Safeway Shelving 'The Market' Small Store Format; Won't Be Part of its Strategy Going Forward

Breaking Buzz - News & Analysis

Smaller format stores, except its soon to be shelved 'marketside by Walmart,' may be in at Walmart but Pleasanton, California-based Safeway Stores, Inc. is sticking with a single-format strategy - its"Lifestyle"format supermarkets, which average 43,000-55,000 square-feet, with some exceptions - and saying no to further development of its two-store small-format 'The Market' fresh food and grocery venture.

Safeway Stores' CEO Steve Burd confirmed yesterday what we've been saying in Fresh & Easy Buzz for well over a year - which is that Safeway's 'The Market' will not be a part of the grocer's retail format strategy going forward.

In a conference call yesterday as part of Safeway's reporting of its third quarter 2010 results, Burd said the grocery chain does not plan to build the two-store (Long Beach and San Jose, California) "The Market" into a chain of small-format stores.

Here's what the Safeway chief said:

"The good news is that we’re batting a thousand. We built two ['The Market'] stores and they both make money. I think there is no one else that’s created a store that small that can boast that kind of a batting average. At the same time when we went into the small store format we said that we weren't going to make it a big piece of our strategy unless we thought it represented a very significant opportunity. I would tell you that if you can’t build 300 of these for a company like us, then it’s not meaningful, say, over a five-year period.

"So, we think that we learned a lot from the smaller store and some of those concepts we are applying to our main fleet of stores. I think we might have communicated at the last Investor Conference or maybe in one of these earnings calls, we don’t see creating 300 small stores as a basic part of our strategy. Will we occasionally build a store that might be 20,000 square feet, I would say occasionally in some pretty unique circumstances, but we learned enough to conclude that for us it was not a new format that we were going to try to grow and make a big piece of our offering."

The San Jose, California 'The Market' format store - 'The Market by Safeway' - which opened in 2009 - is 21,000-24,000 square-feet. The Long Beach store - 'The Market by Vons' - which is in a building that previously was a standard Vons supermarket, is about 15,000 square-feet. It opened in May 2008.

While Burd didn't say at the most recent Safeway Investor conference earlier this year that "The Market" would not be a part of a multi-format strategy for the grocery chain going forward, he hinted at it at the conference, as he has in the past, at least for those of us who watch Safeway closely.

In fact, Burd spelled out the metrics required from the format in order for Safeway to go forward with it as early as the end of 2008

In December 2008 at that year's annual investor's meeting, eight months after the first "The Market" store in Long Beach, California opened, Burd said the results to date were less than thrilling, as we reported in this story - December 12, 2008: Competitor News: Safeway CEO Steve Burd Says Small-Format 'The Market' Is 'Good' So Far But Not 'Great;' But Must Be 'Great' in Order To Expand. His then assessment on the performance of the first small-format 'The Market' store eight months on was that it's: "good, not great."

At the 2008 meeting he said Safeway planned to open at least two more of the small-format 'The Market' stores in 2009.

However, the grocer opened just one additional store in 2009, the unit in downtown San Jose, California, and hasn't opened any additional stores in the format since then. We wrote about what was the then planned third store in this July 25, 2008 story: Breaking Competitor News: Safeway Stores, Inc. Plans to Open A Small-Format 'the market by Vons' Grocery Store in Downtown Los Angeles.

In December 2008 the Safeway CEO said once the additional two 'The Market' format stores are open, "Unless the results go from 'good to great' and we feel we can open 30 -to- 50 of these per year, it won't make enough difference for these stores to be more than an experiment."

As Burd said yesterday, Safeway may occasionally build a store in the 20,000 square-foot range. But providing his own question and answer in a sentence he qualified that rather clearly, saying: "Will we occasionally build a store that might be 20,000 square feet? I would say occasionally in some pretty unique circumstances."

'The Market" as a multi-store second format for Safeway Stores, Inc. is history.

We're told there are no plans at present to close either the San Jose or Long Beach stores though. As Burd said, they are making (some) money. In the case of the two, we can tell you this: The San Jose store is doing much better than the Long Beach unit.

In early 2008 Safeway had the Cornish & Carey commercial real estate team help it find five or six locations in the San Francisco Bay Area - the downtown San Jose site was one of the locations - for its "The Market" format, which it had only recently finished developing at the time. The firm and Safeway located the sites but the downtown San Jose location is the only one to be built and opened.

A key reason Safeway souoght out the locations was because in January 2008 Tesco announced its plans to open an initial 37 Fresh & Easy Neighborhood Market fresh food and grocery stores in Northern California - 19 in the Sacramento region and 18 in the Bay Area.

Safeway had first-hand experience with Tesco. United Kingdom-based Tesco was the first major chain in the world to establish a food and grocery e-commerce site and combine the online ordering element with home delivery. In the 1990's, when Safeway was interested in doing the same, it partnered with Tesco in Groceryworks, which was Safeway Stores' initial online/home delivery grocery service. The partnership didn't last long. The two chains parted ways and Safeway took the business in-house, which is where it remains today.

