West Sacramento-based Raley's Family of Fine Stores is trying out a new, smaller-format (about 40,000 -to- 45,000 square feet) supermarket concept under the new "Raley's Fresh Market" banner in the northern San Joaquin Valley city of Oakdale, in Northern California's Stanislaus County, Fresh & Easy Buzz has learned. Previously the supermarket chain has only used the Raley's name on its superstore format stores.
Oakdale, which calls itself the "Cowboy Capital of the the United States" because it holds one of the largest annual rodeos in the U.S., as well as has the most national competitive rodeo champions in the nation, is a small city of about 20,000 residents, located right next door to Modesto, which has a population of about 210,000. Stanislaus County currently has a population of about 500,000. The three-county northern San Joaquin Valley region, comprised of San Joaquin, Stanislaus and Merced counties, has a population of about 1.4 million residents.
As we reported in this piece earlier today, Raley's, which currently operates about 129 supermarkets and warehouse stores under the Raley's, Bel Air Markets, Nob Hill Foods, Food Source and now Raley's Fresh Market banners, is looking for new store sites throughout Northern California and in the Reno/Sparks/Lake Tahoe region in northern Nevada.
The new Raley's-owned store in Oakdale, called Raley's Fresh Market, is at 40,000 -to- 45,000 square feet much smaller than most of the modern day Raley's banner stores, which range from about 55,000 -to- about 75,000 square feet. It's also unique in that the "Fresh Market" banner store is located in a former supermarket building the retailer remodeled for its Oakdale store.
For example, nearly every new Raley's, Bel-Air, Nob Hill Foods and Food Source store the grocery chain has opened in recent years has been a brand new, built from the gound up supermarket, or in the case of Food Source, a discount warehouse format store.
The Oakdale store also is the first time Raley's has used the "Fresh Market" name along with its Raley's name on a supermarket.
The Oakdale store previously housed an independent supermarket named Oak Ridge Fresh Market, which was a spin-off by the owners of the building's previous grocer, Richland Markets, which built the building and operated a Richland Market banner supermarket in it for a number of years.
Richland Markets, a long-time family-owned area multi-store independent, has been selling off most of its seven supermarkets in the cities of Modesto, Turlock, Ceres and Oakdale over the last few years due to family succession and competitive issues, according to a Modesto-area food broker and regular Fresh & Easy buzz reader.
Just recently, Richland Markets agreed to sell two of its remaining three supermarkets to another locally-based multi-store independent, discount grocer Cost Less Foods, leaving Richland left with only its flagship supermarket in Turlock, which is a city of about 75,000, located 10 miles from Modesto, according to the local area food broker.
The decision to locate the store in a vacant supermarket building and to try out the new Raley's Fresh Market banner name was made for a couple of different but related reasons, Fresh & Easy Buzz has learned.
We've learned Raley's decided to acquire the vacant building this spring--the Oakdale Raley's Fresh Market just opened a few weeks ago--and turn it into a new format using the Raley's Fresh Market name for three primary reasons.
First, the store is located right across the street from a Save Mart supermarket. Savemart, which is headquartered in Modesto and operates supermarkets throughout the Central Valley under the Save Mart banner and warehouse stores under the Save Maxx banner--along with supermarkets in the San Francisco Bay Area under the Lucky banner (it acquired those stores in its 2006 acquisition of Albertson's, Inc.'s Northern California Division)--is the market share leader in the northern San Joaquin Valley.
When Save Mart acquired Albertsons Inc.'s Northern California stores in 2006 (close to 200 supermarkets), for the first time the Modesto-based chain entered Raley's home turf market of Sacramento. Prior to that, Save Mart had never opened a Save Mart banner supermarket in the Sacramento market, even though its only about 65 -to- 70 miles from Modesto. The retailer always had stores as close as 20 miles from Sacramento, so going into Sacramento would not have been unusual.
Additionally, Raley's only operated a handful of stores (literally two or three only) in Save Mart's home market region of Stanislaus, San Joaquin and Merced counties.
Further, Raley's and Save Mart are partners in a grocery distribution warehouse located in the Northern San Joaquin Valley city of Lathrop. The two chains even shared the same private label, Sunny Select, as their respective store brand, until Raley's started converting most of its store brand items to the Raley's label a couple years ago.
Raley's also uses the Nob Hill Foods brand for store brand specialty and premium foods items. Raley's still sells items in certain categories under the Sunny Select brand. Save Mart continues to use it as its primary store brand across all categories.
However, with Save Mart's arrival with multiple supermarkets in the Sacramento regional market following its acquisition of Albertsons Northern California Division, Raley's got its competitive juices flowing and decided to hit Save Mart a bit harder than in the past in its home base. In the last year, Raley's has opened brand new Raley's banner superstores in Modesto and in Riverbank, which is a right next door to both Modesto and Oakdale. Raley's now has three Raley's superstores in Modesto, one in Riverbank and now the Raley's Fresh Market in Oakdale.
The Oakdale location right across the street from the Save Mart supermarket was too good to pass up for Raleys as part of its upping the competitive ante on Save Mart on its home turf.
