Grocers fight for food niche

Although three family owned supermarkets in Northwest Arkansas have closed or sold to chains in the past year, area grocers say there’s still room for independent stores in a profession that is increasingly dominated by large chains.

“I think they can survive if they’ve got the right-sized store,” says Gerald Harp, president of Harps Food Stores, a Springdale-based chain with 42 supermarkets in Arkansas, Oklahoma and Missouri.

Frequently, “right-sized” is relatively small, says Harp. If an independent owner has a 40,000-SF supermarket and Wal-Mart Stores Inc. builds a 200,000-SF Supercenter nearby, it can put the independent out of business, he says. But the independent might thrive with a 20,000-SF store in the vicinity of a Supercenter.

Wal-Mart has noticed the trend toward smaller stores. The company responded by opening two 40,000-SF Neighborhood Market stores in Northwest Arkansas (and one in Fort Smith) in late 1998 — all of which were across the street from existing Harps stores. Wal-Mart also opened a Neighborhood Market in Sherwood, near Little Rock, and one of the stores is planned for Fayetteville.

Bob Rogers, owner of B&K Foods, which has small supermarkets in both Springdale and Siloam Springs, says he ignores Wal-Mart and the company’s foray into the food business. The result? B&K’s business hasn’t dropped at all since Wal-Mart opened a Supercenter in Springdale in 1991 and a Neighborhood Market in 1998.

“Every store probably has their little niche,” says Rogers, who became manager of the Springdale store in 1976 and bought it in 1982. “One of the big advantages we have is we’re a little neighborhood store. We do carry out. Our meat market sells only choice beef.

“I think a lot of people like us because we are small. People like it when they walk into a store and see the owner stocking shelves.”

Grady Lamb, owner of the IGA Supercenter in Siloam Springs, agrees.

“I don’t try to compete with anybody,” he says. “I just try to take care of my customers.”

Lamb has been taking care of his customers in Siloam Springs since 1966.

Supermarket sales

Watson’s Supermarket of Fayetteville sold last August to Bob’s Markets Inc. of Jasper. The Watson family has operated a grocery business in Washington County since 1937 when Ottis Watson began selling produce from the back of his truck.

The 63-year-old Twiggs Supermarket in Gentry sold in November to Harvest Foods Inc., the retail arm of Affiliated Foods of Little Rock.

And Barry Cooksey says he’s closing the 12,500-SF Barry’s IGA in Bentonville after running the store since 1985. A grocery store has been in business at the site since 1959.

Cooksey says he’s closing because construction to widen Arkansas Highway 102 has cut his business by 30 percent. Barry’s IGA is at the corner of Arkansas 102 and Walton Boulevard. Cooksey says he plans to develop the property but wouldn’t elaborate.

“We may be doing another store somewhere,” he says.

Cooksey says Northwest Arkansas’s growth will attract national supermarket chains to the area. National restaurant chains have targeted the area over the past couple of years.

Also during 1998, the Dillons Food Store in Fayetteville closed in July after being open at the same location for 31 years. It was the last of three Dillons stores to pull out of Fayetteville. Dillons Cos. is a wholly owned subsidiary of the Kroger Co., the nation’s largest retail food company with about 2,200 supermarkets in 31 states and $43 billion in annual sales (pending its completed merger with Fred Meyer Inc. that was announced Oct. 19).

During the 1960s, Dillons had 11 stores in Northwest Arkansas. Now, there’s only one Dillons left in the area, and it’s in Prairie Grove.

“The Fayetteville market is over-stored right now,” Tim Bellanti, general manager of the Springfield, Mo., division of Dillons, said in 1998. “It has too many grocery stores for the amount of volume available. There are a lot of grocery stores in Fayetteville right now that are right on the fence. Fayetteville is going through a shaking out period.”

Wal-Mart competition

Harp says he doesn’t believe Wal-Mart is targeting area Harps stores as a location for Neighborhood Market stores, but Wal-Mart is Harps’ primary food competitor in Northwest Arkansas nonetheless.

“They’d be our major competitor by far,” says Harp. “They’ll be everybody’s competitor before it’s over with.

“It’s a chore,” he says of competing with the Bentonville-based retail company. “They’re not much different than keeping up with those other big chains.”

Wal-Mart first entered the grocery business in 1987 with the opening of four Wal-Mart Hypermart USA stores. Although that experiment failed, another Wal-Mart venture succeeded. In 1988, the company opened its first Supercenter, selling groceries and a wide variety of other items. Now, Wal-Mart has more than 500 Supercenters in the United States and plans to open another 150 during 1999.

Harp says he’s confused by Wal-Mart’s strategy. Wal-Mart has a tendency “to put stores in where they’re not needed and make them work,” he says.

Harp agrees with Bellanti that Northwest Arkansas was already over-stored in late 1998 when Wal-Mart launched its Neighborhood Markets — all of which are being tested in Arkansas.

