Big mergers and national chain castoffs bring opportunities for small retailers who buy up discarded stores after the dust settles. In this edition of PLMALive! Bob Vosburgh surveys the current situation.
[KGVID width=”600″ height=”320″]http://c0000626.cdn2.cloudfiles.rackspacecloud.com/2016_10_BobF.mp4[/KGVID]
Science tells us that earthquakes are often followed by aftershocks. These small tremors occur after the main event, but they’re just as important in reshaping the final landscape that’s to come.
The same idea can be applied to the retail world. The ground-breaking deals between retail giants like Ahold and Delhaize… or Walgreens and Rite-Aid… create a number of post-merger rumbles that have chipped off opportunities for smaller retailers.
Take for instance, Weis Markets, currently operating 162 supermarkets in Pennsylvania, Maryland, New Jersey, New York and West Virginia. The chain snapped up 38 Food Lion stores as a result of the merger between Ahold and Delhaize. As a result, store count grows to 200 stores, and Weis expands into two entirely new markets, in Virginia and Delaware.
Another beneficiary of the Ahold-Delhaize tremblor is Tops Friendly Markets in Buffalo, N.Y. The independent chain now operates 171 stores thanks to picking up six stores as a result of the merger. And, it also expands Tops’ territory into Massachusetts for the first time, while increasing its footprint in northern and eastern NY state.
Sometimes retailers get so big, they crumble at the edges — and that allows smaller independents to pick up stores, too. Harp’s Food Stores in Arkansas was able to acquire nine Walmart Express units when the larger retailer decided to shut the experimental format down. Harp’s operates 79 stores in Arkansas, Missouri and Oklahoma.
And then, sometimes, the movements occur on their own. There are plenty of recent examples of that: Hispanic specialty retailer Fiesta Mart in Houston snapped up 11 Minyard Food Stores in the Dallas-Fort Worth metroplex when Minyard went out of business. Not far away, San Antonio-based H-E-B dug deeper into Dallas-Fort Worth with the purchase of six Sun Fresh Market stores.
From Spokane, Washington, Yoke’s Fresh Markets announced it had bought Trading Company Stores, a local, four-unit chain.
And the list goes on. The point is that all the talk about smaller retailers dying off in the face of larger competition doesn’t match up with the action taking place on the ground.
The significance of these small grabs can’t be underestimated. While the large chains like Walmart, Kroger and Albertsons collide and merge with rivals, independent retailers remain nimble, alert and ready to grow as well.
A report from the finance consulting firm Duff & Phelps found that moderate levels of inflation combined with an accommodating lending environment has driven well-capitalized retailers to pursue acquisitions and consolidation as they attempt to gain access to new markets, leverage sourcing and merchandising capabilities and manufacture earnings growth. That’s what’s happening here.
Of course, such moves don’t guarantee success. There’s the tale of Haggen Food, the well-regarded local chain in Northwest Washington. In 2014 the original chain of 18 stores and 16 pharmacies took a huge gamble and acquired 164 grocery stores and 106 pharmacies from Albertsons. A year later, the chain declared bankruptcy and dissolved. Analysts blamed management missteps, supply problems and poor planning.
Ironically, much of Haggen’s expansion occurred in California and the Southwest. It’s a region where earthquakes are common.