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.
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