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Feeding frenzy: As Amazon and Walmart get hungrier, the industry wonders what’s next

BY Seth Mendelson

Can other retailers find a comfortable — and profitable — niche in the marketplace, while Amazon.com and Walmart go toe-to-toe in their seemingly endless battle for retail supremacy?

The answer will not only define retail for the next generation or two, but also determine who will survive what many call the “new normal” in what is becoming a more complex and risky arena.

There is no hiding the fact that Walmart and Amazon are locked in a vicious campaign for the hearts, minds and wallets of the consumer. Each is taking strategic steps to become better merchandisers in the other’s space. Walmart’s $3 billion-plus acquisition of Jet.com last year, as well as other moves into e-commerce, shows that the Bentonville, Ark.-based chain is serious about learning as much as it can about e-commerce merchandising as quickly as possible.

“Walmart is getting its mojo back,” said Jim Wisner, president of Chicago-based Wisner Marketing Group. “The company has learned a lot from Jet and is accelerating its online performance to better interact with its thousands of physical locations. The company is definitely leveraging its relationships with manufacturers to build its e-commerce business.”

Amazon is not sitting still either. Its $13.4-billion purchase of Whole Foods this summer just confirms that the Seattle-based company is committed to being a serious player in just about every segment of the retail world — online and through traditional storefronts. And, many industry observers say they would not be shocked if Amazon followed up on its last purchase with another blockbuster, this time possibly a drug store chain or pharmacy distributor to close Walmart’s lead in that extremely profitable segment.

“It’s all about gaining distribution points,” said Ken Morris, a principal at Boston Retail Partners. “One big reason Amazon bought Whole Foods is to get what, in essence, are distribution centers across the country. About 90% of the population lives within 10 miles of a Walmart store. Think about what this will mean for same-day shipping.”

Where does all this activity by these two companies leave other retailers in the field?

Opinions may vary on pricing and selection strategies, but most industry officials stress that knowing as much about your potential consumer is vital for survival in the marketplace.

“Let the two gorillas in the room fight it out among themselves,” said Farla Efros, president of Toronto-based HRC Retail Advisory. “Stay the course. Going head on with them would be like chasing a ghost. Other retailers need to carve out a niche that emphasizes unique products and service. They need to spend more time learning who their shoppers are and what they can do for them.”

Morris feels that other merchants need to be more aggressive in their approach. While agreeing that retailers need to carve out a niche and understand their customers’ demands, he said that they must also make shopping a more entertaining experience.

“If you are just going to sell a commodity, these guys are going to eat you up,” he said. “Entertainment is the key. Retailers have to make their stores more fun and exciting, and convince consumers that they actually want to come into the store. That will especially be true for the malls, where more entertainment venues like restaurants, movies and bowling alleys will attract consumers.”

Phil Lempert, a Santa Monica, Calif.-based retail analyst, said there is a silver lining for other retailers, especially with Amazon’s recent acquisition. “Suddenly everyone wants to work in retail,” he said. “The Whole Foods deal made retail an attractive employment alternative for many Silicon Valley types. They are going to join retailers and bring new ideas that will help them understand shoppers better and bring more of them to the store or their websites. They are going to help rethink the overall shopping experience.”

In the end, it is going to come down to customer loyalty, and everyone agrees that is a fleeting thing. “Retailers are going to have to get their shoppers hooked on what they offer, including their own store brands,” said Wisner. “They are going to have to stay up on everything to make sure they offer shoppers what they want, when they want it and at a fair price. It is not going to get any easier for anyone.”

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Rite Aid names EVP operations from Northeast and Midwest division

BY Michael Johnsen

CAMP HILL, Pa. — Rite Aid on Tuesday promoted Derek Griffith from SVP operations in the Northeast and Midwest to EVP store operations.  In this position, Griffith will be responsible for all aspects of the company's chainwide store operations. He will report to Bryan Everett, COO Rite Aid stores.

"Derek is a seasoned retail operator with demonstrated expertise in developing and implementing operational initiatives to drive and increase financial performance," Everett said. "Since joining Rite Aid nearly 10 years ago, he has made significant contributions to the company and our associates. As we move forward, his leadership and knowledge will help us successfully execute our operational plan and grow our business while further enhancing both the associate and customer experience in our stores."

Griffith brings to bear more than 30 years of experience in store operations. He joined Rite Aid in 2008 as a regional VP store operations. In 2010, he was promoted to his current role, with responsibility for more than 1,100 Rite Aid stores in the Northeast and Midwest. Prior to joining Rite Aid, Griffith held various store operations roles with increasing responsibility at Target and Home Depot.

Griffith holds a bachelor's degree in petroleum engineering from West Virginia University. 

 

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Supervalu expands wholesale reach through Associated Grocers of Florida acquisition

BY Michael Johnsen

 MINNEAPOLIS — Supervalu on Wednesday announced its acquisition of Associated Grocers of Florida in a transaction valued at approximately $180 million.

"Associated Grocers represents a great opportunity for us to further expand our wholesale business into another important region," stated Mark Gross, president and CEO Supervalu. "Christopher Miller and his talented team have done outstanding work to build and support a dynamic and diverse retailer base. We're looking forward to welcoming the strengths and talents of the Associated Grocers team to Supervalu and working together so that, once the transaction is complete, we can bring the benefits of our combined scale and expertise to their customers to help them better compete in the evolving grocery industry."

This transaction, which was approved by each company's board of directors,  provides Supervalu with the ability to expand its operations into a new part of Florida as well as provides new opportunities to bring Supervalu's products and services to Associated Grocers' diverse customer base in South Florida, the Caribbean and other international markets. Additionally, as part of the pending transaction, Supervalu has reached a long-term supply agreement with Associated Grocers' largest customer that will go into effect upon the closing of the transaction.

During Associated Grocers' last fiscal year, which ended on July 29, 2017, Associated Grocers' revenues were approximately $650 million, estimated by Supervalu under its accounting policies.

In addition to announcing its proposed acquisition of Associated Grocers, Supervalu also reported second quarter fiscal 2018 consolidated net sales of $3.8 billion, an increase of $995 million or 35%. “We continue to make tremendous strides in driving our strategy, evidenced by another quarter of strong growth from our core wholesale business which now represents over 70% of net sales,” Gross said. “Additionally, our results now include the benefit of Unified Grocers, where I'm pleased that the transition is going well. We have a lot to be excited about as we turn our focus toward the back half of our fiscal year.”

Total net sales within the wholesale segment increased 58%. Retail identical store sales were negative 3.5%. Second quarter Retail net sales were $1 billion, a decrease of 1.1%.

Founded in 1945, Associated Grocers is a retailer-owned cooperative that distributes full lines of grocery and general merchandise to independent retailers, primarily in South Florida, the Caribbean, Central and South America and Asia. Associated Grocers' customer base of conventional, specialty and ethnic stores includes an exciting mix of multi-cultural independent grocers that complements Supervalu's customer base.

The Associated Grocers transaction is currently expected to close by the end of calendar year 2017, subject to approval by Associated Grocers' shareholders and other customary closing conditions. Following completion of the merger, Associated Grocers will be a wholly-owned subsidiary of Supervalu.

Faegre Baker Daniels and Cleary Gottlieb Steen & Hamilton acted as Supervalu's legal counsel. RBC Capital Markets acted as financial advisor to Associated Grocers of Florida and Akerman acted as Associated Grocers' legal counsel.

 

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