A Randalls in Katy is throwing in the towel
Grocer says it has no plans for further closings in the Houston market
“Despite the best efforts of our store team, we have not been able to reposition that location to better compete in the marketplace.” Dawne Proffitt, Randalls spokeswoman
Randalls is planning to close one of its Katy locations, the latest casualty of a cutthroat grocery market.
The store, at 1525 S. Mason, is expected to shut its doors mid-February, though the exact date has yet to be determined. Meanwhile, other grocers are expected to open more than 20 stores in greater Houston this year to meet the demands of a growing population.
“Despite the best efforts of our store team, we have not been able to reposition that location to better compete in the marketplace,” Randalls spokeswoman Dawne Proffitt said in an email.
She said the company has no plans for further closures in the Houston market. It’s now working to remodel its locations in Kingwood and Bellaire, she noted, though details of the new designs have yet to be announced.
In Katy, the Randalls on Mason is surrounded on all sides by competitors. A large H-E-B opened across the street from it in recent years, and at least 10 more grocery stores are in the vicinity, including two other Randalls locations.
“It is a viciously competitive market, and there has been an awful lot of growth in the area,” said Ed Wulfe, chairman and CEO of Houston commercial real estate
firm Wulfe & Co.
Randalls, once a dominant player in Houston, has been downsizing for years as some of the nation’s largest grocery store operators attract more shoppers with lower prices, wider offerings and flashier stores. The latest closure will bring the number of local Randalls stores to 19, down from 51 in early 2005.
The company’s market share began to slide after its acquisition in 1999 by Safeway, which later merged with Albertsons. Randalls had claimed the second-largest market share in the Houston area prior to the deal.
Since then, major players including H-E-B, WalMart and Kroger expanded dramatically. Each of those chains now claim roughly a quarter of the local market, while Randalls’ share has dropped to less than 4 percent.
Challenges for Randalls
The company faces challenges on several fronts. Its stores are smaller than those of most of its competitors, and its prices are often higher.
It has improved its sale and merchandising strategies in recent years, but its prices still top H-E-B’s by as much as 20 percent, said Scott Mushkin, managing director and senior retail and staples analyst for Wolfe Research.
“I scratch my head trying to understand what the appeal is,” he said. “They’re not nearly the size of Kroger, H-E-B or Wal-Mart, and they’re not priced correctly.”
Competition among grocery stores ramped up considerably last year as many chains expanded aggressively throughout the city. Cincinnati-based Kroger and San Antonio-based HE-B each added several locations and battled with larger selections of local and natural products and services such as curbside pickup.
“Both Kroger and H-EB are actively expanding and have been for years to maintain their market share,” Wulfe said.
Extra goods and services play a large role in competitive strategy, particularly among the larger retailers, said Joe Williams, a grocer issues consultant with the Texas Retailers Association. Once relatively limited in their offerings, stores now offer extensive selections of freshly prepared foods, cafes, pharmacies, and pickup and delivery services.
“It’s caused us to do a real rethinking of the structure of the stores based on the services that are being offered today,” Williams said. “You don’t see that transition for smaller neighborhood or independent grocery stores.”
Pricing battles
Cost, too, has become increasingly important to consumers, giving way to a price battle that affects grocers of all sizes. H-E-B, for example, now rivals WalMart on pricing, Mushkin said, sometimes beating it by as much as 5 percent.
The battle show no signs of easing. Wulfe & Co. anticipates the grocery sector to add 10 Aldi locations, six Krogers, three H-E-Bs and one Wal-Mart neighborhood supermarket, among others, driving nearly a quarter of the area’s projected retail expansion this year. Two new stores are slated for the Katy area.
Lidl, a German discount grocer, and 365, Whole Foods Market’s value store, are also expected to enter the market, setting the stage for a “super-market share battle,” according to research by CBRE’s Houston office.
”You have fairly significant population growth,” Mushkin said. “It’s one of the more competitive markets.”