“They’re just not in the same class as a Kroger’s or Albertson’s,” Harp says of the Wal-Mart Neighborhood Market stores.

Although some people in the grocery business in Northwest Arkansas believe business hasn’t been good for the Wal-Mart Neighborhood Market in Springdale, Wal-Mart spokesman Les Copeland says sales have met expectations since the Neighborhood Market stores opened. Wal-Mart won’t release sales figures for particular stores or for the Neighbor Market stores as a separate unit.

As Copeland has stressed from the beginning, the smaller Wal-Mart stores are an “experiment.”

“We adapt to the marketplace and adjust to our customer needs,” says Copeland.

Copeland says the Neighborhood Markets serve as convenient stores for people who don’t have time to go to a Supercenter.

“Our customers continue to respond well to one-stop shopping and enjoy the opportunity to go in and find everything they need under one roof,” he says. “Our Supercenters continue to be our primary growth vehicle.”

Harps background

Harps Grocery Store was founded in 1930 in Springdale. The company opened its second store — in Springdale’s Plaza Shopping Center — in 1964.

Gerald Harp began working at the original Harps while in high school, stocking shelves and carrying out bags of groceries. He became president of the company in 1994. Harps now has 42 stores (including 15 Price Cutter stores) in three states.

“We never did think about becoming a big chain,” says Harp. “The situation just kept popping up to buy stores.”

Harp also competes with Jim Marvin, who owns 27 Marvin’s IGA supermarkets, most of which are in Arkansas and Oklahoma. But Marvin doesn’t preoccupy Harp like Wal-Mart does.

“We don’t focus on him like we do on Wal-Mart,” Harp says. “You can’t focus on everybody, so you have a tendency to focus on your biggest competitor. We watch him to see what he does.”

Local foothold

Rogers says customers tell him they shop at his stores because they’re more pleasant than shopping at a large supermarket. Employees know the customers and provide better customer service as a result, he says.

B&K has a 10,000-SF supermarket in Springdale and a 15,000-SF store in Siloam Springs that opened in 1995.

“Everybody said the small stores like ours would go out of business first [after Wal-Mart opened a Supercenter in Springdale in 1991],” Rogers says. “We’ve survived Food-4-Less, Consumers and everybody.”

Rogers says his supplies come from the same warehouse used by Harps Food Stores, so he pays the same price as the chain does and can offer goods to customers for similar prices.

If a week’s worth of groceries was purchased at each the Wal-Mart Supercenter, Harps and B&K, Rogers says the price wouldn’t vary by more than $5.

Dave Montgomery, owner of the 14,000-SF Montgomery’s IGA supermarket in Pea Ridge, says there’s a place for the independent supermarkets in Northwest Arkansas. He also cited customer service as a benefit of the independent stores.

“I deliver to shut-ins, people who can’t get out,” says Montgomery. “If there’s snow or ice on the road, I deliver groceries. We still make our own hamburger. A lot of bigger stores buy their beef already ground.”

Montgomery says independent stores are not relics in this era of chain stores. People may buy the majority of their groceries at a large supermarket, but they often stop by Montgomery’s IGA for random items because it’s more convenient.

“Sure, I lose a lot of business to the big towns,” he says. “To a lot of people, I’m a big convenience store. People tend to buy their week’s groceries [in the city] where they work, and they fill with me.”

Wal-Mart cited convenience as a major reason for unveiling the new Neighborhood Market stores, which are some 160,000-SF smaller than the average Supercenter.

Montgomery thinks the trend may be turning back to smaller stores.

“We’ve seen the bigger, bigger, bigger and bigger,” Montgomery says. “Now I think we’re going to see a swing back to the smaller stores.”

Montgomery says the larger stores are generally thought to be cheaper on groceries, but that’s not necessarily the case.

“Price is a funny thing,” he says. “You don’t have to be the cheapest in town. You just have to be perceived to be the cheapest in town.”

In surveys, customers have cited cleanliness as the main reason they shop at a particular grocery store. Montgomery says stores must be clean and keep up with technology and trends or they won’t be able to compete.

Bob Toney says location and customer service have made his 15,000-SF store in Elkins profitable.

Toney and his wife, Margaret Ann, opened Bomart Apple Market in December 1997 after the Bomart IGA supermarket they owned at the site was destroyed by fire in February of that year.

Toney, who has worked for the Bomart store since 1958, says he borrowed more than $1 million to build a more modern store at the same site. As a result, he has been doing about twice as much volume in sales compared to the old store.

“I never dreamed there were so many people looking for a place to shop,” he says. “They’re not all shopping at Wal-Mart.”

Toney says the Bomart draws customers from as far away as near Ozark (Franklin County) and Huntsville (Madison County).

The Toneys have dropped IGA and now purchase groceries from Associated Wholesale Grocers Inc. of Springfield, Mo.