Supermarkets: small formats for SCs

Feb 15

Major supermarket chains are looking to open new small formats, ideal for shopping centres and creating a new challenge to convenience stores. In the past, supermarkets and GMS brands have generally preferred to open in their own SCs rather than those of independent developers but more chains are taking the decision to look for new store opportunities in third party SCs, especially around Tokyo. This is a major shift in strategy, and an opportunity for overseas brands.

Supermarkets are changing. Smaller format stores are being actively developed and with this more carefully targeted merchandise profiles to fit particular locations. This is in turn offering new opportunities to open stores as tenants in shopping centres. With a few exceptions, supermarkets have either opened independently on owned or leased land or, as in the case of most large players, preferred to develop their own shopping centres anchored by their own chains.

Today, however, supermarkets are at saturation point and face the prospect of major sector consolidation. Meanwhile, shopping centres want the best supermarkets to improve customer draw. A popular supermarket can guarantee footfall throughout the week, smoothing the weekend peaks, but also provide families an additional reason to visit during their leisure days.

Some chains are in more demand than others. Yaoko is one of the country‘s most consistently successful supermarket chains and a retailer that stands out in terms of marketing prowess. In April the chain will open a 2,700 sqm store in Mitsui‘s new Lalaport Fujimi. The store will feature the chain‘s iconic open-kitchen that allows customers to see food preparation areas that most chains hide away in back offices.

Although Yaoko has long been an SC developer in its own right, specialising in neighbourhood SCs before Ito-Yokado even imagined the idea, Yaoko opened its first SC tenant store in Unimo Chiharadai in Chiba only a year ago, specifically to gain more understanding of tenant operations. Yaoko is popular for many reasons – excellent private brands, high quality employees, and clever marketing ideas such as the open kitchen, cooking stations and unique ranges. As a result, developers like Mitsui and Mitsubishi are keen to get the chain into more locations.

Mitsui has also signed Inageya as a tenant for another upcoming Lalaport due to open in the Autumn in Tachikawa. Except for a handful of small format stores in neighbourhood SCs, this is also the first time Inageya has opened in an SC development. Inageya, which is partly owned by Aeon, has been storming forward recently with a new upscale, smaller format store – a range of deli items again features prominently. It plans its first eat-in area for the new store in Lalaport too.

There is a common theme, at least in Tokyo, with chains looking to improve product quality and variety, including more overseas brands, while often reducing costs at the same time. Maruetsu, another chain owned by Aeon, already has around 60 small format Maruetsu Petit stores in operation. Almost all new Maruetsus will be small format, and it has a full supply system in place, meaning that deli and chilled products are produced in a process centre for delivery throughout the chain, using a logistics system similar to that employed by convenience stores.

A single manager is also responsible for multiple stores in most locations, again helping to reduce costs. Maruetsu hasn‘t yet said it is looking to put the format into SCs, but it plans to expand the number of Petit stores to more than 100, at which point new locations in SCs will likely become necessary. The sub-1,000 sqm format is easy to fit in most locations, and Maruetsu‘s growing expertise in flexible, just-in-time product delivery would mean it could adjust merchandise ranges for a particular property.

So far these more progressive moves have been largely limited to Tokyo and are partly due to the scarcity of locations in the capital and the difficulty of building larger formats. Given that current economic conditions have hit provincial supermarkets far harder, there is every likelihood that the trend will spread further afield as better supermarkets and SC developers come together to offer something different for particular locations.