Surge of Smaller Stores as Food Retailers Focus on Niche Markets Including Organics, Ethnic and Gourmet Foods, According to FMI’s Dec 20, 2004 WASHINGTON, DC — December 20, 2004 — Driven by a robust growth in target market segments — such as natural/organic, ethnic and gourmet stores — the average size of a supermarket in the U.S. decreased to 34,000 feet in 2003, taking the size of new stores below 40,000 for the first time in 10 years, according to a new study by the Food Marketing Institute (FMI). The report, Facts About Store Development 2004, attributes the declining percentage of new store construction to a tough economy and a highly competitive business environment. New store construction went down for the fourth consecutive year, totaling 3.1 percent of all stores. Store remodeling tended to be the activity of choice by most food retail companies, with 4.9 percent of those surveyed remodeling at least some stores. The percentage of store closings remained fairly stable at 2.5 percent, compared with 2.7 percent the year before. As a bonus, the 2004 edition of Facts includes real-life examples of specific development trends, enhanced graphics and essays from industry experts. New Store ConstructionNew store construction, while slow overall, tended to be driven by target market-focused stores in 2003. Overall, 12.6 percent of companies responding to the survey operated at least one target market-focused store. Of these, 44.4 percent offered gourmet formats and one-third each Hispanic-oriented or natural/organic formats. The majority of these companies operate smaller chains of 11 to 100 stores. Similarly, 36.4 percent of the stores that these companies plan to open this year will be Hispanic formats, 45.5 will be natural/organic outlets and 18.2 percent will be gourmet ones. The most popular features in new stores included deli departments, fresh seafood, floral/plant shops, prepared foods for take-out, ethnic foods, pharmacies and in-store bakeries. The fastest-growing features in new stores last year were dollar-item aisles/departments and self-checkout lanes. Nearly one in five new stores featured specialized low-price/dollar-item sections. By contrast, in 2002, only 6 percent of new stores were equipped with dollar-item aisles. Self-scanning checkout lanes were included in nearly one-third of new supermarkets, almost double the 2002 figure of 17.5 percent. Low-carb sections were included in 12.2 percent of all new stores — the first time that this feature was measured. Wine sales areas, where permitted by law, also grew — with 1,000 square feet of a new store dedicated to wine sales, up from 420 square feet in 2002.Store Remodeling TrendsSurvey respondents reported that close to 5 percent of the stores they represent underwent a major remodel in 2003, down slightly from 7 percent the year before. Over half of the companies (50.3 percent) did so because of a company policy that mandated remodeling after a certain number of years. Other reasons cited include the desire to meet the needs of changing demographics and anticipation/entrance of competition into their primary markets. Less than one in 10 (6.6 percent) of store remodels included a store expansion. The median number of square feet added was 6,500. Independent operators, who operate 10 or fewer stores, were far more likely than chains to add square footage to their stores during a remodeling. Remodeling improvements tended to focus on satisfying consumer demand for simplified and convenient shopping. Similar to new stores, the most popular additions in remodeled ones included self-scanning areas and dollar-item departments, with just under one in four remodels adding each area. Also popular were prepared foods areas, ethnic foods aisles/sections and pharmacies — each were added to more than 10 percent of remodeled stores. Real-Life Examples and Essays from ConsultantsFMI has revamped the 2004 Facts report by including specific, real-life examples of development trends, enhanced graphics and essays from noted industry experts about important development trends. The additions provide much more detail as to the “how and why” certain projects are undertaken, and the overall impact on customer relations and business operations. Essays include “Nothing is as Constant as Change” by Lou Scudere, vice president, real estate, K-VA-T Food Stores, Inc.; "Future Trends in Supermarket Store Development" by John Domino, vice president, real estate, design and construction, SUPERVALU, Inc.; and “The Circle of Retailing” by Elliott Olson, Chairman and CEO, Dakota Worldwide Corporation. MethodologyData for this report was obtained through mail-in questionnaires sent to FMI member companies in the United States. Seventy-one food retail companies responded, representing 12,212 stores. Approximately half (49.3 percent) of the respondents were independents. Companies operating chains of eleven or more stores accounted for 50.3 percent of the responses. Respondents were also segmented based on their annual company retail sales. Companies were divided relatively evenly between those with annual sales of under $100 million (32.4 percent), $101 to $999 million (36.6 percent), and $1 billion or more (29.6 percent). Other areas covered by the report include construction costs, equipment purchases and architectural and engineering fees. To purchase Facts About Store Development 2004 (PDF pricing $50 FMI retailer/wholesaler members; $90 associate members; $105 nonmembers; print version an additional $10), please visit the FMI Store at www.fmi.org/pub/ or call 1-202-220-0723 with Product ID 2051 (print).