CSA talks with Jeff Edison: What's growing in grocery?

Supermarket growth fell last year, but that’s deceiving because it grew so immensely the year before. For instance, square footage grew 9% in Texas in 2017, against a 16% rise in 2016.

In California, Virginia, and Florida, grocery square footage actually rose last year. Grocery-anchored centers are the gifts that keep on giving to investors and in-line tenants alike. No one knows that better than Jeff Edison, whose Phillips Edison & Co. runs 300-plus neighborhood centers.

Chain Store Age caught up with Jeff recently to find out what’s growing in grocery.

Name two or three tenants or formats you’re seeing across your portfolio that you didn’t see five years ago.

In recent years, we’ve seen growth in a number of formats — value-oriented concepts, specialty grocers, restaurants, fitness, and entertainment brands. People want the convenience of taking care of all their daily needs in the same center. Specifically, our centers have seen a shift in fitness retail, which has trended toward personal training and smaller specialty studios. Concepts like CycleBar, CorePower Yoga, Pure Barre, and Orangetheory are looking to be near the larger studios and gyms in order to appeal to people looking for a complementary workout.

A new truism blooming in retail real estate these days is that you’ve got to draw customers with experiences, not products. Is that the case in necessity-based, grocery-anchored centers as well?

Grocery-anchored shopping centers are inherently experience-based, if not in the flashy way we’ve seen gripping the retail sector in the past couple of years. What makes grocery-anchored retail such a sound investment is the fact that many of the shops in our centers offer goods and services that are harder — if not impossible — to access online.

Large cities have seen a rise in online grocery shopping, but for suburban and rural areas, grocery-focused centers still anchor their towns. Amazon still hasn’t come up with a way to duplicate the feeling of getting a manicure or having your hair washed at the salon — these are experiences that are unique to the physical world. Grouping these concepts together into one shopping center creates a nucleus for the local population — a convenient one-stop shop where they can do everything that needs to get done and have a little fun in the process.

What can retailers that aren’t necessity-based do to survive the retail revolution?

The product is no longer at the forefront of the retail experience, and experience really has to be the name of the game. It’s about recognizing the fact that people no longer want or need to walk into a store to look at, try on, and purchase a product most of the time. Knowing that, it’s crucial for retailers to rethink the entire concept of a bricks-and-mortar location and center their stores on an experience — things that make shopping in the real world more exciting and less of an inconvenience when compared to shopping online.

What can shopping center owners and operators do to maintain consistent foot traffic?

Listen to their consumer bases and gain a deep understanding of their communities. If you pay close attention to the needs of the community, you can introduce retailers that meet those needs. We coined a term at Phillips Edison: “Locally Smart.” It’s a simple phrase that cuts to the heart of our investment and management strategy, as well as how we examine our merchandising mix at the local level. The goal is not only to serve, but to be a part of the communities in which you operate.

What does the ideal tenant mix look like, in your view?

If there are only one or two stores in your shopping center worth going to, people will more often than not forego those locations in favor of centers that allow them to accomplish more of their objectives for the day. With that in mind, we look to bring in a mix of tenants that meet as many day-to-day needs as possible. In addition to a top-ranked grocery store, this mix can include food and beverage operators, fitness locations, medical offices, discount stores, hair salons, nail salons, and entertainment options. Our ideal tenant mix would seek to hit most, if not all, of these categories.