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Apr 10, 2008
Shop Talk Supermarket development, real estate get panel spotlight at Midwest Idea Exchange By Jen Danko Murmurings surrounding the Chicago-area arrival of British supermarket giant Tesco have yet to phase the conscience of some local retailers. At least three grocery store gurus say it’s business as usual on the real estate front. Noting the Tesco’s Fresh & Easy Neighborhood Markets are not achieving the same fresh and easy success. “We’re not anticipating doing anything different,” says Joseph McKeska, vice president of SuperValu Inc., the parent company of Chicagoland’s Jewel food stores, on his operations in response to Tesco’s potential plans. McKeska spoke as a part of a panel of grocery store retailers at the Midwest Idea Exchange & Illinois Alliance Program held at Chicago’s Hyatt Regency (151) East Wacker Drive on February 21 and 22. The panel “Grocery Stores in Your Community – Deal or No Deal,” was moderated by Matanky Realty Group President James Matanky. Matanky asked developers and executives in a sometimes tight-lipped industry what goes into creating a grocery store and finding the right place for it in a neighborhood. Fellow panelists Bob Ferratto, development manager for Save-A-Lot and Adi Mor, founder of the locally owned Garden Fresh Market chain, also contributed to the panel discussion. Size, location and operations emerged as hot button issues, alongside the possible arrival of Tesco to the city’s northwest side. Some Chicago grocers are breathing a little easier after a report published earlier this month in Supermarket News cited that 52 West Coast-based Tesco stores that have opened since November are averaging weekly sales volumes of $50,000 to $60,000 or about $5 per square foot, well below the goal of $200,000 a week and $14 to $22 in sales per square foot as the company had projected. “I have the opportunity to visit Tesco (on the West Coast), it’s a unique format, “ McKeska says. “It’s a lot of ready-to-heat meals, and I think they are trying to create a different market, and they are trying to get customers to shop differently than they do today… consumers in Europe shop differently than we do in the States, so it will be interesting to see what they are doing over time.” With parallels drawn between Tesco as the British version of Wal-Mart, panelists explored the big box impact on local grocer stores in their operational communities. “We closed our store in Crystal Lake because of the Wal-Mart,” Mor says. Panelists also looked at the flipside, examining factors that drove them to invest in land and open stores in certain neighborhoods. “Up until recently, residential growth was a big factor in determining if we should open a store, but that has slowed down dramatically,” McKeska says. “When we build a store, we look five, 10, 20 years out. On real estate front, panelists discussed the diversified sizes of grocery stores and h ow they can make them fit into their community du jour. Ferratto’s Save-A-Lot stores, which generally cater to a lower-income customer base, tend to average around 16,000 to 17,000 square feet while McKeska’s store clock in at an average 62,000 square foot, for a suburban location. Urban neighborhood stores scale down to 40,000 or 45,000 square feet while downtown stores – including his smallest one located at corner of Ohio and State Streets – measure 32,000 square feet. McKeska says that sizing up the ideal grocery store is only the last step in a lengthy process. “Having land available and responsible cost to develop is critical… but the most important thing is to have a neighborhood that is moving in the right direction in terms of gentrification from the development stand point,” McKeska says. “If you create critical mass by having large development where you can spread the cost of Security and maintenance, all the other things that come around with building a shopping center and provide people with safety and security – that goes a long way as well. The above is an article in Illinois Real Estate Journal, Volume II, number 4, April 2008
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