Supermarket Industry Evolving

WASHINGTON -- Average supermarket size declined for the second year in a row and store openings continued to outpace closings, according to a new Food Marketing Institute (FMI) study, Facts About Store Development 2001.

Due to a strong economy that raised land prices and building costs, the industry continued to embrace alternative site solutions and reduce the size of new construction, according to the report. The typical store opened last year covered just 44,072 square feet, a significant reduction from the 49,000 recorded in 1999 and the all-time high of 57,064 square feet recorded in 1998.

Notwithstanding, the proportion of store openings reached its second- highest point in the past decade -- 4.9 percent -- and store closings continued their downward descent to 2.4 percent -- the lowest point recorded by the study in 10 years. Furthermore, major remodeling rates increased to 5.5 percent last year -- from 5.0 percent in 1999.

New Stores Focus on Expanding Services for One-Stop Solutions
Similar to 1999, the most widespread departments and services in new stores are fresh seafood (100 percent), deli (96.6 percent) and floral services (96.6 percent).

New store construction projects showed that retailers are increasingly concentrating on consumer's demand for the convenience of one-stop shopping, according to the report. Prepared foods for takeout, greeting cards, pharmacy operations and wine are among the fastest growing specialty segments in supermarkets in the past decade.

The prepared foods for takeout section reflected its fast expansion rate in 2000 as supermarkets continued to seek a larger share of that profit pie. Supermarket operators made fresh food for takeout available in 89.7 percent of new stores, compared with 58.5 percent in 1999.

Other "one-stop" services showing a growing presence in new store construction include on-site photo processing (31.0 percent), dry cleaning (24.1 percent) and gasoline service (3.4 percent).

New Construction, Remodeling Costs Drop

While building costs -- the largest component of new store development -- remained relatively flat at $64.26 per square foot last year, total construction costs fell from $103.32 per square foot in 1999 to $98.26 per square foot last year.

In 2000, 5.5 percent of all stores underwent a major remodel. Major remodeling costs increased from $32.46 in 1999 to $35.09 last year. The typical cost per square foot for store expansions -- 17 percent of all remodels -- is more than double the median at $83.00.