New grocer on the block

Grocers are bracing for Wal-Mart's further entry into the Reno market - this time directly into supermarket competition.

Wal-Mart has chosen Reno for rollout of three to four Wal-Mart Neighborhood Markets,with 2007 as the target opening date for the first of them, said Colliers International Senior Vice President Kelly Bland.

And the retailer is shopping the area for locations.

"Over the next few years, Wal-Mart is looking at additional opportunities in the area," says Daphne Moore, Wal-Mart's community affairs manager, but Wal-Mart does not comment on market-wide expansion plans.

Nevada industry observers say Wal-Mart's decision to locate a major grocery distribution center east of Sparks may be another hint, though, of the retailer's growing interest in the northern Nevada and California region.

Wal-Mart's possible new entry into the area its Neighborhood Markets are stand-alone, 24-hour grocery stores that range from about 42,000 to 55,000 square feet and include a merchandise mix mirroring a traditional supermarket - groceries, related general merchandise and pharmaceuticals.

(For comparison, the Raley's Store on Keystone at Seventh is 42,000 square feet; the new one on Robb Drive is 45,600 square feet.) Wal-Mart operated 76 Neighborhood Markets nationally as of November 2004.

The mega-retailer also operated 1,672 Supercenters - discount stores that include grocery departments.More have been built since.

Reno/Sparks has four Wal-Marts, three of them Supercenter stores.And, adds Moore, another is beginning construction at the intersection of Pyramid and Los Altos.

The number of grocery stores in the Reno/Sparks market, including the Wal-Mart super stores, reached 37 by the end of 2004, says Bland.

This created a ratio of one grocery store for every 10,000 people - higher than the national norm of one per 12,500 people.

In a highly competitive industry, this ratio makes for intense competition, he adds.

Profit margins are razor thin in the grocery industry anyway, says Dave Heylen, vice president of communications for the California Grocers Association, which encompasses Nevada.

The norm is 1 percent to 3 percent.With that kind of tight margin, every inch of a grocer's shelf space is valuable, and every new entry into the market creates a shiver.

Wal-Mart's grocery stores are already creating a buzz, if not yet a shiver.

Reno real estate experts say privately that other major grocers are holding off on expansions into the Reno market as they await Wal-Mart's possible arrival.

"Anytime anybody opens a store, it divides up the pie," says John Stampfli, Scolari's Food & Drug Company marketing manager."When we open a store, it affects others."

Scolari's, with 19 stores in California and northern Nevada, has not yet gone head-tohead with a Wal-Mart neighborhood store.

But Safeway has.

"Initially, facing a non-union store like Wal-Mart is a challenge," says Jennifer Webber, Safeway's director of public affairs for its northern California division."Our experience is that customers are attracted to the new stores." But long-term? "We do well," she says.

Safeway opened a new store with a gas station on Vista just north of S.

D'Andrea Parkway in Sparks in 2003 and added a gas station to its store on McCarran at Mae Anne in 2004 but has no firm plans for northern Nevada in 2005, according to Webber.

Traditional supermarkets such as Albertson's, Raley's, Safeway, Scolari's, Smith's and the like create their own niche, adds Heylen, and adapt to the local market more readily than Wal-Mart.

That's an edge that the traditionals have.

But, he adds,"overall, many are concerned that Wal-Mart is coming in." And does the customer base overlap? Between the traditionals and the Wal-Mart super stores, there is some differentiation of customer base.

Not all grocery store customers want Wal-Mart's discount shopping experience.

But the Neighborhood Markets, with their smaller square footage (Supercenters range from 109,000 to 220,000 square feet) are still relatively new - the first opened in 1998 - and are an unknown entity.

They could be of more concern to traditional grocers than the super stores, says Heylen.

The industry is watching for Wal-Mart's next move, says Webber.

Wal-Mart's new 890,000-square-foot distribution center slated for the Tahoe Reno Industrial Park east of Sparks, she says, "is an indication of plans to expand into our market (northern Nevada and northern California)."