By now you’ve likely heard, or been impressed by, Trader Joe’s. The California-based grocer is turning heads and filling baskets with its innovative approach to grocery shopping.
The Fresh Market is similar. Established in 1982 by a former 7-Eleven executive named Ray Berry, and his partner, Beverly, the chain has doubled its store count and sales over the last seven years. Margins meanwhile are through the roof, up 34%.
Like Joe’s, The Fresh Market has quickly moved from a regional player to a significant national contender. Based in Greensboro, N.C., TFM operates 129 stores in 25 states with Florida its biggest market.
On average each store has 15,000 square feet of selling space, with typical weekly sales hovering around US$200,000–or about $525 per square foot per year.
So, what’s the magic? Like Joe’s, shopping at TFM is all about the space itself. Forget large, faceless and fluorescent. Instead, customers walk inside a small, intimate-feeling space, one featuring fresh and specialty items, plus lots of prepared, ready-to-eat foods.
Fashionable and upscale but with rustic touches such as wooden crates and hand-written signs, shopping here is all about convenience and the illusion of being inside a neighbourhood grocer.
The store’s laid-back ambiance is casually reinforced with piped-in classical music, wooden arbours at checkout, hardwood floors and spotlights.
To merchandise such a store, TFM emphasizes its fresh products, including meat, seafood, produce and prepared foods.
Perishables account for 67% of sales and space allocation, the exact reverse of conventional supermarkets. Dry groceries, cleaning supplies and other centre-aisle staples are diminished, replaced with flowers, bulk items and other “healthy living” goods.
To make it work, TFM places its focus on the customer, rather than the supplier. Wherever possible, it chooses to do business with local or otherwise small-scale suppliers, especially for the store’s private-label offerings.
The idea isn’t just to provide something unique; by making a better in-house label, the chain is effectively improving gross margins while at the same time widening shopper appeal. Customers, meanwhile, feel they’re buying something good, and getting it at a good price.
But the success of TFM and other small-scale, customer-focused grocers isn’t just in the merchandising and display. It’s also location. Eschewing the suburban, big-box strategy, TFM looks to areas populated by affluent shoppers who prize two things in their grocery stores: convenience and premium.
It’s a more flexible approach, one that has bore some fruit, as well as a few misses. (Let’s be honest: higher incomes don’t always equal higher sales, especially when an upscale neighbourhood is filled with younger families experiencing “mortgage poverty.”)
So who, then, are TFM’s primary shoppers? Research by DSR Marketing Systems indicates most TFM visitors come into the store every two weeks, typically for special items. Cut to the core and you’ll likely find affluent empty-nesters buying a meal or two at a time. For them, TFM is an extra grocery stop, albeit a pleasant one.
With an aim to expand (management is scoping 500 locations throughout the U.S.), TFM is poised to grow, and quickly. Assuming the American economy remains steady and major supermarkets continue to specialize in mediocre perishables, the potential for TFM’s small-store format is huge.
Dr. David Rogers is president of DSR Marketing Systems, a retail consultancy based in Northbrook, Ill.