Despite myriad COVID-19 -related challenges, Los Angeles area grocery stores have fared well from a sales perspective since the pandemic broke out.
Meanwhile, expansion of major chains has been minimal over the past year, and online ordering continues to gather steam.
Dick Spezzano, president of Monrovia, Calif.-based Spezzano Consulting Services, said that year-over-year sales increases of 22% to 25% have not been uncommon in the supermarket industry this spring as consumers stocked up on groceries and other necessities during the pandemic.
“The retails in Los Angeles from conventional chains are 30% above last year’s overall sales,” he said, but he added that he’s not sure why Los Angeles stores saw such a heavy spike.
Except for items like carrots, oranges, potatoes and onions, fresh produce sales were down during the early days of the shelter-in-place mandates, “because they’re not very storable,” he said.
Frozen fruits and vegetables, however, experienced sales increases.
Fresh sales seem to have bounced back, he said.
The winner in the produce department has been the vegetable category.
Prior to coronavirus, fruits outsold vegetables, he said.
“Now vegetables are outselling fruit by a wide margin,” Spezzano said, even with new crops of cherries, melons and tree fruit coming on.
In Southern California, sales of potatoes, onions, carrots and mushrooms are up 30% to 40%, he said.
Online ordering, a practice that was gaining momentum even before the coronavirus outbreak, made significant gains in the Los Angeles area during the pandemic.
While people were confined to their homes, they were ordering online and having groceries delivered, Spezzano said, “or they were picking up at store level without getting out of their cars.”
“Walmart has done a wonderful job at that,” he said, with 10 or 12 bays where associates bring groceries out to consumers.
About 10% of grocery shopping is done online, he estimated.
“That’s a significant impact.”
Spezzano expects that trend to continue after the pandemic.
Several chains rely on Instacart for their deliveries, Vons has its own delivery service, and some consumers order from Amazon.
Instacart, though generally effective, can be expensive for retailers, he said.
“The more online you do with Instacart, the more erosion of gross margin you have.”
Produce is one of the bigger losers in the online option, he said.
“Customers are drawn to merchandising,” he said, and a store can’t attract a shopper’s attention with a large display online.
Nonetheless, he said the online option has become a must in today’s retail environment.
Retail expansion this past year has not been rampant in Southern California, “which always has been known to be overstored,” Spezzano said.
The independent segment was a bit of an exception, though, as operators took advantage of cheap real estate — stores closed by the major chains — and significant rent discounts as landlords moved to fill vacancies with large stores that attract customers to smaller businesses in their strip malls, he said.
Aldi Inc. has added a few stores in California, Spezzano said, and Stater Bros., a San Bernardino-based chain of 170 stores, opened its latest location in Ladera Ranch, about 50 miles south of Los Angeles, on June 3.
The new location features “a garden-fresh produce department” with more than 1,000 items, a large selection of organic items and a prominently displayed cutting station where fresh fruit is prepared daily.
The cut-fruit trend actually was launched several years ago, when Albertsons started preparing fruit in a back room and merchandised it in an 8-foot section on the sales floor, he said.
Stater Bros. adopted the idea later but started cutting fruit on the sales floor.
“They found a dramatic difference in sales, so they put the cut-fruit section in all the remodels on the sales floor,” Spezzano said.
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