As a result of this first hand experience, along with the fact Tesco is a very respected global retailer, Safeway, which already had been considering a small-format of its own, ratched up the development process, creating 'The Market,' and sought out the various store locations in its home-turf San Francisco Bay Area, where it's headquartered, in part as a defensive move against Tesco, which was supposed to open the first Fresh & Easy stores in the region in early 2009. That never happened. Tesco now plans to open the first batch of its Fresh & Easy Neighborhood Market stores in the Bay Area in early 2011.

In the nearly three years since the first Fresh & Easy stores opened - there are currently 168 units; soon to be 155 after Tesco closes 13 stores by November 2, 2010 - Tesco has struggled with Fresh & Easy, losing hundreds of millions of dollars and is closing in on a billion dollar loss. The retailer says it will become profitable in its 2013 fiscal year, at which time it says it plans to have 400 of the 10,000 square-foot Fresh & Easy markets open and operating. But since its projecting a loss in the $250 million range for its fiscal 2010/11 year which ends in February 2011, that's going to be a tall order to achieve. [See: 13 Closing Fresh & Easy Stores List.]

Tesco's struggle with Fresh & Easy has no doubt played some part in Safeway's decision to drop 'The Market' from its future strategic plans, in our analysis, although Burd clearly laid out the metrics back in December 2008. It was a test - in fact a by-the-book test - and as is the case with tests, a decision has now been made.

Additionally, Safeway Stores' CEO Steve Burd is on the record as early as March 2008, saying at the time, as we reported in this story - March 12, 2008: Safeway CEO Steve Burd: 'I'm Not Particularly Worried About Tesco's Fresh & Easy Grocery Stores in California' - that Tesco's Fresh & Easy venture doesn't worry him much as a competitor.

The bottom line is Safeway doesn't really need a dedicated 15,000 square-foot store format in order to sell fresh-prepared foods; it does it just fine in its supermarkets. And if a particular urban location requires a smaller store, it can do a 20,000 square-foot version of its "Lifestyle" format, which "The Market" is essentially a smaller version of anyway.

In a series of stories so far this year we've offered a roadmap to where Safeway Stores, Inc. is going in terms of its format strategy: 43,000-55,000 square-foot "Lifestyle" format stores with expansive fresh food departments and a combination of price/value focused and more upscale food and grocery merchandising elements.

For example, read these three recent pieces from the blog:

>July 25, 2010: Safeway to Start Construction on New Pleasanton, California Flagship Store Soon; Thanksgiving 2011 Target Opening

>August 2, 2010: Safeway Unveils Plans For New 'Lifestyle' Format Store Designed to Fit Today's Berkeley, California Lifestyle

>April 8, 2010: The Branded 'Signature Cafe' in Safeway Stores' Soon to Open 'Social Safeway' in Washington D.C. Should Turn A Few Heads

Like Safeway with its 'The Market' fresh food and grocery store concept, Walmart is preparing to put an end to its 'marketside by Walmart' combination fresh food and grocery format, as it begins to launch a new generation of smaller format stores. [See - September 23, 2010: Revisting 'marketside by Walmart': Format As We Know it On the Way Out But Some or All Of the Four Stores Could Be Converted and October 13, 2010: Simon Says: Walmart U.S. CEO Outlines Smaller Store Strategy and Plans; Walmart to Offer Groceries Online in USA.

Safeway's 'The Market,' Walmart's 'marketside by walmart' and Tesco's 'Fresh & Easy Neighborhood Market' are all three very similar formats - all three are small-format stores that focus on fresh foods with limited assortments of groceries and perishables, for example - and all were launched at about the same time - late 2007 for Fresh & Easy, and mid-2008 for Safeway and Walmart's small-store ventures.

Time will tell if it's a positive development for Tesco to have its Fresh & Easy Neighborhood Market small-format fresh food and grocery chain as the remaining one of the three similar formats. But unlike Safeway and Walmart, Tesco doesn't currently have any other formats to fall back on in the U.S. should that development be a negative and not a positive one.

