H-E-B loses ground as shopping changes

It still reigns, but rivals taking a bite out of its share

H-E-B has blanketed the San Antonio area with stores, warehouses and manufacturing plants, and its colorful semitrucks ferrying goods are a frequent sight on local highways.

On the digital front, as demand for curbside pickup and delivery has risen, the company has increased those services to try to maintain its grip in the region.

Yet its market share has slipped as Walmart, its biggest rival, has gained ground and several smaller competitors have maintained their footing, according to one report.

H-E-B had 51 percent of the

San Antonio-area market share in 2020 — based on the most recent data — with 57 stores and about $3.8 billion in sales, according to Chain Store Guide. That’s down from 56.1 percent in 2018.

Walmart and its Sam’s Club chain claimed the second-biggest piece of the market — 29 percent — with 34 stores and $2.1 billion in combined sales. That was up from 23.7 percent in 2018.

H-E-B remains a fierce, innovative competitor, industry analysts say.

The San Antonio grocery chain launched curbside pickup in 2015 and has since expanded the option to most of its Texas stores, including at least half of those in the San Antonio area, according to its website.

The retailer bought Favor

Delivery in 2018, a rare acquisition, and doubled the Austin company’s coverage area statewide in 2020 amid the coronavirus pandemic.

H-E-B rolled out a new mobile app enabling customers to order groceries for pickup or delivery. The company also announced it would test self-driving delivery vans around its Olmos Park store, though it has kept mum on the status of that pilot.

H-E-B has worked with Swisslog Logistics to set up automated micro-fulfillment centers at its facilities and devoted more square footage at its stores to preparing and storing curbside orders.

In Cibolo, it plans to build a 55,000-square-foot fulfillment center for curbside and delivery operations along with a 110,000square-foot store. Research firm Ipsos named H-E-B the top grocer for curbside orders last year because of product availability, ample pickup times and helpful instructions for customers.

“They’re a regional retailer that is not afraid to invest in new technologies, to try things out, and if they don’t work, they’re not afraid to let it go,” said Brian Kilcourse, managing partner at Miami-based RSR Research. “Most regionals aren’t that way.”

For its part, H-E-B’s main rival, the deep-pocketed national behemoth Walmart, is focused on boosting its capacity nationwide by adding automated fulfillment centers at its trove of stores, testing driverless trucks for delivery and expanding its in-home delivery option, the Wall Street

Journal reports.

“Walmart, you have to give them a lot of credit, because they saw this coming,” said Kilcourse, referring to demand for online ordering.

Other competitors, such as Target, also have hurried to build out pickup and delivery services, and Amazon is constructing more warehouses in the area for preparing and transporting orders. Dollar stores are also adding more grocery items.

“They’re under more competition, as everybody’s under more competition than ever before,” said Jon Hauptman, senior director of e-commerce at WinstonSalem, N.C.-based Inmar Intelligence, referring to H-E-B. “All different types of formats are selling groceries, and now most of those formats are selling groceries online.”

“However, H-E-B has kept up with that, and they’ve continued to lead the industry with their approach to online grocery,” Hauptman said. “Because of their strong loyalty and track record of excellence, they’re really well insulated against the growth of other online shopping competitors — probably better insulated than virtually any other supermarket chain I can imagine.”

Kroger is also returning to H-E-B’s turf with what it calls a “spoke facility,” which will store items for delivery and work with a Dallas fulfillment center. Though the company is not opening a store here, it aims to offer delivery by the end of 2022.

Kroger is a “significant threat”

because of its size, financial strength and abundance of customer data, said Venky Shankar, director of research at Texas A&M University’s Center for Retailing Studies.

It’s the third-largest food and grocery retailer in the U.S. and Canada by annual sales, which reached $132.5 billion in 20202021, according to Supermarket News and analyst IGD.

With 2,742 stores across 22 banners — such as King Soopers and Harris Teeter — it trails only Walmart, which has 5,342 locations. Kroger has partnered with Ocado Group to develop a network of automated fulfillment centers for handling online orders, a move retail experts and analysts praised.

“Kroger has the capacity to really dive deep and make significant inroads,” Shankar said.

The fray

Part of H-E-B’s motivation for expanding its curbside and delivery services may simply be to prevent customers from decamping to another grocer that offers those options.

“It really is just a way to not give shoppers an excuse to shop some place else,” said Carol Spieckerman, president of Spieckerman Retail, based in Bentonville, Ark., where Walmart is headquartered. “There are customers that are really loyal to H-E-B and have shopped there for years, and they’re just like, ‘Don’t make me go somewhere else.’

“H-E-B has to reasonably keep up with other retailers and just not shut the door on offering its own arsenal of convenience options.”

Regional grocers may also have more room to make mistakes because they have built a loyal customer base and are often more agile than national companies, which have to focus first on scale.

As H-E-B vies with national retailers, one of its strengths is emphasizing its Texas roots and connections. “People feel affection toward H-E-B, and I think

Jessica Phelps / Staff photographer An H-E-B employee rolls out groceries for curbside pickup. Its biggest rival, Walmart, is boosting its online services.