Nine in 10 companies are featuring fresh seafood, delis, prepared takeout foods and aisles or sections devoted to ethnic offerings in new stores. At least half are including olive bars, sushi stations, pharmacies and a separate organic or natural food aisle or section.
The number of supercenters and food-drug combination stores offering virtually all these features continues to increase, driven by consumer demand for one-stop shopping.
Retailers Focus on Ethnic, Organic and Gourmet Niches
At the same time, retailers continue to target well-defined niches. Overall, 14.5 percent of the companies surveyed opened at least one niche-focused store in 2005. Of these, 44 percent were ethnic formats, predominantly Hispanic. Retailers are building natural and organic stores for consumers concerned about health and wellness and gourmet outlets for high-income shoppers.
“The niche stores and diverse assortment of fresh products show that the industry is responding to the changing and diverse demands of the American consumer,” said FMI Senior Vice President Michael Sansolo. “Relentless competition is forcing retailers to maintain a keen focus on their customers and act quickly whenever they see a shift in lifestyles or needs.”
This fast response is reflected in the short time it now takes to build stores, a median of 29 weeks, according to the report. As recently as five years ago, the time required to construct a supermarket was 40 weeks.
“These trends,” Sansolo added, “are all the more impressive given the double-digit rise in construction costs.”
Store Construction, Remodeling Costs Increase Sharply
In 2005, the typical food retailer invested $6.5 million to build a store, costing $146.70 per square foot. These figures are up from $5.5 million and $124.86 per square foot the previous year. Measured in square feet, the cost increased 17.5 percent. Remodeling costs increased 45.5 percent, from $44 to $64 per square foot. The typical remodeling job cost $1.9 million in 2005.
Driving up these expenses were increases in the cost of asphalt, steel and electrical construction, each exceeding 20 percent, and concrete, masonry, plumbing and lumber, exceeding 15 percent, according to the companies surveyed.
Four in 10 retailers opened stores in 2005, the same ratio as the previous year. Remodeling activity declined to 4.5 percent of the stores represented in the survey, from 5.7 percent in 2004.
Many companies are reducing construction costs by converting existing buildings to supermarkets. In 2005, more than one-third of the retailers that opened stores (35.5 percent) retrofitted standing structures. The cost to retrofit was only $88.70 per square foot, 40 percent less than the cost to build a store from the ground up.
Retailers are also cutting costs with energy-saving features such as LED lighting, timer-controlled lights and the use of alternative energy sources.
This report is based on a survey of food retailers operating a total of 6,860 stores. The companies surveyed included retailers operating 1-10 stores (40 percent), 11-100 stores (38 percent) and more than 100 stores (22 percent).
To purchase Facts About Store Development 2006 ($75 for FMI retailer/wholesaler members, $125 for FMI associate members and $175 for nonmembers), visit the FMI Store at www.fmi.org/store/ or call 202.220.0723.