After 18 Months And 11 Stores, Publix Fails To Make Significant Impact In Richmond
Earlier this month, Publix opened its 11th store in the Richmond market. And while it’s still too early to gauge the performance of its 50,000 square foot Mechanicsville unit (first in Hanover County), don’t be surprised if Publix’s newest location turns out to just as underwhelming as the majority of stores it has opened since entering the Richmond area in July 2017.
Which on one level is surprising given the stellar reputation and performance that the Lakeland, FL-based chain enjoys with its customers in other Southeast markets. However, on closer inspection, Publix’s disappointing entry shouldn’t be surprising at all.
First, it’s always difficult being the new guy on the block. And in a medium-sized market like Richmond, Publix entered a landscape that was already overstored and featured a diversity of retail operating styles and formats. As newcomer Lidl (which debuted in the capital of the Old Dominion a month earlier) found out – being wedded to your established format isn’t always going to work, especially if you’re intractable to change.
And that’s been the primary reason, in my opinion, why Publix’s sales aren’t where many trade observers believe they should be.
Publix’s super clean stores and strong customer service are hallmarks that have led the employee-owned chain to dominate the entire state of Florida, Alabama and parts of Georgia and Tennessee. In all those markets, there are an abundance of stores, all consistently well run which has brought Publix great success and profitability.
But as the 1,200-store chain has continued to expand northward into Charlotte, Raleigh and now Richmond, it has not dominated like it has in most other markets where it operates.
Sure, we’ve heard the story about how in the early 1990s Publix planted its flag in Marietta, GA and despite years of challenges, it hung in by staying true to its core philosophy to ultimately become a dominant force in the Atlanta area. Similar examples can be shown in Birmingham and Nashville.
But this is 2019 and the industry has radically changed. The “wait it out” mindset isn’t going to work for Publix (or any other retailer in any market). Shortly after Publix announced it would acquire 10 stores from Martin’s (Ahold Delhaize) in 2015, existing competitors Kroger and Walmart were already developing counter strategies against Publix who they already competed against in other markets. When Wegmans opened its first store in May 2016 on Midlothian Turnpike it was easy to see that the uber-merchant had the potential to crush Publix’s existing vanilla model.
So, when Publix cut the ribbon on its first Richmond store in Glen Allen, VA (a “from the ground up” store, not a rehabbed Martin’s), I was surprised that the company seemed to make virtually no adjustments to compete more effectively against a strong field of competitors.
As Publix began to open more stores, it was obvious it wasn’t interested in making the changes that I believed were necessary to win over consumers. Some might argue that its 50,000 square foot prototype is too small to effectively compete in a market that features 90,000 square foot non-Marketplace Krogers and 120,000 square food Wegmans. I don’t think size is the real issue; as the new kid in town you’ve got to prove your differentiation and your advantages. With among the highest retails in the market, not enough local, specialty and ethnic products and a mediocre perishables program (especially in prepared foods), Publix has done little of either.
While a handful of stores in the Richmond market won’t alter its tremendous profitability or deter its growth plan in the market – it plans on opening new stores in the Carytown section of Richmond, on West Broad Street in Henrico County, on Three Chopt Road and on Charter Colony Parkway and the former Huguenot Shopping center, the latter two in Chesterfield County.
And Publix is also struggling in the Raleigh-Durham area where it currently operates six stores and has several other new supermarkets planned. Also coming to the Triad area of North Carolina is Wegmans with five planned stores. Currently, Richmond is the only market where the two regional chains compete.
Moreover, Publix is being handicapped by a key supply chain issue – its closest distribution center is located in Dacula, GA, hundreds of miles from its stores in Virginia and North Carolina. While a new 2 million square foot DC in the Greensboro area is planned, it won’t be ready for another three years. And when compared to Kroger and Walmart, Publix is also lagging in e-commerce and digital connectivity.
Publix certainly has the wherewithal to turn its Richmond problems around, the bigger question remains whether it’s willing to. After 18 months, it has shown a distinct unwillingness to adapt to the realities of the local market.
That’s a problem that won’t go away.