BIG GAMBLE

Lucia Moses

While its phenomenal growth has cooled, Las Vegas is still as hot as the desert it's built on.

The city attracts some 5,000 new residents a month, and it's not for the slots. The booming casino town still has plentiful jobs and relatively low housing costs. Many of the newcomers are retirees from California, lured by the area's low taxes and leisure activities.

Perhaps owing to the city's relative newness, chain retailers have dominated the market; the top three accounted for 67% of grocery sales in 2004, according to Metro Market Studies, Tucson, Ariz.

The leading chains haven't been feeling so lucky lately, though, with value operators like Wal-Mart Stores scooping up share while specialty retailers like Whole Foods Market, Wild Oats Marketplace and Trader Joe's are testing the market. A host of independents serve the area's burgeoning Asian and Hispanic residents.

Adding to the chains' vulnerability, an April 2003 study by retail research firm DSR Marketing Systems, Deerfield, Ill., found chains overpriced vs. Wal-Mart. In a city where 30% of the workforce is in hospitality and other service jobs, price is paramount.

Remodeling and new-store activity has been brisk, although rising property values and resident opposition have lately tamped down interest in new sites, according to one broker. The chains also are burnishing their price image, in large part by trying to get competitive on everyday Center Store items, and heavily promoting high-frequency items like soft drinks, bottled water, snacks and cereal. Store visits by SN earlier this month offered a window into the chains' strategies.

Residents of Spring Valley, the area's first master-planned community, with a mix of modest and luxury homes, have been benefiting from a price war between the No. 1 and 2 chain players.

In an Albertsons at the corner of West Tropicana Avenue and Jones Boulevard, the "Check the Price" campaign the chain recently took nationwide was in effect. Shelf tags invited shoppers to compare prices on frequently bought Center Store items with No. 2 player Smith's Food & Drug, a Kroger banner.

The store had a "10 for $10 Mix or Match" section, the chain's year-old answer to the growing popularity of dollar formats. Marked by hanging signs and floor decals, the aisle was chockablock with general merchandise and common grocery items like six-packs of Crystal Geyser bottled water and Bugle snacks. That week's circular carried the 10-for-$10 theme.

Elsewhere, aisles burst with "Xtreme Value" and "Everyday Low Price" signs, reinforcing the deals theme. A pallet display near the dairy case was filled with $1 and $2 toys and sundry impulse items.

In a corner given over to wine and liquor, which are legally sold in supermarkets in Nevada, a large sign hung from the ceiling listing club card savings on 11 items. A 10%-off sale on mixed half-cases was in effect.

Underscoring the value message, another Albertsons three miles away had an aisle dedicated to big-pack items, as is common here. The "Max Pak" aisle housed shelves of bottled water, in gallon jugs and 24-packs. More 24-packs were stacked on pallets, as were 96-ounce jugs of Clorox bleach and 100-ounce liquid Tide. Opposite the water ran freezer doors full of club-sized bags of store-brand prepared chicken and burgers.

At the Smith's 24 Hour Savings across from the Albertsons on Tropicana and Jones, lobby signs called shoppers' attention to yellow tags indicating lower prices on commonly purchased items. "Right store. Right price" and "price cuts" shelf signs marked lower prices throughout the Center Store aisles.

A large lobby display featured pallets of 12-can packs of Big K private-label soft drinks promoted at a price of 6 for $10, along with 24-packs of store-brand bottled water, 2 for $7.

Value packs also played big at Smith's. A sign reading "Lowest prices guaranteed" ran atop a row of freezer doors at the rear of the store. The freezers were filled with family packs of prepared meals, vegetables, ice cream and the like. Family packs also led that week's ad, which was headlined by "club store pricing" on "super value packs" of meat.

How did the two retailers compare on price? On at least two high-volume items that Albertsons marked "Compare with Smith's," SN found shoppers could do slightly better at the competitor. Albertsons sold an eight-roll pack of private-label toilet paper for $6.99, and eight rolls of Bounty went for $7.45. Smith's priced the Bounty the same, although frequent shopper card holders paid $5.99. Two four-roll packs of Smith's private-label toilet paper totaled $5.58 ($2.79 each).

