With three grocery stores in a one-block area, how do consumers choose? They don’t.
On a July Saturday before the heat takes over, the competition for a parking space is on at Trader Joe’s in San Rafael. Many of these same, crazed drivers with blood in their eyes will also later vie for valuable real estate in the parking lots across the street at Whole Foods and United markets.
They are, after all, “doing the triangle.”
And while the shoppers work the lot (and each other) for their slice of pavement, it’s nothing compared to the supermarkets’ competition to get the shoppers in the door in the one-block triangular area along Third Street.
Because while the shoppers head into the respective markets, the store managements know that most will hit at least one of their competitors—and, often, all the stores—in a single trip. This store hopping is partially explained by the focus Marinites have on food, its treatment and origin. We seemingly never tire of learning what’s missing from or added to our soy sauce, or whether the beef is grass fed or the fish is on the “right” list. There are times when the aisles seem more like libraries, with shoppers cramming for an exam, and the well-timed “accidental” cart collision designed to break though the congestion brings reproaches similar to that of a control-freak librarian.
Not that I would know anything about that.
But some of the shopper migration is on the stores. While United strives to be all things to all shoppers, it doesn’t have the specialty items Trader Joe’s has nor the organic selection of Whole Foods. Trader Joe’s has far fewer items than most grocery stores by design, and only its own brands, with the exception of some beverages, which naturally sends shoppers out the door destined for another store. Whole Foods Market sees itself as a full-service market, but because of its focus on natural foods, a lot of processed foods and traditional brands are missing from its shelves as part of its strategy.
United is the senior player, having staked its store in 1955, three years before Trader Joe’s was founded in Pasadena, Calif., and 35 years before it ventured out of Southern California, opening its first Northern California location in—wait for it—San Rafael. Both TJ’s and Whole Foods, based in Austin, Tex., are, of course, national retail chains. Based on simple scale, one might think this would put the family-owned United at a disadvantage, that TJ’s and Whole Foods have the resources to take a large bite out of United’s customer base. But the truth is, United may be as much of an aid as a thorn to the other two stores.
The old school
“Let’s face it, all of us are competing for the same customer dollars. That’s why there’s a draw into this area,” says Bill Daniels, who heads up United’s two-store chain (the other store is located in San Anselmo). “I think all three stores benefit from the location of the others, but we position ourselves to be the low price leader, and our goal is that the customers see the added value.”
When it comes to competing, the affable, 70-year-old Daniels isn’t sure how his chain approaches the fight for customers, whether United is simply competing in Marin for grocery dollars or against the chains for its bottom line. “It’s a really good question. The way I view this is, we’re in a triangle. Some of our customers are going to shop at Whole Foods, but they may not like the prices and they’ll cross the street and come back to us. We have the variety and consistent selection that the other stores don’t.
“We focus on the Marin customer, and we think we know what those customers want. It’s how we built our reputation. We’re part of this community!”
Community is a big deal to Daniels and United. Each week, United takes out a double truck ad (side-by-side pages) in the Marin Independent Journal, which not only features that week’s sale items but a salute to a “United family,” a community cause or a nonprofit, along with a photo of the family, group or staff and their “story” or a description of what they’re trying to accomplish. While spotlighting the community certainly buys Daniels and company some good will, it’s more an illustration of how United sees its position in the community. “We’ve been here a long time and we feel we’re a part of Marin’s history,” Daniels says.
Being a part of the community, for Daniels, includes weighing in on local issues. When Target decided it wanted a store in East San Rafael off Highway 580, Daniels led the charge to be sure City Hall understood the store was a bad idea. The fact that the Minneapolis-based chain planned on selling groceries was incidental.
“I know a lot of people thought we were against it because of they were going to sell groceries, but that really wasn’t the problem. Take a look at Target. It pays low wages, turns jobs over quickly and, when it comes to health care for its workers, it relies on the government, which means you and I pick up the tab for its workers’ health benefits,” says Daniels. “If it’s not paying benefits to its people, then it’s not taking care of its people. It also means other retailers in the area aren’t on a level playing field. When we have to subsidize their benefits, the impact on the community is the issue here. How many companies will be affected, and not only in the food industry—it affects the entire retail community.”
