NATURE'S NORTHWEST:

MARYELLEN LO BOSCO

LAKE OSWEGO, Ore. -- Nature's Northwest here has opened a fresh chapter in food retailing with this month's formal launch of its new prototype.

The brainchild of president Stan Amy, the new 42,000-square-foot unit here reinvents the supermarket as a lifestyle store with a wide array of services -- from groceries to gourmet takeout, health care to haircuts, specialty foods to spa treatments.

Natural products are melded with more conventional supermarket fare in an unusual setting that offers shoppers everything from self care solutions to organic foods and a cooking school.

In an interview with SN here, Amy explained that Nature's is structured to address concerns that are near and dear to baby boomers: wellness and vitality, access to community and information and convenience and choice.

General Nutrition Centers, the natural products retailer based in Pittsburgh, owns Nature's Northwest and plans to roll out its new concept first on the West Coast and then nationally, according to Greg Miller, spokesman for GNC.

The targeted customers of Nature's Northwest, baby boomers, have come to terms with middle age and are once again reshaping the market -- in this instance, the supermarket.

"The boomers hit a market with such a mass of demand that it really allows for a wellspring of entrepreneurism and new formats to be developed. Following their demands and expectations, you are always at the change point," explained Amy.

GNC bought the six-unit Nature's Northwest chain from Amy a little more than two years ago, and the "production model," as Amy calls it, was in the making for that time. Amy already had created a "laboratory store" in Vancouver, Wash., where he successfully tested crossover and conventional groceries, a naturopathic pharmacy and a hair salon. Together, Amy and GNC expanded and refined the prototype.

Amy said the new concept has the potential to increase the 5% customer base of hard-core natural foods shoppers that chains like Whole Foods Market, Austin, Texas, and Wild Oats Community Markets, Boulder, Colo., depend on to include the 20% of the population that has been dubbed "the fence-sitters."

The fence-sitters Nature's is targeting want natural foods, said Amy, but they are more skeptical, more conservative and more convenience-oriented than the traditional natural-foods shopper. They like organic juice, but they also want to buy diet Coke. They will purchase natural remedies, but "they don't want to be told to take a hike for their antibiotics," he said.

"We consciously adopted a strategy to define ourselves not by what we refused to carry, but what we did a good job with," Amy continued. "It's a more inclusive approach."

Another unusual aspect of Nature's Northwest is its location -- in the more sparsely populated suburbs. The large natural food chains until now have put their stores in highly populated areas, for obvious reasons. Nonetheless, most people with a college education -- a salient characteristic of the natural-foods shopper -- live in the suburbs.

"We were very interested in designing a format that could reach that second tier of customers that we think is available out there," explained Amy.

To overcome the lack of volume that allows a supermarket to achieve economies of scale, Amy decided to offer an "edited selection" from several categories. These categories appeal to a particular population that is more highly educated and quality-conscious. Thus, the operator can achieve segment dominance rather than category dominance.

"We can fill more niches in a person's life, which gives us more ways to have a revenue base. By overlapping complementary niches that reinforce one another, we have developed a format that appeals to 20% of the population that has expressed an interest in these various niches, but are not actively engaged in all of these markets."

So while margins may be very low in the grocery department, where Nature's Northwest goes head-to-head with Fred Meyer, this area's dominant supermarket chain, they will be very high in the salon or the flower shop. In this way the store's niches create respectable profit margins.

Another advantage to the niche approach is that the store can draw from a variety of trade areas, which also drives up overall store margins. For example, Amy first tried a charcuterie at the laboratory store in Vancouver and was surprised to find that most people were interested in expensive smoked meats, not the smoked ham for $3.99 per pound. Eventually, the store became known as a destination for its charcuterie and attracted shoppers from all over southeast Washington.

Throughout the store, as well as department by department, it is clear that Amy and his team have done their homework. The store addresses core consumer needs through a carefully structured layering of products and services with programs and information.

Beginning in the produce department, customers can feast their eyes on a wide variety of organic, transitional organic and conventionally grown fruits and vegetables. While produce displays are not huge, they accentuate colors and shapes of the foods. SN counted more than 200 varieties of produce.

During SN's visit, many tomatoes were on "best buy," and shoppers could choose among black crimson, green zebra, marvel stripe and baby green grape and yellow pear tomatoes, to name a few. Many of the selections were organic.

While shopping for fruits and vegetables, consumers can view the multiple screens on the left wall, high above the section. Here a continually changing set of visual images is presented that tells the story of organic produce and the farmers who grow it. Here shoppers can learn that buying organic foods helps preserve rural communities and that organics taste great and protect water quality.

On the other side of produce, a mural behind the take-out cafe shows people cooking Italian food. In front of the mural is the wood-fired brick oven and closest to the customer is the food case with prepared dishes. Customers also can order from the pizza and sandwich menu.

The department theme is "Slow Food Cooked Fast." A huge billboard explains the Slow Food Movement, begun in Italy in 1989, as a revolt against the pace of modern life, which leaves people little time to cook and eat.

Further down, more food cases, a sushi bar and an "exotics" case give customers even more choices of prepared items, and deli personnel are ready to make dishes to order. Some of the exotics include roasted garlic heads, banana date chutney, garlic-herb bocconcini and apricot ketchup.

At the end of the Market Hall is the What's for Dinner? station, where a demonstration was going on during SN's visit. Behind the demonstrator are cases with components of that day's meal solution. Customers can choose other components, or prepared meals to go. To the left of the demonstrator is the kitchen, where cooking classes will be held. On a billboard near the demonstration station are a list of upcoming classes. The kitchen has the feel of an enclosed, semi-private space, although it is open on three sides. During the day, the kitchen also serves as a dining area for customers.