Related Stories:

March 5, 2008: New Details and Analysis About Safeway's Small-Format Summer SF Bay Area Surprise for Tesco's Fresh & Easy Neighborhood Market

March 12, 2008: Safeway CEO Steve Burd: 'I'm Not Particularly Worried About Tesco's Fresh & Easy Grocery Stores in California'

May 15, 2008: Breaking News: Safeway Opens its First Small-Format 'The Market' Grocery Store Today in Long Beach, California

June 5, 2008: Breaking News: Safeway Stores, Inc. Nearing Negotiation End-Game For its Second Small-Format 'The Market' Store Site; This One in San Jose, California

July 8, 2008: Southern California Market Report: Safeway Stores,'the market by Vons' Mass-Mails First Advertising and Promotional Flyer to Vons Club Card Members

June 6, 2008: More on Safeway's 'The Market' Format: 20-Year Food Retailing Industry Vet Offers Observations and Analysis on 'the Market by Vons,' Long Beach, CA

July 25, 2008: Breaking Competitor News: Safeway Stores, Inc. Plans to Open A Small-Format 'the market by Vons' Grocery Store in Downtown Los Angeles

January 30, 2009: Competitor News: Safeway Stores, Inc. Confirms Second Small-Format 'The Market' Unit to Be in San Jose, CA; Fresh & Easy Buzz Nailed it in June, 2008

Competitor News: Safeway CEO Steve Burd Says Small-Format 'The Market' Is 'Good' So Far But Not 'Great;' But Must Be 'Great' in Order To Expand

Safeway Stores, Inc. chairman, president and CEO Steve Burd (pictured above) offered an approximate eight month assessment of the chain's small-format store test, "the market by Vons", in Long Beach, California, which opened in May of this year, last Thursday during a meeting with analysts at Safeway headquarters in Pleasanton, California (San Francisco Bay Area.)

Burd's assessment thus far of the single test store of the grocer's "The market" format: "good, not great," Burd said on Thursday.

He said the Long Beach store is doing well but isn't setting the house of Safeway on fire, essentially.

Burd says Safeway will open at least two more of the small-format "The Market" stores next year. One of those two stores will be in a converted retail building, the other will be a built from the ground-up store, Burd said.

We believe the new construction store will be at this location in San Jose, California or this one in downtown Los Angeles, or both. which we broke the news on and wrote about earlier this year.

Burd said at the meeting that once the additional two "The Market" format stores are open, "unless the results go from 'good to great' and we feel we can open 30 to 50 of these per year, it won't make enough difference for these stores to be more than an experiment."

Burd's saying this about "The Market" shouldn't come as a shock to anybody, especially regular readers of Fresh & Easy Buzz. We've been writing all along since first reporting last year on Safeway's small-format development that it's an experiment and a test for the supermarket chain, which operates about 1,750 supermarkets under various banners in the U.S. and Canada, and is now ranked as the number four retailer of food and groceries in the U.S., after Wal-Mart, Kroger Co. and Costco.

Safeway's food and grocery retailing focus will continue to be on its Lifestyle format supermarkets. Burd said the company has nearly completed converting all of its supermarkets into its Lifestyle format, which combines discount retailing with a more upscale flair. The supermarkets are customized (we call it mass customization), ranging for being fairly mainstream to being super upscale, depending on the demographics and other criteria of the particular community and neighborhood the store goes into.

Burd also said at the analysts meeting that Safeway will further step-up its value proposition beginning early next year when it will make additional price cuts across all categories on numerous items in its supermarkets.

He also said the aggressive promotional programs, which even include the fresh, prepared and specialty foods categories in the stores, will continue and probably intensify beginning early next year.

Burd said Safeway "will survive" the recession in better shape than some of the price operators who are thriving now. "Recessions are temporary, and strong companies weather the downturns better than weaker companies," he told analysts.

"Some people on Wall Street have questioned whether we have the right strategy for a recession. But we believe you build a strategy to create long-term shareholder value, not to deal with a recession," Burd said.

So far he appears to be correct as Safeway has been doing fairly well despite the recession, thanks though in large part to the fact the grocer recognized the economic downturn early in 2008 and rapidly began expanding its value proposition.

CEO Burd told analysts that Safeway projects 2009 earnings per share of $2.34 to $2.44 and non-fuel ID sales growth of 2% to 3%.

"We believe that, despite all the price investments we plan, we will still be able to expand operating margins," Burd commented.

Reader Resource

Links to some past stories on Safeway's "The Market" from Fresh & Easy Buzz:

May 15, 2008: Breaking News: Safeway Opens its First Small-Format 'The Market' Grocery Store Today in Long Beach, California... June 5, 2008: Breaking News: Safeway Stores, Inc. Nearing Negotiation End-Game For its Second Small-Format 'The Market' Store Site; This One in San Jose, California... July 25, 2008: Breaking Competitor News: Safeway Stores, Inc. Plans to Open A Small-Format 'the market by Vons' Grocery Store in Downtown Los Angeles...

July 8, 2008: Southern California Market Report: Safeway Stores,'the market by Vons' Mass-Mails First Advertising and Promotional Flyer to Vons Club Card Members...July 16, 2008: Former NBA Great Earvin 'Magic' Johnson is Working His Business Magic in Urban, Inner City Neighborhoods; We Offer An Idea For Tesco's Fresh & Easy... June 6, 2008: More on Safeway's 'The Market' Format: 20-Year Food Retailing Industry Vet Offers Observations and Analysis on 'the Market by Vons,' Long Beach, CA

Breaking Competitor News: Safeway Stores, Inc. Plans to Open A Small-Format 'the market by Vons' Grocery Store in Downtown Los Angeles

Safeway Stores, Inc. plans to open the second or third (see our June 5 report about a potential "the market by Safeway" store in downtown San Jose, California here) store of its small-format (15,000 square foot) "The Market" grocery stores in downtown Los Angeles, Fresh & Easy Buzz has learned.

