In a recent interesting article, Forbes discusses the newest Wegman’s, a brand-new supermarket opening in Greenwich Village this week. This event is already sending ripples through the Manhattan real estate and commercial landscape, given that a full-fledged supermarket is a rare convenience for residents of this vibrant borough.
However, it would be remiss to categorize the upcoming Wegmans store as a run-of-the-mill supermarket. While its sheer size – an impressive 90,000 square feet spanning two levels – certainly qualifies it as such, a mere 13% of this extensive space, equivalent to 11,600 square feet, is devoted to what we commonly associate with supermarkets: traditional grocery aisles filled with pantry staples, dairy products, and frozen goods. The remainder of the store takes a different approach, offering an ambiance reminiscent of the food halls you’d encounter at London’s illustrious Harrods or the famed Eataly.
This intriguing shift in supermarket dynamics raises the question: Why is Wegmans embracing this unconventional approach?
To answer this, we need to consider the dichotomy within the supermarket business. Products can be classified into two categories: Core and Periphery. Core products include everyday items such as Cheerios, frozen pizza, and coffee, and they are often considered commodities due to their widespread availability. In contrast, Periphery encompasses fresh, prepared, and artisanal foods, including bakery delights, meats, and seafood. These are products that can be exude uniqueness and quality, enabling grocers to command higher margins and stand out in a crowded market.
Wegmans is taking this concept to a new level by centering its store around these Periphery products. It embraces the “food hall” model renowned for its impeccable service and convenience and transplants it into an urban, densely populated, and high-income neighborhood. This strategic choice is particularly relevant because many residents of Manhattan have compact kitchens that aren’t conducive to extensive cooking. By prioritizing Periphery products, Wegmans taps into a lucrative market, allowing for profit margins that far exceed traditional supermarket expectations.
This innovative approach is Wegmans’ playbook for competing with retail giants like Kroger, the nation’s leading grocer with nearly 3,000 stores. While Wegmans may never achieve the same inventory cost advantages for Core products, such as canned peas, as industry giants like Kroger, their strategic focus on the Periphery ensures that their margins remain robust.
In essence, the forthcoming Wegmans store at Astor Place represents a seismic shift in the world of commercial real estate in Manhattan. By elevating the importance of Periphery products and turning their store into a culinary haven, Wegmans is redefining the concept of a supermarket. This pioneering approach is set to not only reshape the landscape of Greenwich Village but also inspire new possibilities for commercial real estate in Manhattan, proving that innovation and adaptability are the keys to success in a rapidly evolving market.
Richard Kestenbaum, Forbes.com.
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