Second, since the Raley's Fresh Market store building is smaller than a normal Raley's banner superstore (and is more a supermarket), Raley's decided it would have to limit the assortment it normally puts in its Raley's banner stores. Therefore, the retailer wanted to differentiate its name by adding "Fresh Market" to it, among other reasons fro choosing the name.
Additionally, Raley's wanted to go head-to-head with the Save Mart across the street on price and value, which meant offering lower everyday prices than it does in its Raley's superstores, along with deeper store-specific promotions. Therefore, the format tweaks required by the smaller store footprint, along with the name change, are allowing the retailer to focus more on price and price promotions in the Raley's Fresh Market in Oakdale, without creating confusion in terms of its merchandising and pricing in the Raley's superstore format stores.
Lastly, since the store is in a smaller footprint as well as existing building, its overhead and operating costs are much lower for Raley's than is the case with its newer Raley's banner superstores, which at about 55,000 -to- 70,000-plus square feet not only are bigger, which consumes more energy, but also feature lots of refrigerated and frozen cases in them. Therefore, it can offer lower everyday prices and hot promotions, which it is, designed to undercut the Save Mart across the street. In general, Save Mart supermarket prices tend to be a bit lower everyday than Raley's supercenter prices are.
Since the supermarket's previous tenant, the Oak Ridge Fresh Market, used "Fresh Market' in its name, Raley's also decided to use it as part of its new banner (or hybrid Raley's banner perhaps is a better way to phrase it) because the supermarket chain felt it allowed for some consistancy in the tranistion from the previous grocer to Raley's.
The Oakdale Raley's Fresh Market is a conventional supermarket essentially with a few twists. For esxample, it puts a much stronger emphasis on fresh foods--meats, produce, prepared foods--than a traditional 40,000 square foot supermarket does.
Price and heavy promotion also are part of the store's focus. Since opening, the store has been conducting numerous hot, store-specific promotions, which have included heavy couponing, free gasoline cards to customers who spend a certain amount of money per-purchase, deep discounts on fresh foods and groceries, and other heavy price and value-oriented promotional campaigns.
The Oakdale Raley's Fresh Market also is offering customers a $5 back on every $25 spent promotion currently, along with coupons for free items like fresh eggs, meats, produce items and other food and grocery items throughout the store.
Save Mart hasn't stood still though. It recently fired back with a thick coupon book specific to the Oakdale Save Mart location across the street, offering higher coupon values on many of the same items the Raley's Fresh Market offered in its coupon book. Save Mart also last week launched a special promotion in which it gave a gas rebate of $40 in the form of a gas card to the first 500 customers to spend $40 on groceries in the store.
Raley's has now come out with another thick coupon book for the store; which no doubt will be met by another similar one from Save Mart. Oakdale shoppers, and from what we are told those from surrounding towns, are definately benefiting from the competition between the two across the street situated grocers.
A Raley's spokesperson recently told Fresh & Easy Buzz it's possible the grocery chain may open more Raley's Fresh Markets of approximately the same size as the Oakdale store in other cities, in vacant supermarket buildings. However, she said the Oakdale store currently isn't any sort of test for rapidly rolling out a smaller-format, Raley's Fresh Market banner chain of stores anytime soon. However, the retailer isn't ruling out more, similar stores.
As we reported in this May 10 piece, Tesco plans to open its first Fresh & Easy Neighborhood Market grocery store in Modesto next year in a currently vacant building which most recently housed an independent supermarket that went out of business earlier this year.
That building, which is about 30,000 square feet, is set to be split in half by the shopping center's owner, with nearly half of it then remodeled into a Fresh & Easy small-format grocery store. Ironically, that now out of business Modesto independent supermarket, Michotti's Marketplace, bought the store (the business not the building) from Richland Markets, which is the same retailer that built and operated the Oakdale store the new Raley's Fresh Market is now located in.
We also know from our commercial real estate sources that Tesco Fresh & Easy Neighborhood Market is currently searching for additional store sites in Modesto and in the surrounding cities and towns.
Additionally, as we reported here, Tesco plans to locate its Northern California Fresh & Easy distribution center facility in Stockton, which is about 30 miles from Modesto. Stockton and Modesto (as well as Sacramento)--and the other cities mentioned above--are all conveniently connected along California Highway 99.
In terms of Fresh & Easy's entrance into the Modesto-Oakdale area, the Raley's and Save Mart price fight and competitive battle in the small city of Oakdale should give Tesco some idea of how much these two regional supermarket chains want to protect their respective hometown turf--the Sacramento region where Raley's is headquartered and the northern San Joaquin Valley region where Save Mart in headquartered.
Raley's, with about 129 stores, has annual sales of about $3.5 billion, while Save Mart, which has more than double Raley's total store count, had sales of nearly $6.5 billion in its latest fiscal year.
Both chains are far and away the current market share leaders in their respective headquarter regions. Additionally, Save Mart, with its acquisition of Albertsons Northern California divsion, the stores of which it now operates under the Lucky banner, is the number two market share leader in the San Francisco Bay Area, after number one Safeway Stores, Inc.