As we mentioned in our May 15 piece when we were one of the first publications to report on the upcoming grand opening (which Safeway kept under wraps) of Safeway's first small-format store, "the market by Vons," in the Belmont Shores neighborhood in Long Beach (Southern) California (the inside of which is pictured at the the top), the grocery chain had plans to also open "The Market" small-format food stores in urban locations. [Read our report on Safeway's plans to open a "the market by Safeway" in a new high-rise residential development in downtown San Jose in the San Francisco Bay Area here.]

We haven't been able as of yet to determine the precise location of the "market by Vons" store slated for downtown Los Angeles. We have some strong leads from sources but aren't ready to report a location until we are able to further confirm it.

For decades, downtown Los Angeles has been what is termed a "food desert," meaning that the vast urban downtown has been without food and grocery stores that offer a decent selection of basic groceries and fresh foods, especially fresh produce, at affordable prices.

Although the downtown is still underserved by such grocery stores, it's beginning to change primarily as the result of lots of new residential development that's been occurring in the city's urban core in recent years.

For example, a year ago this week, Southern California-based Ralphs supermarkets, which is a banner owned by Kroger Co., opened one of its first new Fresh Fare format supermarkets in what was then a brand new residential loft development in downtown Los Angeles.

The one-year old downtown Los Angeles upscale Ralphs Fresh Fare supermarket at 645 West 9th Street, which isn't a small-format grocery store but rather is a 50,000 square foot urban giant, was the first full-service supermarket to open in downtown Los Angeles in decades.

The Ralphs Fresh Fare stores are more upscale than the Ralphs conventional supermarkets, hundreds of which are located throughout Southern California. And as the "Fresh Fare" name implies, the stores feature an expanded selection of "fresh" foods, including produce, meats, dairy and fresh, prepared foods. The stores also have a greater selection of natural, organic and specialty food and grocery items than conventional Ralphs supermarkets do.

Although Tesco's Fresh & Easy Neighborhood Market is based in Southern California and has stores in Los Angeles, the grocery chain has yet to open one of its small-format (10,000 -to- 13,000 square foot) combination basic grocery and fresh foods markets in downtown Los Angeles. Based on our sources, who are good, Tesco's Fresh & Easy currently doesn't have any downtown Los Angeles stores in the new store opening pipeline either.

Ralphs, and now Safeway Stores, Inc. with its small-format "market by Vons" future downtown Los Angeles store, aren't the only grocers looking to the city's urban core for new business.

Hispanic consumer-focused, family-owned Southern California-based Liborio Market has opened a couple new supermarkets in downtown Los Angeles recently.

Liborio Market opened its first store in Southern California on February 6, 1966 in Los Angeles with $1,400 of initial capital, which was the collective savings of Enrique J. Alejo, Jr., Enrique B. Alejo, Sr., Randy M. Alejo, Berta Alejo and Nancy Alejo. The first store1,200 sq. ft. and had only $800 in beginning inventory, according to members of the family-owned grocer.

Liborio Market currently operates 9 full-sized supermarkets in Southern California, Nevada and Colorado. Two of those 9 supermarkets are in downtown Los Angeles. (five of the 9 stores are in Southern California where the grocer is headquartered.) One of the stores is in Las Vegas, Nevada. The remaining three supermarkets are located in Colorado: one each in Colorado Springs, Aurora and Commerce City.

Although the grocer's stores focus on Latino customers, the downtown Los Angeles stores also offer basic food and grocery items in order to reach the many non-Hispanics who live in the downtown neighborhoods. All of the Liborio Market supermarkets have full-size fresh produce, meat and grocery departments, along with having in-store bakeries and fresh, prepared foods departments.

The majority of the new residential growth in downtown Los Angeles is coming from younger professionals, who are moving into the numerous new multi-unit residential loft, apartment and high-rise condominium developments that have been built in the downtown core in recent years, and continue to be built despite a bit of slowing do to the credit crunch and the poorU.S. and California economies.

These young, mostly college educated professionals are moving to downtown Los Angeles for a variety of reasons, including to be closer to the office buildings where they work, to enjoy the excitement of the urban core, which is becoming an arts and restaurant and club mecca, and for a variety of other personal and professional reasons.

Downtown Los Angeles, as is downtown San Francisco and San Jose in Northern California, is luring numerous retired baby boomers in there late fifties to mid-seventies into the new, upscale lofts and condos rising throughout the city's urban core.

