INROADS IN THE INNER CITY

ELLIOT ZWIEBACH

PHILADELPHIA -- One customer likened the store to "a Taj Mahal in the middle of Beirut."

He was referring to one of the three Brown's Thriftways here, all located in rundown, underserved inner-city neighborhoods.

Brown's stores are part of the 61-member Thriftway/Shop and Bag advertising group sponsored by the Oaks, Pa., division of Fleming Cos., Oklahoma City. All three appear to be succeeding in their urban niche, despite the blighted conditions and poverty that surround them.

According to owner Steve Brown, what's outside the stores doesn't affect what goes on inside.

"I don't see the urban blight as a negative but rather as an opportunity to improve," he told SN.

"Inner-city customers are more appreciative of their local supermarket than people are in the suburbs, and they respect you for what you're doing. And it's very rewarding to put people to work that haven't had the opportunity to work. It makes you feel good to do business in those areas, and I enjoy coming to work every day.

"Plus, I was born and raised in similar areas, so it comes naturally to me to operate stores in those areas."

Rather than reflecting the poverty of the neighborhoods, Brown's stores take a more upscale approach.

His two stores that opened last year offer food courts with sit-down cafes and menus catering to each location's ethnic mix -- Southern specialties like sweet-potato pie, corn bread, grits, thick-slab bacon and fried codfish at the store with a heavy African-American clientele; and rice with chopped pork, gandules (pigeon peas), fried plantains and boiled green bananas for Puerto Rican customers at the other location.

All three stores feature a wide produce assortment, including root vegetables and tropical fruits, service meats, natural and organic foods, store-within-a-store health and beauty care departments, and financial-service centers, and the two newer ones also have scratch bakeries with professional pastry chefs plus service seafood and delicatessen counters.

"Shoppers in inner-city neighborhoods deserve as nice a store as those in the suburbs because their money is just as green," Brown said. "I wanted the stores to be places customers would be proud to shop in and to show to their friends.

"We could certainly get away with less, but if you give shoppers something they can be proud of, they'll be more loyal. People will respect and appreciate the store and not vandalize it."

Brown acknowledged his expansion within the inner city has been expedited by help from various agencies that offer incentives to operators to move into such understored neighborhoods.

"We got tax abatements on the real estate at the last two stores, which reduces our tax burden by 40% to 50% for the first three years. And we've worked with the Private Industry Council of Philadelphia to help us train employees under a welfare-to-work program, which entitles us to get back 50% of the wages paid to employees who were previously on welfare or public assistance.

"Hiring people from the neighborhood has really complemented our business, and giving those people a chance really shows in their performance because they're proud to have the opportunity to work in a store that's catering to them and their neighbors. And we believe we treat them well. We're a good, fair, socially responsible company that cares about its people and its customers."

Brown said he's also gotten financial help from the Local Initiatives Support Corp., which works with municipal, state and federal agencies and trusts to help retailers open inner-city stores, and, at one location, from American Street Financial Services, which provides funding to groups developing stores in empowerment zones.

"We want to continue to operate stores in underserved areas as long as we have support from non-profit or strong community-backed organizations," Brown told SN.

He also noted that Fleming has supplied him with considerable assistance.

When he opened his first store in University City, "Fleming helped me structure the deal to acquire the store," Brown recalled.

A couple of years later, the wholesaler was overseeing construction of another store, "but when another retailer backed out of the deal, Fleming asked if I was interested," Brown said. Fleming also brought Brown into the deal at his third location when another operator dropped out, he added.

Fleming has helped him get some of the specialty items he needs, Brown said. "Fleming's specialty foods division has brought in a lot of products for us. And even when they don't source everything, if a supplier won't sell directly to us, very often he'll sell to Fleming.

"And if I need a certain item and can't handle a full truckload, they help find other customers to buy the remaining product."

Patrick Trimble, general manager of Fleming's Oaks division, said Brown has no trouble connecting with consumers. "Steve respects his customers in a way many inner-city operators don't, because he doesn't take anything for granted, and they in turn trust him.

"And he treats his employees the same way. He talks to them, and he takes the time to train them, and as a result, while most retailers are having trouble finding employees, Steve doesn't have any problems at all in that respect."

According to Trimble, Brown is helping Fleming keep a strong foothold in the market here "at a time the chains are trying to come back into the city. So we look at Steve Brown as the kind of operator who can open one new store a year for us and help us protect what we have."

