SUPERMARKETS SCALE BACK CONSTRUCTION; AVERAGE SIZE DROPS 2004-11-01 (1)

CHRISTINE BLANK

ORLANDO, Fla. -- Supermarket companies are building fewer new stores and are putting off undertaking major remodels, according to early results from a new study released at Food Marketing Institute's Retail Store Development Conference here last week.

For the fourth year in a row, the proportion of newly constructed stores decreased, accounting for about 3% of all stores in 2003, according to FMI's "Facts About Store Development 2004" study, which will be available in late November.

Store remodels fell from 7% of stores in 2002 to 5% in 2003, as many companies are choosing to postpone store expansions and remodels until the economic times are more certain, FMI said. Independent operators were more likely than the market at large to undertake major remodeling projects, the study revealed.

Another significant finding from the study was the steep decline in square footage of new stores: The median size of new stores has plunged from 47,500 square feet in 2002 to 34,000 square feet in 2003. The size of new stores fell below 40,000 square feet for the first time in 10 years.

Dovetailing with the smaller formats, construction costs for new stores fell from $124 per square foot on average in 2002 to $108.30 per square foot in 2003.

Meanwhile, FMI said supermarket operators are getting their new stores to market faster, while Michael Sansolo, senior vice president, FMI, said Wal-Mart is taking longer than it used to to build its new stores.

"If it's a smaller, targeted store, then it could be there in three months. Even big stores are happening in 34 to 35 weeks," Sansolo said at the conference.

In some of the smaller formats, such as limited-assortment chain Save-A-Lot, shelving and other elements of the store design are at a "bare minimum," speeding up the construction process, Sansolo said.

Meanwhile, 13% of all new stores are "targeted" to either the Hispanic, natural or gourmet shopper. The Hispanic population is one of the fastest growing in the United States. Sansolo said grocers need to do a better job of building stores and carrying products tailored to this customer base.

Deli and seafood are the top departments being added in new stores. In fact, 100% of new stores in 2003, including smaller formats, feature those two departments. Ethnic, floral, takeout, low-carb and pharmacy sections are featured in 90% of new stores.

Supermarkets got involved in low carb on the "dying end" of the trend, Sansolo said. "We've got to get back on the cutting edge of trends, instead of the dying end. Low carb was taking off in a lot of places before it hit the supermarket."