The self-care center begins with the body shop, and once again, a sign helps customers negotiate the area. The sign says: "Selfcare is about helping people live well by becoming effective partners with their healthcare providers; making healthy lifestyle choices to prevent illness; and integrating the best of conventional and alternative medicine in treating illness."

This theme is executed throughout, in sections for nutritional supplements; body, bath and kitchen products; cosmetics; vitamins and herbs and so forth. One merchandising unit devoted solely to aromatherapy displays bath and body products and essential oils. Another unit sells natural hair color. One section is devoted to "green" supplements, protein and fiber products. Two other areas are devoted to herbal and homeopathic medicines.

Vitamins and supplements are identified in clear categories: for example, B vitamins, multivitamins and minerals; men's supplements and women's supplements.

Also found in this area of the store is a cough and cold remedy section with allopathic and naturopathic items -- aspirin, Tylenol, Advil, echinacea, zinc lozenges and so forth. Everyday health and beauty care items can be purchased here, from razors to condoms.

A wealth of information is available for the curious customer -- books for sale and a kiosk with access to GNC's nutritional encyclopedia and Health Notes On-Line. Two pharmacies stand side by side, one staffed by a naturopathic physician in the role of naturopathic pharmacist, and the other by two traditionally trained pharmacists who know something about homeopathy and naturopathic medicine.

The self-care center, said Amy, is designed to give consumers the best of both worlds. For example, parents of a child with an ear infection can get antibiotics here and pick up herbal echinacea, which is said to have immune-strengthening properties. They can talk about chronic ear infections with the naturopathic pharmacist, who can perhaps recommend some dietary changes and homeopathic remedies.

The grocery section is perhaps the best example of total integration of natural and mainstream outlooks at the Nature's store. A tea section that merchandises herbal, medicinal and black teas along with tea accoutrements is used to segue into the grocery aisles. Here the selection seems almost equally mainstream and alternative; products from both worlds stand side by side.

Nature's provides more natural, organic and gourmet selections in categories where upscale shoppers seldom buy traditional offerings -- oil, salsa, pasta and sauces and rice mixes -- while providing mainstream items that almost everyone looks for -- bleach, detergent and dog food, for example.

And a good selection is available in many other categories. The store carries Chef Boyardee meals and Dinty Moore canned meats, along with Eden organic beans and Millina's organic meals for kids. A variety of upscale, organic and natural chips and dips is available, but so are Wow! chips, made with olestra, and Ruffles, Lay's and Dorito chips.

Grocery includes a bulk aisle with pet supplies, and the usual assortment of gravity and scoop bins dispensing herbs and spices; pasta, rices and other grains; nuts, trail mixes and grain mixes and beans. Liquid bulk supplies of molasses, oils, soy sauce and tamari, vanilla extract and honey also are available. There are two nut grinders so shoppers can make their own almond and peanut butter.

A wine section in the grocery area, complete with a temperature-controlled wine cellar where additional SKUs are stored, has an impressive assortment. A wine kiosk is located here, which gives shoppers access to Nature's database of wines. Customers can search by country or type of wine, and have access to Wine Spectator reviews.

When SN visited this Nature's store, it had been open for less than three weeks and had done no significant advertising, but it already was exceeding projections. GNC initially expected the store to be a $20 million to $25 million operation by the second year.

"But we've started out much faster than we expected, and all bets are off," Amy said, adding it was possible the store might be profitable the first year.

Miller of GNC told SN it was not unrealistic to expect the chain to open 10 additional stores a year, until it has about 100 units of the new format in selected markets. "There's an opportunity in this category to create a Wal-Mart strategy," noted Amy, "where you start with secondary markets and build a huge base."

The Nature's store had a soft opening at the end of August, as reported in SN, and three fairs were official celebrations: the first on Sept. 12, focusing on specialty foods and one on Sept. 19, highlighting the spa and salon; the last one, at the end of this week, will spotlight nutritional products and supplements.

The unit here opens into a Market Hall, crowned with a triangular cathedral ceiling.

Skylights buttressed with massive wooden beams let in a vast amount of light and create an overall effect of warmth, richness and abundance.

In addition to light, the Market Hall generates a great deal of noise and activity; the produce department is to the left and the food-service areas are to the right. During SN's visit, a table was set up near the door to sign customers up for the Partnership Program, Nature's version of the frequent-shopper card.

From the vantage point of the Market Hall, the second-floor mezzanine is visible as a bridge and also serves as a "clock tower," giving shoppers a point of reference seldom available in the wide-open spaces of grocery stores. According to Amy, the store was designed to create what architectural planners call a "third space," where people come together in an unstructured community that is neither work nor home, but that still generates a sense of connection.

Past the Market Hall and bakery, shoppers encounter the flower shop and the bath and body shop. To the left is a broad spiral staircase. If they continue through the body shop, they reach the wellness center and pharmacies. If they climb the staircase, they will find a landing where they can pause at the Hear Music station and listen to CDs.

Or they can continue up a few more steps. To the left is the spa and beauty salon. To the right is a resource center, with a library of books for perusal or sale, two computer stations and more seating for eating, studying or simply contemplating.

The floors here are honey-colored wood, as they are in many areas of the store. The bookshelves, like many of the grocery shelves and other merchandising units, also are, which helps create a warm but upscale ambience.

Back on the main floor, the pharmacy gives way to the grocery department. But if shoppers continue along the periphery, past the water and beverage department, they will find the meat, fish and poultry departments; the charcuterie, or smoked meat department, and the fresh cheese department, and the dairy and frozen food sections. By the time customers have moved through what feels like a spiral floor plan, they finally encounter the checkout.