anticipation of competition entering the market, and 24 percent said they remodeled to meet the needs of changing demographics in their trade areas. Another 24 percent said their companies have a policy in place to remodel each store after a certain number of years.Services, Departments Continue to ExpandSupermarkets continue to address consumer demand for one-stop shopping by offering a wider variety of services and departments in one place. The most popular services/departments in new stores are greeting cards (87.0 percent), deli (85.7 percent), fresh seafood (83.1 percent), prepared foods for takeout (79.2 percent) and in-store bakery (75.3 percent). Other services/departments — wine sales (58.4), in-store banking (49.4), in-store pharmacy (42.9) and gasoline sales (16.9) — continue to grow rapidly.Gasoline service, for example, was available in 16.9 percent of new stores built in 2001, compared with none of the new stores in 2000. Although online grocery shopping models are less prevalent than what they used to be, 23.4 percent of new supermarkets are dedicating a pick-up area for online orders. After a decline in video sales in the past few years, video sell-through has begun to grow again, with close to four out of 10 new stores offering video and other multimedia sales. This category has seen a sales boost due in part to the boom of the DVD marketplace.The services/departments added during remodeling reflect the trends in new stores.MethodologyFacts About Store Development 2002 is based upon an annual survey of food retail companies across the U.S. A total of 122 companies representing 13,708 stores participated. Just over half of the respondents (54 percent) were independents — operating between one and 10 stores. Forty-six percent of respondents operated more than 11 stores.Respondents were also segmented based on their annual company retail sales. Forty-eight percent had annual retail sales of less than $100 million and nearly one-quarter (23 percent) had sales figures between $101 million to $1 billion. Close to three in 10 respondents (29 percent) had sales over $1 billion per year.To purchase Facts About Store Development 2002, ($30 for members; $68 for associate members and $80 for nonmembers), visit the FMI Store online at http://www.fmi.org/pub or call 202-220-0723.