Kroger's Experiment at Bridging the Gap
Kroger has enjoyed tremendous success as a middle-market grocer selling from conventional-sized supermarkets. But that hasn't precluded them from other store formats.
Kroger owns more than 700 convenience stores under various banners, include Kwik Stop, Tom Thumb and Turkey Hill Minit Markets. (Another 83 are franchised.) These stores, which operate in 19 states, account for roughly 5 percent of Kroger's total sales.
Now Kroger is attempting to bridge the gap between supermarkets and c-stores with a new mid-level concept. Turkey Hill Markets are three experimental stores of about 7,500 square feet that Kroger established last year in the Columbus, Ohio, market. The idea is that they will combine the quickness of c-store shopping with the access to the variety and fresh foods of a supermarket.
The Turkey Hill stores are true hybrids; while they offer fresh meat, produce, dairy and eggs, they have more of the look and feel of an expanded convenience store. They sell gasoline (as do many of Kroger's supermarkets) and have an expanded menu of c-store-style foodservice items like hot dogs and soda-fountain drinks.
Kroger is going for the hybrid concept. When the stores opened late last year, Darel Pfeiff, president of Turkey Hill Minit Markets, said in a written statement: "It's the best of both worlds when it comes to a retail model for gasoline and carwash service, fresh groceries, quality meats and produce, and hot meals, along with the snacks, beverages, and the everyday necessities people count on at traditional convenience stores."
But how well will this concept work?
At 7,500 square feet, the Turkey Hill stores are closer to the size of a c-store than a supermarket. That makes them significantly smaller than the "small-format" stores being tried by Walmart and Target.
Craig Johnson, a consultant and head of Customer Growth Partners, is dubious about the prospects for Turkey Hill Markets, saying that their size puts them at "subcritical mass."
"It's very difficult to do a full range of groceries and to do a good job of fresh food in a store of only 7,500 square feet," Johnson says. "It's a little too small–you need to get at least into the five figures."
For Kroger to set up stores of 7,500 square feet, which are about the size of dollar stores or large c-stores, gives customers the same degree of access and transaction speed, but with more of the foods they supposedly want. That includes c-store-style snacks side-by-side with a surprisingly varied selection of produce.
Produce and other fresh foods will be the difference between a successful new outlet and a failed overgrown c-store, Johnson says: "The meat and produce sections are the key items that are differentiators between a successful smaller-format store and unsuccessful ones."