Can hard-battling supermarkets significantly hurt supercenter results and even lead to a reduction in supercenter expansion plans? That may be the scenario in the central New York region, according to Ron Hodge, senior vice president of operations at Hannaford Bros., Scarborough, Maine. Based in Albany, N.Y., Hodge is responsible for all Hannaford operations in New York, Vermont, New Hampshire and Massachusetts.
In central New York, where both Wal-Mart and Kmart are fairly new supercenter participants, neither operator seems to be doing as well as they had expected, Hodge said.
Assuming that the weekly break-even point for a Super Kmart is about $1 million in total store sales, he estimated that a Kmart supercenter in Amsterdam, N.Y., is running at 50% of that figure after eight months in operation, and a supercenter in Glens Falls, N.Y., is running at 75% after seven months.
A Wal-Mart supercenter that opened in Rome, N.Y., last November "appeared to open with very high volume" but "it seems to have leveled off below their expectations," he said.
Hodge made his remarks at the executive forum of the New York State Food Merchants Association held recently in New York City.Wal-Mart and Kmart executives could not be reached for comment.
Several factors have contributed to these "dismal" performances, Hodge said, including poor site location and inconsistent execution. The aggressive stances taken by both Hannaford and its major competitor, Price Chopper Supermarkets, Schenectady, N.Y., played a major part, he said.
"I think the major reason [for the supercenters' low volume] has been the strong preparation [from supermarkets]. Price Chopper has chosen to upgrade facilities. Both of us are building new stores in the marketplace and none of us has backed away from a price fight.
"We significantly lowered margins in the Amsterdam market long before Kmart entered the marketplace and we did that to a lesser degree in Glens Falls. And in both of those cases, Kmart entered the marketplace at higher gross margin levels than we had established before they entered. This pre-emptive action probably blunted the impact of their openings.
"Kmart had announced three additional sites in the capital district but there is no activity on them and we're hearing that they've backed away from at least two of them," he said.