Between the San Anselmo and San Rafael stores, United employs approximately 150 people. The San Rafael location sits between Second and Third streets with Grand Avenue bordering its parking lot, which raps around from Second to Third. It includes an outdoor nursery section as well.
On the inside, the store steps back in time a bit. A butcher counter greets shoppers with a selection of meats and fresh fish. A bakery section sits across from it and, at times, the scents of fresh cookies and pies waft through the air.
The market also has a huge selection of wine, which demonstrates one of the strategies at United. While the markets compete with Whole Foods on price point for grocery items, wines are marked up to a wider margin. Within the grocery industry and even the hospitality industry, alcohol is often considered a profit center. This isn’t to say United doesn’t offer bargains on sale wines, but the everyday prices are higher than those found at Trader Joe’s, for example.
United also gives more floor space to the sale of wine and spirits, which is going to drive its price point higher if for no other reason than the dedication of the space means there’s lost opportunity in that the market can’t sell other grocery items in that space. The good news is the monster variety of wines means it likely draws more wine-centric shoppers and bumps its per-square-foot sales stats as well.
A stroll through United’s produce section shows it understands Whole Foods is across the street, at least to a degree. While it stocks both conventional and organic produce, United is competing on product and not presentation. Whole Foods has elevated the display of organic Fuji apples and baby mixed greens to an art form, while United is hopeful consumers are simply happy it’s stocking organic red potatoes. It also has a to-go salad bar for those looking to get their veggies on the run.
Around the corner, United has a deli selling meats by the pound as well as sandwiches. It also has house made hot entrées to go as well as boxed sushi for those looking for simpler fare. To capture the hearts of shoppers with a sweet tooth, it offers a display with a selection of gourmet chocolates at the gourmet price of $15.99 per pound.
For a facility that’s at least 58 years old, it isn’t long in the tooth…but it isn’t going to make the cover of Architectural Digest, either. The shelves are industrial without being chic and the lighting is functional.
Where United shines is the folks staffing the boat. They’re helpful and appear happy to be there. Ask a question about the fish, and they can tell you if it was line caught and when it arrived at the store—good things to know about those that swim in the sea.
One oddity: There’s a podium at the back of the store that asks, “Organic natural food customers: How can we better serve you?” The last time I was in the store in July, it was stashed in the back next to the frozen foods, in a location that the National Security Agency would feel good about. If United wanted to appeal to shoppers with a natural inclination to spend their grocery dollars at Whole Foods, the podium would have been at the front of the store, near the produce.
The shtick
Let me begin this section by saying that, while I’m a regular shopper at TJ’s in San Rafael, Novato and Petaluma, I was unable to speak with someone at the home office, as they did not return phone calls. And I was advised by local employees that all comment needed to come from the mother ship in Los Angeles. This being said, I’ll attempt to share some observations about how the store shops and how it does business in general.
To begin with, operating a phone appears to be a challenge.
The San Rafael location has been pretty popular if for no other reason than it was the only Trader Joe’s location in Marin for a number of years, though Corte Madera and Novato now boast their own stores.
Still, for many years, this meant that the parking lot was a mob scene, where it was serious business to get a space in the strip mall. A few years back, after I’d found a spot and was making my way toward the entrance, a woman in her car yelled, “You’re not compact!”
I told her, sure, I’d put on a couple pounds, but she was being rude, which was far more polite than what I was actually thinking. But it was that kind of place.
Since that time, the store has expanded into the adjacent space and the parking lot has been reconfigured. Parking still isn’t an easy proposition, but it’s better. And being so popular that parking is a challenge is a good kind of issue to have.
Trader Joe’s is privately held and owned by the Markus-Stiftung Trust out of Germany, but it was founded by Joe Colombe in Pasadena, Calif., in 1958 as something called Pronto Markets, a 7-Eleven-inspired retailer. Today, it’s a grocery store focused on staples along with a huge selection of frozen and specialty foods. It’s discovered that by taking fresh veggies, then cleaning and cutting them and placing them in small packages, consumers will pay more.