Many retired baby boomers who've lived in the suburbs for decades now find themselves with their children grown and out of the house, retired from their primary careers and perhaps working as consultants or in other second full-time and part time careers (or merely retired), as well as being "house rich" from twenty to thirty years of built-up equity as a result of historically fast-rising California housing values.

Many are "cashing out" and leaving the suburbs for urban centers such as Los Angeles' for a variety of reasons, ranging from desiring a simple change of lifestyle, to being able to be in the center of the city where they can drive less and walk to restaurants, cafes, restaurants and art galleries, for example.

Safeway's fairly upscale "The Market" format food and grocery stores, which feature fresh, prepared foods, fresh produce and meats, along with a selection of basic and natural and specialty food and grocery items, fit this "new urban" lifestyle well, although in the case of downtown Los Angeles, where the majority of residents are still low-income, the store's price points as they currently are in the Long Beach store, will need to come down if the store is going to cater to all levels of income in the downtown Los Angeles neighborhood where it is located.

However, since urban living usually means shopping more frequently because often residents in the urban core walk to the store or take public transportation, the fact that elements of the small-format "The market" format strores are designed for that type of shopping could make it a success in downtown Los Angeles.

Safeway has positioned its "The Market" format stores for "fill-in" shopping since the grocery chain also operates hundreds of full-size supermarkets in Southern California and elsewhere in the United States.

Therefore, unlike Tesco's Fresh & Easy Neighborhood Market, which the retailer has positioned to appeal to all consumers and wants to be used by consumers as a primary shopping neighborhood grocery store, Safeway can live by design with only attracting a certain segment--generally higher income--of consumers. In fact, that's the strategy behind the small-format, fairly upscale "The market" format stores.

To look at it in a related way, Safeway is using a multi-format food retailing strategy, with its "The Market" stores as secondary and tertiary shopping venues (its supermarkets being primary), while Tesco is using a single-format strategy currently, with its small-format Fresh & Easy stores designed to appeal to all shoppers and to be primary and to a limited extend secondary grocery shopping venues.

As we've reported previously, Safeway plans both a suburban and urban strategy in locating its small-format "The Market" food and grocery stores. [The name of the stores depends on the supermarket banner the retailer operates in a given market region. For example, it operates the Vons banner in Southern California. Therefore the stores are called "the market by Vons." In Northern California it uses the Safeway banner. Therefore those stores will be called "the Market by Safeway.]

The future store in downtown Los Angeles, along with the potential store in downtown San Jose we reported on here, demonstrates Safeway plans to put as much emphasis--at least thus far--on urban locations as it does on suburban ones. This makes sense because urban neighborhoods, regardless of demographics, are seriously underserved by quality food and grocery stores.

Tesco's Fresh & Easy realizes this trend as well, which is why it's mixes an urban and suburban store location strategy into its mix in California, Nevada and Arizona.

Small-format food and grocery stores are the ideal urban format. You will see even more urban stores from Safeway and Tesco's Fresh & Easy, as well as from other food retailers; not just in California but throughout the United States.

It's taken the grocery retailing industry a long time to see the potential of urban stores, and the changing suburban to urban demographics have helped that realization along in the last few years. However, numerous major grocery chains and independents are now seeing the potential of opening small-format stores in the city core. In fact, we see opening urban small-format grocery stores of various formats as being on of the top initiatives of the U.S. food and grocery retailing industry over the next few years.

Recent Related Posts From Fresh & Easy Buzz:

May 15, 2008: Breaking News: Safeway Opens its First Small-Format 'The Market' Grocery Store Today in Long Beach, California

June 5, 2008: Breaking News: Safeway Stores, Inc. Nearing Negotiation End-Game For its Second Small-Format 'The Market' Store Site; This One in San Jose, California

July 8, 2008: Southern California Market Report: Safeway Stores,'the market by Vons' Mass-Mails First Advertising and Promotional Flyer to Vons Club Card Members

July 16, 2008: Former NBA Great Earvin 'Magic' Johnson is Working His Business Magic in Urban, Inner City Neighborhoods; We Offer An Idea For Tesco's Fresh & Easy

June 6, 2008: More on Safeway's 'The Market' Format: 20-Year Food Retailing Industry Vet Offers Observations and Analysis on 'the Market by Vons,' Long Beach, CA

Southern California Market Report: Safeway Stores,'the market by Vons' Mass-Mails First Advertising and Promotional Flyer to Vons Club Card Members

Safeway Stores, Inc. has mass-mailed its first promotional flyer for its first small-format grocery store, "the market at Vons," which opened in Long Beach, California in May.

The advertising sheet, which was mass mailed to members of Vons' Club Card who live not only in the neighborhood where the store is located but also to residents who live a considerable distance away from the grocery store, introduces the Long Beach small-format grocery market as "Your neighborhood store (that) offers the best of everything."