Brown told SN his interest in serving the inner city grew out of his work with his father, who operated several inner-city stores in southern New Jersey.

When Brown went into business for himself, he said he looked at all the megastores in his area and at Ahold's ongoing expansion, "and I felt I needed a niche to grow my business so I could avoid those big, big companies -- and the inner city was an underserved area in which I could grow my business," Brown explained.

He said his stores are the only conventional supermarkets in each of the areas in which they operate. One unit is 2.5 miles away from its nearest competitor, a Pathmark store; another location is about 4 miles from a Pathmark and a local independent; and the third store competes with the same Pathmark 2 miles away, plus several bodegas.

"But the bodegas are very expensive, and we don't even look at their pricing, " Brown said. "Their edge is convenience and the product mix they carry, so we look at their mix and then add many of those items.

"To operate where we do, we must know and understand our customers, and we have to listen to our employees. We always put in the items people request. We're constantly trying new items, new cuts of meat. And we're quick to change if we're doing something wrong."

After operating a ShopRite store in south Philadelphia in the late 1980s and then working for Melmarkets, Garden City, Long Island, N.Y., Brown was approached by Fleming in 1994 to operate a store in Pennsauken, N.J., whose owner was in bankruptcy. Brown said he turned that store around and sold it last year.

Brown opened the first of his three current Thriftways in 1996 in the University City section here, just three blocks from the University of Pennsylvania. He said the 35,000-square-foot store accounts for weekly volume of $345,000, or nearly $18 million a year.

Approximately 75% of its customers are African-American, while another 10% come from the student body and faculty at Penn.

Although the store has bars on its exterior windows, the inside has a more inviting look, Brown said. He said the bars will be eliminated when the store is remodeled at the end of the year.

The second Brown's Thriftway, which opened last March, is located at Fifth and Berks streets in north Philadelphia. The 40,000-square-foot store caters to a customer base 85% Hispanic and 15% African-American and features more product pictures on the walls "because people don't always speak or read English."

In less than a year of operation, the store's volume is about $280,000 a week, "which is less than we expected," Brown said.

The newest Brown's Thriftway opened in mid-November in the Logan section of north Philadelphia -- the first new store in the area in 30 years. According to Brown, the store did $400,000 its first week and is averaging $160,000 a week since, although it is projected to do $300,000 to $325,000 a week eventually.

Brown said he was selected to open that store by Triumph Baptist Church, which owns the property.

The three stores feature perishables up front "because that's the most important category to inner-city shoppers," Brown said.

When customers enter either of the two newer stores, they find themselves in a wide power aisle that occupies about 30% of the store's floor space. On one side is a rounded counter that includes the in-store cafe, hot foods, foods to go, delicatessen and seafood; on the opposite side is a bakery, with produce in between, and a service meat counter farther back.

Near the back of the Fifth and Berks store, which caters to a largely Hispanic clientele, is a flexible display that uses pallets to extend product assortments beyond the gondolas early each month and that is shrunk back as the month progresses, Brown said. Key items in the section include sugar, flour, corn-muffin mix, tomato sauce, malta (a malted molasses beverage), Spanish rice in 20-pound bags and Spanish beans in bulk.

He said he plans to add pharmacies at all three locations, with the first scheduled to open at the Logan store in April. "We had trouble leasing it out, and I'm not sure it will make money, but we committed to doing it ourselves," he said.

The pharmacy will be located in a 400-square-foot area in the middle of the store, a section that was designed to be a pharmacy when the store opened. "We'll add pharmacies at the other stores once we see how we do with the first one," Brown said.

All three stores offer health and beauty care items in a store-within-a-store -- an attempt to keep the products secure while offering consumers a self-contained section, Brown said.

Operating in inner-city neighborhoods makes security a big concern, Brown acknowledged. However, the company has softened its approach, he said.

"We spend $2,500 to $3,000 a week at every location on security. Originally, we gave our people guns, night sticks and handcuffs dressed them in commando pants, and we told them to be tough, to show the community we won't tolerate theft.

"But now we've taken away the guns and hardware and softened their look, and we refer to them as 'safety ambassadors."'

The change came in response to customer complaints, he said. "We realized their attitude made some situations worse, particularly with problem customers, who were more apt to fight and be difficult when challenged," Brown said.

Now the security force greets customers, hands out circulars and helps customers to their cars, "and the problem people have been more cooperative because we're treating them fairly and professionally. So our security people really are safety ambassadors because they create a safer shopping experience," he said.