Grocers Are Shifting to Smaller Store Formats

Smaller footprints and more technology integration are shaking up the grocery industry. CBRE has published research with the top grocery trends that will change the industry over the next decade, and smaller more convenience-oriented store formats, automation and robotic inventory were among the top new trends. Today, smaller grocery chains are ahead of the curve, and the national brands are playing catch-up.

“The majority of specialty grocers see the benefit of adopting technology, and they are taking the reigns and running with it,” Ryan Gast, senior associate at CBRE, tells GlobeSt.com. “I think the traditional grocers, like an Albertson’s, Ralphs or Vons are behind the curve a little bit, but I think they will start to pick up. They have focused on online delivery, and those are not profitable for grocer stores. It will catch up with them that they will start having to be competitive in other ways, and I think technology will be the key. That will happen soon.”

Technology integration will help stores operate on a smaller and more efficient footprint. Boutique grocer brands are already using smaller formats and more convenience-driven models. “Grocery outlet and Aldi have capitalized on the smaller format store and making it more about convenience,” says Gast. “They have planted more stores with less square footage to facilitate that. Grocers are looking at downsizing and how to be competitive with less space. That is a trend we are definitely going to see as well.”

While stores will trend smaller in the future, Gast doesn’t see stores downsizing existing locations. That is good news for investors who are implementing grocery-anchored strategies. “I don’t think that we are going to see traditional grocers downsize existing space in the short-term, but I think progressing forward for new stores, they will capitalize on a smaller footprint,” he explains. “We have seen that already in smaller Whole Foods or Vons. Because it isn’t going to happen in the short term, I don’t think that it is going to impact the investment community.”

Still, if grocery brands do downsize, Gast says there are still a lot of retailers that could back fill the space and actually create more synergy in a shopping center. “There is an opportunity when grocers do downsize for other users to complement the grocery sector,” says Gast. “I think that grocer and entertainment, grocer and lifestyle and grocer and fitness are learning how to co-exist. Fitness in particular has been a huge driver of the neighborhood grocery.”