The front of the advertising flyer, as you can see in the photograph at the top, features a picture of a bicycle with a basket full of groceries on it, with the tag line: "a refreshingly simple way to shop." The picture reinforces the messages of simplicity, conveniece, neighborhood, community, and the environment.

The messages are then elaborated on inside the flyer, pictured directly below, along with featuring items at promotional prices.

Below is the full text or copy inside of the mass-mailed promotional flyer:

welcome

Your neighborhood store offers only the best of everything.

a refreshingly simple way to shop

The Market by Vons is designed with a simple layout, so its easy to find what you're looking for. It's the perfect place for you're "fill-in" shopping or to grab a quick and delicious meal or snack.

the big little store

We offer a wide range of products, including fresh produce, meat and seafood, ready-to-enjoy meals, freshly baked goods and other everyday basics. So you can find everything you need but less of the things you don't, like long lines and 12 different kinds of ketchup.

no extra charge for convenience

You can expect the same great service and everyday value prices you'll find at Vons.

we want to be a responsible neighbor

Our store is 100% wind powered and is actively involved in programs that benefit our community.

have a taste

We offer samplings of our products daily. We'd like to help you discover what's in store in a delicious way.

Safeway is offering 10% off every item in "the market by Vons" small-format grocery store in the advertising flyer for the entire month of July.

In addition to the across the board 10%-off deal, the flyer promotion offers five features at fairly substantial discounts above 10%. These features are: A package of Safeway's private label Eating Right healthy brand fresh mixed lettuce greens, offered for free with no minimum purchase; $2-off any of Safeway's popular O' Organics store brand organic food and grocery items in the store; $3 off of the regular price of Safeway's Signature Cafe in-store roasted ready-to-eat whole chickens; and two deals on wines.

Safeway's Southern California Vons division has preloaded these promotions into all of the Vons Club Cards so that when shoppers purchase the items at the Long Beach "the market by Vons" store the promotional prices will automatically be reflected at the point-of-sale.

In the advertising flyer, under the "a refreshingly simple way to shop" header, Safeway mentions "The Market" is great for "your fill-in shopping." This is the retailer's positioning of the small-format "The Market" stores as we first reported here.

Unlike Tesco's Fresh & Easy Neighborhood Market, which is positioning its small-format (10,000 -to- 13,000 square foot) Fresh & Easy combination basic grocery and fresh foods Fresh & Easy stores as everyday or primary shopping neighborhood grocery markets, Safeway is positioning its "The Market" small-format (15,000 -to- 20,000 square foot stores) as more upscale, "fill-in " shopping venues as part of a multi-format strategy. In Southern California that multi-format strategy including Vons supermarkets and superstores, Vons Pavilions supermarkets, which have an upscale and specialty foods focus, and now the small-format "The Market" format, the first store of which is "the market by Vons" in Long Beach.

The Long Beach "The Market" store has come under some criticism since opening in May for having prices which some shoppers say are just too high in general, while others have commented the small-format store's prices are higher than those at traditional Vons supermarkets in Southern California.

Fresh & Easy Buzz has learned two things in this regard.

First, Safeway is adjusting the pricing in the Long Beach "market by Vons" store to make sure its generally in line with the everyday pricing at nearby Vons supermarkets.

Second, we've learned Safeway plans to mass mail flyers like this first one on a regular basis in order to create a value proposition for "The Market," along with positioning the format as convenient, quality and community-oriented.

In the mass-mailed advertising piece, Safeway says the Long Beach store is powered 100% by renewable wind power. The grocery chain is achieving this by buying wind power credits for 100% of all the energy the store consumes. Safeway has been doing this for some time for the stores throughout the U.S. in which it operates fueling or gas stations alongside the supermarkets. Every Safeway fueling center is powered by wind energy in the form of Safeway buying wind power credits equally the energy used by those gas stations.

As Safeway opens more "The Market" format stores, the retailer plans to put a major emphasis on the dual and compatible concepts of the environment and community with the small-format stores.

Green issues are front and center currently at Safeway. In addition to the wind power credits, Safeway is in the process of putting solar panel arrays on about 35 of its supermarkets in Northern California. The solar panels are designed to provide about 35% of a stores total energy use. Additional panels are set to be installed on more stores in Northern California as well as on a number of stores in Southern California.

Safeway also is converting its entire trucking fleet from traditional fossil based diesel fuel to biodiesel fuel, made from vegetable oils. The retailer initiated this program last year, before the price of diesel fuel soared, primarily for environmental reasons. However, with diesel fuel edging towards $6 a gallon, the economics of converting its huge trucking fleet to biodiesel should pay off well for the grocery chain much faster than it anticipated they would.

More on Safeway's 'The Market' Format: 20-Year Food Retailing Industry Vet Offers Observations and Analysis on 'the Market by Vons,' Long Beach, CA

Inside Safeway's 15,000 square foot "the Market by Vons" in Long Beach, California. The store, the first of the small-format, opened on May 15.

