St. Louis: Value in focus in vie for Gateway City shoppers

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St. Louis: Value in focus in vie for Gateway City shoppers

By John Karolefski - 04/25/2018
A declining population in the St. Louis metro area is exacerbating a competitive retail marketplace dominated by Schnuck Markets, Walmart and Walgreens. Meanwhile, no-frills discount chain Aldi is ramping up the pressure on traditional grocery retailers. Lidl, a similar German-owned chain, is rumored to be opening stores in the area soon.

Analysts said a declining population could mean everything from price wars to declining sales potential to flat growth, which may lead to operational changes and sometimes even store closures. Certainly, St. Louis is not a robust market for building or remodeling stores — unless the retailer is Aldi.

The German discount chain is renovating dozens of its stores in the St. Louis metro area. About $49 million is being spent to spruce up stores and become more of a retail factor through a nationwide remodeling program.

Since the discount chain’s calling card is lower prices, its stepped-up presence will apply considerable pressure on traditional grocers Schnucks and Dierbergs Markets. The former controls a 28.6% market share, while Dierbergs stands at 10.4%, according to ARM Insight. Walmart has a significant share with 27.4%.

And then there is Amazon.

The dot-com giant — always a market disruptor — will open its first fulfillment center in St. Peters, Mo., in May 2019. The warehouse’s legendary robotic technology will efficiently give Amazon Prime customers in the St. Louis area next-day, and perhaps even same-day, delivery of thousands of products.

“Stores that are most vulnerable to online competition will likely feel more pressure and may be the first retailers squeezed out of the market,” said Douglas Munson, principal at MTN Retail Advisors, said. “Declining population will eliminate current struggling chains and force the surviving chains to reconcile their existing store network.”

Lari Harding, vice president of product strategy and marketing at Inmar, doesn’t believe that a declining population and decreased foot traffic will automatically result in a store closure. Changing marketing conditions could first lead to other less dramatic responses, such as limiting labor hours.

“If sales do dip enough to make closing a store a serious consideration, it will not be a quick decision,” Harding said. “Retailers will consider several important factors, including real estate and unionized stores, as part of the decision-making process. For real estate, do they rent or own the land? What are the conditions of the lease? When is the lease up? In the case of unionized stores, closing is further complicated by the likelihood that the retailer may have to offer senior, higher-paid employees jobs at another store — potentially shifting labor costs to other stores that may be facing similar challenges.”

In the drug channel, independent pharmacy’s market share is almost gone. Walgreens has more than an 80% share of the drug store business in St. Louis, while CVS has a 14% share.

Inmar’s Harding urges supermarkets to open in-store pharmacies to give the drug chains some competition. Inmar’s 2018 Shopper Behavior Study found that more than 44% of shoppers rate the ability to shop for groceries at the same location as “important” or “very important” in selecting a pharmacy to fill their prescriptions.

Schnucks operates pharmacies in two dozen stores in St. Louis. Dierbergs Markets operates pharmacies in its half-dozen urban stores.

“These retailers, responding to the growth of retiring baby boomers, will have to execute an assortment change that recognizes and enables the shopping habits and preferences of this group,” Harding said. “ “This change represents an opportunity for retailers to drive additional sales in a number of categories, particularly in health care and personal care where retailers can elevate OTC medications and beauty aids.”