D'Agostino's: Clear of Big Boxes, but Facing Challenges

David Merrefield VP, Editorial Director [email protected]

How good would it be to operate a small regional chain of supermarkets in a highly urbanized market — the very type of market that provides insulation from supercenters and other surging store formats that nettle most supermarket operators?

It wouldn't be all bad, as is made clear in this week's main news feature about D'Agostino's, the quintessential urban operator. D'Agostino's was founded 75 years ago in New York City, specifically the Upper East Side. See Page 1.

To this day, D'Agostino's chief presence remains in Manhattan, where it operates 16 stores. D'Agostino's also has a store in Brooklyn and three in suburban Westchester County, for a total of 20. Throughout that territory, D'Agostino's is protected, for the most part, from big-box operators and so faces competition that looks more like itself than, say, a deep discounter. To be sure, there is unconventional competition close by. In Manhattan, there are Whole Foods outlets and a Trader Joe's. (For a little more on Whole Foods in Manhattan, see “Better Yet,” Page 55. Incidentally, a fourth Whole Foods opens in Manhattan this week.) Other manifestations of the gourmet-oriented store include Balducci's, Citarella, Gourmet Garage and Fairway. In addition to those, Costco has a presence in Queens and Target is on Staten Island and in the Bronx. And virtually every discounter has a presence in close-in suburbs. Yet, in a city where many shoppers are without an automobile and tend to confine their shopping trips to the blocks near where they live, the insulation factor is real.

Nonetheless, as this week's news feature also makes clear, D'Agostino's is not without challenges. The most immediate one has to do with its fellow conventional stores, which are legion. They include Pathmark, Gristede's, Associated, C-Town and Food Emporium, to cite a few.

All food chains face daunting circumstances operating in an urban environment. Consider distribution logistics alone: Typically, supermarkets in the city accept deliveries early in the morning. Product is stacked on the sidewalk in front of the stores, then brought in through a side door or through the main entrance.

Supermarkets also must pack a lot of product and services into a small space, and into irregular space too. One D'Agostino's store near Supermarket News' office has the lobby of an apartment building thrust into its center. That D'Agostino's has two entranceways, on either side of the lobby. A corridor in the back of the store unites the two halves. The only operator in the city that doesn't face such situations is the delivery service FreshDirect, which, after all, has no store.

Indeed, the real challenge facing D'Agostino's today is to establish a point of differentiation among the plethora of choices, including delivery services. One tack available to D'Agostino's is to improve current service levels, a move that shouldn't be too difficult, since it has been a high-service provider traditionally. It may also need to remind shoppers that it has long offered home delivery, as do many city supermarkets, and couple that with a claim of immediacy: Unlike FreshDirect, if anything is amiss about an order, shoppers can go to their nearby D'Agostino's to obtain a correction. D'Agostino's is also evaluating its Web presence.

Let's hope D'Agostino's continues to succeed for another 75 years.