On May 15, we wrote this piece about the grand opening of Safeway Stores, Inc.'s first "The Market" small-format (15,000 square feet) food and grocery store in Long Beach in Southern California, called "the Market by Vons." The format averages 15,000 -to- 20,000 square feet.

Yesterday, we reported Safeway is in negotiations with the developer of a 22 story high rise condominium tower in downtown San Jose, California in the San Francisco Bay Area to put its second "The Market" format store on the ground floor of that residential building, as the retail anchor for the development.

Today, we bring you the observations and analysis of "the Market by Vons," Safeway's first small-footprint food and grocery store, in Long Beach, California.

The piece below is written by a 20-year retail food and grocery industry veteran, and regular Fresh & Easy Buzz reader and correspondent. The analysis was offered to Fresh & Easy Buzz via email based on our request of the writer to visit the store and offer our readers his observations and analysis. The writer is active in the retail food industry in Southern California at present, so asked we not use his name, which we are honoring.

Below in italics are the industry veteran's observations and partial analysis of Safeway's "the Market by Vons," which opened a little over two weeks ago in Long Beach, California. The piece was written on June 3, based on a June 2, 2008 visit to the store:

I went into "the Market by Vons in Long Beach yesterday....interesting store, but I really don't think it will compete that much with F&E (or Trader Joe's) unless they really start expanding and promoting their ready meals and carry more healthy products.

Here are my observations:

There wasn't very good signage over the prepared meals: salads, entree's, etc.

They really need to promote the fact that the products are fresh and were created by their restaurant chef .

I did like the presentation of the salads, especially the large round bowls and the safety seal that said "handcrafted."

The rest of the prepared meal presentation was just "OK" and I feel they really need to tout the fact that they were created by a chef.

I also don't think they will compete with F&E unless they do more organic and healthy entrees without preservatives. By the way...the code date on the salads (at "the Market by Vons") were 6/3...so I know there has been a lot of complaints about the short shelf life on F&E products...but the salads only had 1 day shelf life remaining. In addition, I couldn't find any code dates on the entrees, so I'm not sure if this is a good or bad thing in the eyes of the consumer.

I really liked all the tasting stations scattered about the store. In addition, all the employees were very friendly and made a special effort of saying "hi, can I help you." It actually almost felt like overkill, like there were too many employees with not enough to do. [Fresh & Easy Buzz Editor's note: Safeway Stores, Inc. has a corporate policy, which started in the late 1990's, in which every employee must say hello to every customer that employee comes into contact in the store.]

I did like how they presented the produce "in the round." It seemed pretty easy to find the produce you were looking for and everything looked fresh.

As for the dry grocery items...again, I was surprised by the lack of healthy products. Most of the products were run of the mill top brands, and very little private label. Once again, if they want to compete with F&E or trader Joe's (and who said they did?), then I think they need to have more unique healthy products in the store. They most certainly have a larger sku count then F&E does because their shelving is higher and not as deep, and they are displaying the product out of the case.

I did find the checkout rather confusing. They had self checkout and service checkout, but it was confusing because at the beginning they had a roped off section and it was hard to tell which line you needed to get into for which. It looks like they decided to go with about 50% self-checkout and 50% service checkout. I went with the service checkout (in retrospect I wish I had gone with the self so I could see how easy it was), but I got in the wrong line!

I found the pricing to be higher than a typical Vons' supermarket (maybe my imagination), and higher than F&E. But if the product was on promotion, it seemed closer to the F&E pricing.

I thought the atmosphere was very nice in the store, low mellow music (not sure if F&E is still piping in loud music in the stores, but I personally don't like it). Overall, I really felt 'the Market by Vons" in Long Beach was pretty much just a grocery store shrunk down with a few nice benefits (tasting stations, bread cutting, etc).

Fresh & Easy Buzz will be publishing additional observations and analysis--including an original piece we are working on based on two long visits to "the Market by Vons" to date--in the upcoming days. Stay tuned.

More on Safeway Stores, Inc.'s 'The Market' small-format and it's First Store, 'the market by Vons,' Which Opened Last Week in Long Beach, California

The "Signature Cafe (above)," which is a regular feature in Safeway's "The Market" format stores, in the new "market by Vons" in Long Beach, California provides a real "fresh foods" signature and feel to the small-format grocery store. It also creates a nice sense of place in the store based on its design elements and color tones.

On Thursday, May 15, we reported in this piece on the Wednesday, May 14 grand opening of Safeway's new "The Market" format "The market By Vons," a small-format, hip new grocery store in Long Beach California.

As we mentioned, numerous shoppers at the grand opening told Fresh & Easy Buzz the store reminded them of a "mini Whole Foods Market." One shopper said the store reminded him of Trader Joe's with a makeover. Another said it reminded her somewhat of a small grocery store version of Starbucks.

