Taking Stock

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Wegmans Still Rolling With New Downsized Prototype, Expansion Plans to Enter Richmond With Two New Units 

When you’re one of the few supermarket operators in the country to have achieved significant growth over the past 10 years (both through organic expansion and identical stores sales), there are a lot of eyeballs on your performance. That’s the case at Wegmans and the Rochester, NY-based uber-grocer has seldom failed to perform at a high level. Two events that occurred in the past 30 days give reason to believe the regional chain’s high marks will continue. Late last month, the retailer opened its second Boston area store. And for the first time since the 1990s, the new Wegmans wasn’t a 130,000-140,000 mega market.

On April 24, the ribbon was cut on an 80,000 square foot “fresh” model in Chestnut Hill, MA, a tony suburb about 11 miles from the Boston city line. Wegmans didn’t intentionally seek out a smaller footprint, but the quality of the location made the site too hard to pass up. It took more than a year for the retail scientists in Rochester to develop a model that would resemble the large Wegmans units, but to quote one Boston based food broker, “It’s pretty much all in there.” Reports from several vendors indicate the store has easily surpassed the million dollar a week mark during its first three weeks of business.

And having visited the new unit in early May, I can attest that it really is “all in there.” Other than a few downsized departments, the store still creates the perception that you’re in a 100,000+ square foot store, with the perishables areas (“gallery of gross profit’) seemingly intact. If Wegmans can perfect this new format, its ability to build stores in affluent urban and suburban locations (where real estate availability and costs often make it very difficult to expand) would be significantly enhanced. Can you imagine the impact of a Wegmans in Center City Philadelphia? Or Brooklyn? Seemingly the only limitation would be its internal ability to construct stores at a rate faster than its current pace of two or three per year.

The other major news at the ultra-high volume retailer is the regional chain’s upcoming entry into the Richmond, VA market. While it may have been surprising to some that Wegmans would prioritize Richmond over seemingly superior “on paper” opportunities in the Boston or Connecticut areas, the reality is that the family-owned retailer has enjoyed tremendous success in the Old Dominion, starting with its initial Virginia entry in Sterling in 2004. Not only does the state offer many great demographic opportunities in which the large-scale retailer can flourish, it also allows Wegmans to sell and merchandise its strong beer and wine program. Currently Wegmans operates six stores in Virginia with two others – Alexandria and Charlottesville (both great demographic fits despite being overstored) – slated to open in the next two years.

The Richmond opportunity is also a strong one for the company with both projected stores located in two of the capital region’s most affluent areas – Short Pump and in a new shopping center off of Midlothian Turnpike (11 miles from the Short Pump unit). There is already a moderate level of familiarity with the upscale grocer from transplants who have shopped at Wegmans previously or from making the 60 mile “destination” trip to its unit in Fredericksburg. However, there will be a fairly significant wait until the stores open – perhaps until late 2016 or 2017 – as the retailer awaits certain zoning approvals and has eight other new stores currently in its pipeline.

It’s truly been an incredible run for the Wegmans team. In the not too distant future it will have to deal with transitional issues affecting family and several senior associates. But Wegmans has been working hard, too, on filling that pipeline from within, and the future looks bright. The equation that Wegmans brings to the table remains very impressive: huge stores, high marks in all perishable areas, strong customer service and the “it” factor – an intangible perception that’s as strong as any merchant across the full retail spectrum.

Just ask the competition.