Store Wars

War! The supermarket scene as we knew it is crumbling under attacks by new stores entering the market. Here is your guide to the past, present and future of Richmond’s ever-changing market landscape.

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For decades, it felt as though it all began with the Ukrop family. Their grocery stores, colored by rainbow cookies and technicolor cake icing, dominated the Richmond landscape, first opening in 1937 and at times earning more than one quarter of all Richmond’s grocery food sales. Next month marks seven years since the last Ukrop’s closed, and the Richmond region’s grocery market has been in a constant churn ever since, with increasing options elbowing for your dollar. As more stores bring more choice and convenience for customers, the new competition means difficulty for the industry itself.

“It’s going to be a battle royale,” says Jeffrey Metzger, a publisher of Food World, which has been covering the Mid-Atlantic food retail industry for more than 40 years.

As of deadline, new players include Aldi, a stripped-down German-owned chain, which launched in the region in 2015; New York-based Wegmans, which built enormous shops in Chesterfield and Henrico last year; and this summer or fall, Lidl, also based in Germany, will open the first Virginia location — possibly one of the Richmond area’s five — just a fraction of the company’s projected 100 stores launching in America over the course of the next year or so. High-end Southern grocer Publix Supermarkets Inc. has announced it’s taking over 10 Martin’s shops in coming years and building two new stores, and plans to open its first Richmond-area store this summer with a mobile app-based ordering system, a large prepared-foods selection, and even an in-store event-planning team known as Publix Aprons. In late March, the Richmond Times-Dispatch reported the Nuckols Place store will include a cooking school.

“I think you’re going to see grocery changing a lot ... They’re ready to do things differently, and they think Richmond is going to be that market to do some of those things differently.” —Laurie Aldrich, Grocery Store Advocate and Executive Director for Virginia Retail Merchants Association

Some market share was left on the table after Martin’s moved into Ukrop’s stores in 2010 because the two were very different retailers, says Laurie Aldrich, executive director for Virginia Retail Merchants Association, which advocates on behalf of most major grocers in the region. “That market share had to be gobbled up somewhere,” she says. And now with Martin’s and Food Lion merging and having to divest of stores in Richmond, “it just creates a whole new dynamic, if you will.”

Those such as Aldrich and Metzger with an eye on the region’s markets believe Richmond is an attractive location for grocers, and it’s at a crossroads. Metzger predicts the area will see store attrition over the next three to five years as old and new grocers struggle for ever-shrinking portions of total food sales in what he calls an “over-stored” market.

“Whether that means companies withdraw totally or just cut back on existing number of stores, I think you’ll see the lineup change,” he says. His publication has been measuring that lineup since 1979 with an annual market-share report for the Richmond area that tracks the top 20 food stores. The rankings on that list have changed dramatically in the past 10 years after relative stability in the decades before.

Martin’s market-share rankings slipped in recent years, and Metzger predicts that share will continue to decline as it sells off and closes its Richmond locations. Last summer, after the parent companies of Food Lion, Giant and Martin’s merged, federal regulators required the newly combined parent company to divest of 19 Martin’s stores in order to resolve antitrust concerns. Florida-based Publix will convert 10 of the stores as a part of a northward expansion. A summer 2017 closing was expected for the unsold Martin’s stores, said Christopher Brand, a company spokesman, in a July 2016 Times-Dispatch story. “We have nothing to announce at this time,” said Samantha Krepps, a Martn’s public relations manager, when asked in March.

And what of the employees? Workers of the 10 stores bought by Publix will lose their jobs if they cannot transfer to another Martin’s location. Publix has encouraged former Martin’s employees to apply to their stores as the company begins hiring closer to its opening dates.

This isn’t new. In 2000, when a merger between Food Lion and Hannaford Bros. Co. made room for Kroger to enter the Richmond market, Kroger took over the old Hannaford stores. A top national grocer, Kroger has since risen to Richmond’s No. 2 spot in the annual market report as of 2016. Perhaps surprisingly, or perhaps not, the No. 1 spot belongs to Walmart, which also owns Neighborhood Market. It went from nine stores in 2006 to 21 stores in 2016.

Robert Kelley, assistant professor of management at VCU’s school of business, looks at the number of retail supermarkets in Richmond and asks, “My god, how are they all going to survive?”

Normally, stores look to set up shop near new neighborhood developments, relying on residents to offset the cost of establishing and maintaining a location. In the Richmond area, while there are cases of this, Kelley sees more grocery stores opening near existing food markets, trying to steal customer bases from other chains. This is a risky move, as everyone’s margins of profit are tight.

“Anytime new stores open up, whoever is in that area is going to take less profit,” says Kelley, who previously worked for Ukrop’s supermarkets as the vice president of operations for 14 of his 18 years with the once-dominant grocer.

“It’s a kind of ego,” says Metzger. “[They think,] ‘Our model is better than yours. We think we can supplant some of the existing players in the marketplace.’ ”

While Metzger and Kelley remain confident that grocery supply is outpacing demand, census data on Richmond’s population and average income shows a consistent growth. According to a measurement using U.S. Census Bureau information, the Richmond Metro Area’s annual population growth rate exceeded the national average by 0.11 percent per year from 1990 to 2000, and then by 0.23 percent annually from 2000 to 2010. Simply put, more people means more people buying groceries, but they also need money to spend.