Kroger caters to the more price-conscious here via its warehouse-style Food 4 Less, billed as "The True Low Price Leader Everyday." At a store located on the western fringe of the city, shoppers are greeted with a wall of deals on items like national-brand soft drinks and breakfast cereal when they enter the store. Other fast-moving items are stacked on pallets.

Large pallet and endcap displays, "compare and save" signs and multiples sales further emphasize the price image. Pallets of Center Store staples were common throughout the store when SN visited, topped with signs listing the difference between Food 4 Less' and an unidentified supermarket's price. On some displays, green-tag specials marked further reduced items.

Thin-sliced and seasoned meat, family-sized cans of menudo stew and hominy, and multiple displays of tortillas evidenced the store's efforts to market to the area's large Hispanic population.

Elsewhere, chains are putting their money on differentiation, pumping up their selections of specialty Center Store and quality perishable items. A new Smith's in the upscale planned community of Summerlin features a six-aisle, Kosher store-within-a-store with grocery, dairy, deli, frozen and service meat; a large natural/organic department; and aisle bumpouts for specialty foods.

Safeway, which operates No. 3 player Vons here, has been heavily investing in its perishables departments. At an older Vons on the edge of North Las Vegas, a blue-collar, industrial area, the circular and in-store signs called attention to its signature meat, quality produce, elegant pastries and artisan bread. Beyond a new 5% savings program for club card members announced on the circular, promotional activity was relatively muted the day of SN's visit, with just a few items marked 10 for $10.

Value packs were plentiful, though. One aisle length was devoted to large-sized grocery and household products: 35- and 24-packs of bottled water, sacks of rice and beans, 300-ounce bottles of Tide and 144-diaper packs of Pampers.

However, the odds just got tougher for the chains here. Wal-Mart opened four Neighborhood Markets on Jan. 26 -- on top of seven area supercenters and five regular discount stores. Combining food, general merchandise and pharmacy in a store with an average size of 40,000 square feet, the food-focused marts slap Wal-Mart's famed everyday-low-price approach on a conventional supermarket format.

Price, not variety, is the card Wal-Mart plays. At one of the stores, endcaps featured 2-liter Sam's Choice private-label soda for 58 cents and 96-cent boxed meals. Signs reinforced the company's well-honed value message: "Always Low Prices: Always Wal-Mart." For price and convenience, there were club-sized frozens like store-brand chicken pieces and 6-pound boxes of lasagna, and pails of ice cream. As for the paper products, Wal-Mart was the price leader, charging $6.97 for eight rolls of Bounty and $5.37 for a 12-roll pack of its own White Cloud bath tissue.

Wal-Mart has already opened 86 Neighborhood Markets in 14 states, according to its Web site, mainly in the Southwest and Southeast, and it's not done. The neighborhood marts will become an increasingly important part of its growth strategy in five years or so, as baby boomers age and lose mobility, Retail Forward predicted in a December 2004 report, "Looking Forward: Wal-Mart 2010."

In Vegas alone, Wal-Mart plans to open 12 Neighborhood Markets in all, according to Kit Graski, senior vice president at Voit Commercial Brokerage in Las Vegas, who represents landowners at three of the proposed building sites.

"Clearly, Wal-Mart must have enjoyed great success with Las Vegas [early on]," retail analyst David Rogers said. "Two years ago, they were all severely overpriced. Now, they have a bulldozer coming at them."

THE PLAYERS

Retailer: Market Share (2004); Number of Stores (2004)

Albertsons: 24.3%; 38

Smith's Food & Drug: 21.3%; 32

Vons: 13.8%; 24

Food 4 Less: 7.9%; 15

Wal-Mart Stores: 7.7%; 9

Costco: 5.4%; 3

Note: Share based on total-store dollar sales, except for Wal-Mart and Costco, whose share is based on food division sales only.

Source: Metro Market Studies

Vegas: Still On a Roll

Clark County population: 1.7 million

10-year population growth: 70%

Racial breakdown:

56% white

23.1% Hispanic

8.6% black

6.6% Asian/Pacific Islander

5.7% other

Median household income: $44,307

2003 single-family housing permits growth: 22%

2004 average new home price: $277,644 (Metro Las Vegas)

2003 cost of living composite index: 98.7 (national average=100)

Sources: Nevada Development Authority; Center for Business and Economic Research, UNLV; and Milkin Institute