Three years after its supercenter format debuted in Fort Wayne, Kroger Co. is moving cautiously before entering other Indiana markets.
The Cincinnati company’s Marketplace concept was first introduced in Arizona in 2000. Besides groceries, the stores sell general merchandise, such as jewelry, housewares, furniture and toys.
Meijer and Wal-Mart stores have been doing this for decades. So, Kroger’s decision to delve into the world of traditional retail is still a work in progress, but company leaders say the stores are winning customers over – and going after competitors.
Fort Wayne remains the only city in the state with Marketplace stores, at 601 E. Dupont Road and 5725 Coventry Lane, which is curious to analyst Jeff Thomison.
“They opened a Marketplace in Shelbyville, a smaller town here in Kentucky, but they haven’t even opened one here in Louisville yet,” said Thomison, a vice president of research for Hilliard Lyons, a brokerage firm. “It’s one thing to have one store, but two (in Fort Wayne) is surprising, because they cost a lot of money.”
About $20 million on average, to be exact.
Kroger has more than 80 Marketplace stores nationwide. The outlets will contribute to Kroger Co. reaching nearly $100 billion in sales in 2013, officials said. Net earnings for the third quarter dipped, however, as the company reported $299 million in December, compared with $317 million in the same quarter in 2012.
Still, when it comes to Kroger’s Marketplace strategy, Thomison said he is willing to give the well-run retailer the benefit of the doubt. The retailer likely is ironing out wrinkles in the format before building another store in Indiana.
“They usually start off in a smaller town first to work out any bugs before moving into a larger city, which in your case would be Indianapolis,” Thomison said. “They’re honing their model in Fort Wayne, and then they’ll build one in Indy.”
Kroger said it would not disclose plans for future Marketplace stores for competitive reasons.
What makes the Summit City a good guinea pig for the outlets? Well, retail expert Richard Feinberg says it could mean Fort Wayne is average in its shopping habits.
“And that’s not a bad thing. It just means Fort Wayne is a good place for trying new things,” said Feinberg, a professor in the Department of Consumer Sciences and Retailing at Purdue University and the director of the Center for Customer-Driven Quality. “There must be something very middle-America about Fort Wayne.”
Jeff Burt, president of Kroger’s central division, which includes Indiana stores, was unavailable for comment for the past week, but spokesman John Elliott conferred with the company’s management team to provide some insight.
“With more than two years’ experience running the first two Marketplace stores in Indiana, it is clear the Fort Wayne market was ready for a new shopping concept,” he said in an email, declining to provide specific figures.
“Customers have responded well in terms of store sales and customer count.”
And even with the fall arrival of a Costco Wholesale store in northwest Fort Wayne, Elliott said Kroger remains confident in its decision to put Marketplace stores on the city’s northeast and southwest sides.
“We do monitor competitor activity in every market,” he said. “We believe Kroger’s product mix, our variety of store formats, the stability brought by our acquisition of Scott’s Food & Pharmacy and the subsequent $105 million investment (in Fort Wayne) … has left us well-positioned in the intensely competitive northeast Indiana region.”
A typical Marketplace store is 125,000 square feet, compared with a traditional Kroger store that spans 75,000 square feet.
“So you can assume customer counts would be proportionately larger and draw from a larger geographic radius,” Elliott said.
Feinberg also said the battle for consumers’ dollars is only going to heat up as alternative groceries crop up.
In April, Fletcher, N.C.-based Earth Fare, a natural-foods score, expects to open a 22,000-square-foot location at the Dupont Crossings shopping plaza on the city’s north side.
Feinberg added that Amazon’s foray into delivering groceries – called Amazon Fresh – makes it another player.
Amazon.com’s service is currently available only in Los Angeles, San Francisco and Seattle, but it is causing a stir in the industry, Feinberg said. Although selling food offers low profit margins, Amazon hopes to entice online shoppers to buy more profitable merchandise.
“It’s all about time, and people don’t have the time to go to several different places to shop like they used to,” Feinberg said. “People don’t go to the butcher’s for meat or the roaster’s for coffee. People would rather get it all in one place.”
Kroger Marketplace is among retailers offering a more one-stop experience.
“Grocery stores are selling prepared foods and (general merchandise) because the profit margins are higher,” Feinberg said. “That’s why you see sweaters, socks and underwear at these stores. You don’t have to sell as much of those things to be profitable.”
Fort Wayne resident Tamra Sovine celebrated Christmas after the holiday because her children couldn’t make it to town. The retiree said she went to a handful of traditional retailers to find a Lego set for her granddaughter.
“I couldn’t find them anywhere, but I found it here,” she said of Kroger Marketplace at Coventry. “I was so glad they had it.”