Like population, the Richmond Metro Area’s annual per capita income growth rate has exceeded the national average, but not by as much. Other factors, according to Kelley, make Richmond attractive to retailers: It has a diversifying market with large corporations such as Capital One and Altria Group maintaining offices here. It’s also the capital of Virginia, a right-to-work state, which means large chains don’t have to worry about workers unionizing. But none of these incentives add up completely.

“I think there’s a lot of positives about coming here that I think are more cherry-on-the-top rather than ‘Oh, that’s why we’ve got to be here,’ ” says Kelley. So if these aren’t enough reason, what’s bringing these stores to Richmond? “Publix had already decided to go north and Wegmans had already decided to go south,” Kelley posits. “Richmond just happens to be in the crosshairs.”

When Publix opens its first Virginia stores, they will be the northernmost expansion of the Florida-based chain. Conversely, Richmond is currently the southernmost reach of Wegmans retail territory. “We open three to four stores each year, and as such, we are very choosy about our sites,” says Wegmans Media Relations Coordinator Valerie Fox, who calls the expansion a natural next step. They’re not the only ones looking to expand; Whole Foods Market filed official site drawings with the city in March for its second Richmond-area store, which will be part of The Sauer Center, a development on the former site of Pleasants Hardware on Broad Street.

Kroger’s expansion into Virginia was planned long before Richmond’s market got so crowded, according to Aldrich: “I think they saw what was on the horizon.”

Lidl, the German-owned company focused on low prices, plans a large-scale entrance into the East Coast, and the company is currently months ahead of schedule.

The chain will introduce a nonfood section in its stores with a rotating inventory, from power tools to fashion. “This is a concept we have found to be very successful across Europe, and we’re excited to introduce it here,” says William Howard, a Lidl spokesperson.

Metzger predicts this could threaten both Aldi’s and Food Lion’s business in Richmond, and that the region’s grocery market has already fractured into overlapping “channels” that focus on different customer priorities: high quality and low prices.

 “If I were Food Lion, I’d be very concerned, because I think Lidl is going to be very strong in that [low-price] channel,” Metzger says.

“We’ve had competitors come and go,” says Operations Director Frankie Marshburn, a Food Lion employee of 26 years and in the region since 2000. “I believe that if we continue what we’ve been doing, that that in itself will deliver what we’re looking for.” Food Lion wants to be a one-stop shop for all customers in the Richmond area. “Anyone who sells groceries is our competitor,” he adds, including nontraditional food sellers such as pharmacies and club stores such as Costco.

Aldrich acknowledges that grocery stores will try to distinguish themselves with unique services but also adopt their competitors’ strategies when those prove advantageous. Think of Kroger’s online service, ClickList, which allows customers to select and pay for groceries online and pick up their order at the store’s front door. Fox notes that Wegmans has been piloting a similar online service, which already includes curbside pickup, at several New Jersey and New York locations.

It’s possible that the development of online services was a preemptive strike against AmazonFresh, or, as Metzger calls it, “the 10,000-pound Godzilla.” Amazon’s service provides same-day or next-day delivery of groceries directly to customers’ homes. This is, as the food writer sees it, the industry’s looming, long-term threat — a game-changer.

“I think you’re going to see grocery changing a lot,” says Aldrich. “They’re ready to do things differently, and they think Richmond is going to be that market to do some of those things differently.” One such difference is the number of grocery chains focused on prepared foods, which she says has already encroached upon small-restaurant business.

Metzger draws a parallel to a time when the pharmacist and florist industries were disrupted as grocery chains brought those services into their stores. Now, the pull goes both ways, with a growing number of alternative food sellers not taking part in the traditional supermarket industry. Of the top 20 Richmond food sellers in Food World’s annual market share report for 2016, only seven were traditional grocery stores; the rest were businesses such as convenience stores, club stores and pharmacies. This competition fractures the market further, posing yet another layer of competition for business and another dimension of choice for area residents.

For many Richmonders, despite the greater choice, this new era of grocery shopping still won’t stand up to their memories of Ukrop’s. Loyalty to the chain is so strong even today that it extends to the Ukrop’s Homestyle Foods Co., founded in 2010 under former Ukrop’s supermarket chain owner Robert “Bobby” Ukrop. The company recently announced it would begin selling its baked goods under the Ukrop’s name and under the name Good Meadow Homemades in Kroger stores in Richmond, Charlottesville and Hampton following the end of its exclusive arrangement with Martin’s in the Richmond market — a move many attest is a strong advantage for Kroger.

“I’m of the generation that I clearly remember Ukrop’s and [its employees] bringing the carts to the car, and the service and the family showing up. That’s still substantial to me,” Metzger says, “but realistically, they sold seven years ago. That’s a long time in retail. Just from a marketing point of view — not from a memory point of view — what’s going on today is a lot more significant.”

Stephanie Breijo and Susan Winiecki contributed to this report.