While Trader Joe’s stocks some local products, it’s all about its private label brand. The chain is known for unusual items, which lends it a cache, but it also often frustrates shoppers by discontinuing items based on one-time buys and sales based on new item introductions. The chain introduces five to 15 new items per week and pulls a like number out to make room. So it’s suffered from a reputation of inconsistency in inventory. In the short term, this may mean shoppers will stock up on Blister Peanuts for fear they won’t be on the shelves next week, but others may be put off when their favorite is pulled from the shelves with no explanation at all.
The supermarket is founded on low price competition, with no sales. Ever.
“’Sale’ is a four-letter word to us,” according to the company website, which points out that the stores have low prices every day and don’t deal in coupons, memberships or discounts.
The wine selection, while not wide or deep, is priced very well, including organic Pinot Noir and Sauvignon Blanc bottled under Trader Joe’s own label, as well as the infamous Two-Buck Chuck, Charles Shaw (now $2.49). One of the things the chain does well is reach out to quality producers and forge agreements for production under the Trader Joe’s banner. For instance, Marin’s own Straus Dairy has produced yogurt for the chain.
The San Rafael location appears to be run and merchandised in the same way the stores are in Novato and Petaluma. You have to walk past flowers to get at the veggies and then meat, with dairy at the back of the store. There’s an aisle in the middle of the store with all manner of frozen dishes, from mahi mahi to bon bons.
The vibe
Whole Foods has enjoyed healthy success in Marin, as befits a brand aimed at informed consumers with a fair amount of disposable income (so much so that the popular putdown of “Whole Paycheck” hasn’t held the chain back). It opened a location in Mill Valley that became so frequented the city planning department was hammered for a lame traffic pattern on Miller Avenue that failed to account for the store’s popularity. Next came the San Rafael store, which did so well that parking was a nightmare, so the chain bought a house next door and tore it down to make way for a lot expansion.
In Mill Valley, the company opened a second location when Lucky’s went out, despite the fact that demographics didn’t indicate the town in the shadow of Mt. Tam needed a second Whole Foods. On the other hand, a retail rumor was that Trader Joe’s wanted the location.
Business is business.
In Novato, the store was to be the anchor of an upscale condo-townhouse development. Well, the housing market went to hell and the condos were a disaster—not a single one sold—but the market opened and the aisles jammed and the dollars flowed. Later, the units were converted to rentals and sold out, while the Whole Foods downstairs sold organic goods to Novotans looking for healthy faire.
“There’s no doubt we share customers,” says Clarke Pomeroy, the store team leader at Whole Foods Market San Rafael. “Every time a customer comes into our store, we see it as a chance to do what we do best. We want great displays; we want people to be able to smell the fruit. Competition helps us.”
Presentation is a big thing at Whole Foods. Produce is displayed in baskets and containers that separate the chain from competitors. Ice is used not so much to keep produce cold as to psychologically promote freshness, according to marketing research.
Pomeroy says each store is given some autonomy as to how it will market the location. So San Rafael has some say as to how it will compete with the nearby United and Trader Joe’s.
“We have lots of stores in close proximity in other places, so this isn’t unusual for us,” he says.
I ask whether part of the local strategy is to employ the age-old practice of loss leaders, ads for popular products sold at a loss as a way to get shoppers in the door. But before Pomeroy can answer, the charming in-house PR person tells me this sort of information is off limits. I reply that I haven’t asked what the cost is, what the products might be or even what the combination to the safe is, just whether the chain employed the strategy. “We have weekly specials and one-day specials every Friday on items like salmon or strawberries,” Pomeroy says with a smile in his voice. “We run ads so people know what’s on sale.”
Pomeroy says part of the local strategy in San Rafael is to simply do what Whole Foods does well. “If you look at how we market our business practices—dealing with animal compassion, how we source our organic produce—we call these things differentiators, and they go with our standards and core values.”
While as a chain Whole Foods is product-driven, it’s selling the sizzle as much as the steak. On three different occasions, Pomeroy brings up idea of how the store looks, smells and (I keep waiting for him to say) tastes. “We really are looking to keep the right vibe.”
It’s doubtful that Daniels at United is concerned with vibe, and one can only guess at the contribution Hawaiian shirts make to Trader Joe’s vibe. But all three stores in the triangle are concerned with mojo and margins, while the shoppers just want enough parking and enough light to read the labels in the aisles.