These actually are all wonderful analogies and examples. Never underestimate the perceptual abilities of consumers.

The store actually is a logical variation of Safeway's Lifestyle format, adapted to small-format food retailing. The store at about 15,000 square feet, offers a limited assortment of basic food and grocery items and perishables, a strong selection of bulk fresh produce displayed farmers' market style, lots of prepared foods under Safeway's "Signature Cafe" and new "World Cuisine" brands, and "assorted other basics and goodies", in the words of a female shopper we talked to on the way out of the store on grand opening day.

Nancy Luna, business reporter for the Orange County Register and the 'Fast Food Maven' blogger for same said newspaper, visited the new "the market by Vons" the other day and has a good post about it in her blog today, along with some wonderful photographs of the store interior taken by Orange County Register photographer Jeb Harris. There's a link on the post where you can click to watch a slide show of Harris' store photographs as well.

Read today's blog post about "The Market by Vons in Long Beach by the Fast Food Maven here.

As we first reported last year, and again in the May 15 piece on "the market by Vons'" Long Beach store grand opening, Safeway is set to open up to four of "The Market" format stores in the San Francisco Bay area this summer. This is ahead of Tesco opening the first of its 18 planned Bay Area Fresh & Easy small-format, convenience-oriented grocery stores in the region starting early next year.

Safeway is based in the Bay Area, and has been for the chain's entire existence. It's also the number one food and grocery market share grocer in California.

Much of the research for "The Market" format was done in the Bay Area. Knowing the San Francisco Bay Area food and grocery retailing market rather well, we think the small-format, somewhat upscale 'The Market" format stores have a huge potential to be a big success in the Bay Area. The stores will be called "the market by Safeway" in the Bay Area.

Their arrival months before the first Fresh & Easy store opens in the region could be trouble for Tesco. We will be providing some analysis on that match up soon in Fresh & Easy Buzz.

What Others Are Saying: The LA Times on Safeway's New Small-Format 'Market by Vons' Grocery Store in Long Beach, California

Above is a photograph of the inside of the Long Beach the Market by Vons. Notice a couple things: The fresh produce in the store is bulk and displayed farmers' market style--as is the norm in California food retailing--rather than packaged like it is at Tesco's small-format Fresh & Easy grocery stores. Second: notice the store shelving/gondolas. The shelving is more high-profile, modern-supermarket-style rather than the warehouse store-type shelving Fresh & Easy stores use. The end-caps in Safeway's "The Market" format stores, like this one, also are made of wood, which is stained a deep, rich color. (Photo: Rick Loomis. Courtesy: Los Angeles Times.)

On Thursday, May 15 Fresh & Easy Buzz reported on the opening of Safeway Stores, Inc's first small-format grocery store, it's 15,000 square foot the Market By Vons, in Long Beach, California.

Read our breaking news piece, "Safeway Opens its First Small-Format 'The Market' Grocery Store Today in Long Beach, California here.

Today's (Saturday, May 17) edition of the Los Angeles Times has a story in the business section by business staff writer Jerry Hirsch about the store, which as we wrote in our piece is located in an older Vons supermarket which Safeway decided was too small and out of date to turn into one of its Lifestyle format supermarkets.

The Market by Vons is located on Ocean Blvd. in the Belmont Shore neighborhood in Long Beach.

Rather than attempt to convert the older Vons supermarket into a Lifestyle format Vons, Safeway decided to remodel it and convert it into its first "The Market" small-format, basic grocery, specialty and fresh, prepared foods grocery store.

Safeway will be converting other such stores in its market regions to the small-footprint, somewhat upscale "The Market" format. For example, in Northern California, the Pacific Northwest, Arizona and Colorado, the stores will be called the "Market by Safeway." In other regions like Chicago, the "Market by Dominick's," and the like, depending on the particular retail banner the grocery chain operates in a given market region.

The stores are sort of a hybrid basic grocery store, fresh, prepared foods and specialty foods' market, similar to Tesco's Fresh & Easy, but also different in look and kind.

In terms of the upscale and specialty products category perspective, Safeway has lots of experience in the categories from operating its Vons' Pavillions format supermarkets in Southern California for many years.

The Pavillions' banner stores, which Safeway obtained when it acquired the Vons chain and has continued to open additional supermarkets under the banner since then, also was in-part one of the inspirations for the food and grocery retailer's Lifestyle format, which it's in the processing of converting--except those stores it turns into "The Market" or decides to close--all 1,740-plus of its supermarkets in the U.S and Canada into. The retailer has converted about 70% of its total supermarkets into Lifestyle format stores to date.

There are numerous synergies between the Lifestyle format--which is a mix of basic food and grocery products value-priced, along with fresh, prepared foods and specialty, natural and organic offerings, with a big emphasis on "fresh," including produce and meats.

Read today's LA Times story, "Safeway Tries Downsizing to Better Fit Local Needs," here.