When Arden Group Inc. opened a Gelson's Market in Paseo Colorado in 2001, it was lauded as a perfect fit for the mixed-use project. With 387 upscale apartment units in the complex, there was a built-in customer base to supplement what was widely expected to be a successful development.
But less than four years later, the store will be closed, a victim of weak sales resulting from what turned out to be a poor location.
The failure underscores the importance that location plays in a supermarket's success. The strengths that malls offer, it turns out, are often counterbalanced by the limitations they impose.
"Grocery stores really need convenient parking, good access and they need to be surrounded by a lot of homes," said Tom Davies, vice president of acquisitions and development for Combined Properties, a Beverly Hills developer. "Generally, regional malls are on major arteries and sometimes but not always surrounded by lots of homes. But it's harder for the customer to access the store when there's a lot of traffic."
One of the biggest factors in site selection is having a concentration of people within two to three miles that fit a store's target demographic, said Bill Bishop, president of Willard Bishop Consulting in Barrington, Ill. As Albertson's Inc. plans to roll out its recently acquired Bristol Farms brand, for example, it will need to look for areas with a significant number of households with annual income of at least $100,000 to be successful.
Markets should also be visible to traffic.
But even if the site is in the right area, and is easily seen, it can fail. Bishop said impediments include inaccessibility, the presence of a direct competitor in the area or a region that is already saturated with other grocery options.
Among the plusses that executives of Kroger Co.'s Ralphs unit look for: a growing community, busy location and easy access and exit. Also, being the first supermarket to enter a neighborhood is always better than being the last.
That will be the case when Ralphs becomes the only major chain to have a store in downtown Los Angeles when it opens on the first floor of a mixed-use site dubbed The Market at 9th & Flower next year.
"With redevelopment bringing in condominiums and apartment buildings, and people expressing interest in moving into the city's core, it's become economically viable to put a store in," said Ralphs spokesman Terry O'Neil.
Working with what's available
Finding that optimal site isn't always possible.
"In a perfect world, you've got a visible location with adjacent surface parking, or at least parking at the same grade as the entrance to the supermarket," said Rob York, partner with Santa Monica-based consulting firm Fransen Co. "There are several cases where that rule has been broken and it can still lead you to a successful supermarket, but it depends on the competitive environment and the quality of the operator."
While parking requirements vary by city, the general rule of thumb is to have five spots per 1,000 square feet of store space.
One exception is the Whole Foods Market on Wilshire Boulevard in Santa Monica. Opened in 2003, the grocer had to build two levels of subterranean parking directly below the market to make it work. While the narrow, winding aisles can cause a jam, particularly with the number of SUVs visiting the store, it is faring well.
"It worked there because of the close-in demographics, population density and incomes and the fact that they don't have a very strong direct competitor," said York. "It wouldn't fly with a different operator who's more widely represented or who isn't a very good match for the local community."
Mall locations often don't offer the visibility that's important, causing Gelson's at Paseo Colorado and Safeway Inc.'s Pavilions in the Westside Pavilion to fall by the wayside.
At the same time, said Davies, the Gelson's in the Marina Marketplace in Marina del Rey, Ralphs in HollyWest Promenade in Hollywood and Vons in the Whitwood Mall in Whittier are doing well.
The Ralphs in the Beverly Connection is one of the chain's most successful stores in the area, said O'Neil. While it, too, has subterranean parking, it is in an area where there are limited supermarket operations and high population density.
Most Ralphs stores are in shopping centers rather than regional malls, O'Neil said. Ralphs prefers to be the anchor or co-anchor tenant in a strip-mall setting where there are complementary businesses that draw additional customers.
"When people go grocery shopping, they may be doing other errands, like going to the pharmacy, dry cleaners or video store," O'Neil said. "They typically aren't going shopping for clothing items, shoes and things that would be in a traditional shopping mall. When you go grocery shopping, you have things you need to take home fairly quickly and get into the refrigerator."
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