Dive Brief:

• Giant Food Stores announced its first Giant Heirloom Market will open January 25 at 7 a.m. in the Graduate Hospital neighborhood of Philadelphia, according to a company press release. The small-format store will showcase a specially curated product assortment that reflects its urban surroundings, and will employ 60 people in part-time and full-time positions.
• The 9,500-square-foot market will offer local produce, specialty products from Philadelphia-area purveyors, kombucha on tap and a do-it-yourself olive oil and vinegar station where customers can create their own blends. Giant Heirloom will also offer "endless aisle" technology with in-store iPads that customers can use to order products they can't find in-store for next-day delivery through Peapod. The market is also equipped or mobile checkout and includes self-checkout stations.
• “We’re proud to serve our Graduate Hospital neighbors during their culinary quests by offering fresh produce, meat and seafood alongside the Philly products they know and love all in a store designed for them,” said store manager Angel Cordero in a press release. 

Dive Insight:

Ahold Delhaize, which own the Giant Foods banner, has high hopes riding on Heirloom Market. After shuttering its bfresh concept last year, the company is taking another swing at establishing small-format urban stores that cater to affluent customers. Heirloom is located on a site formerly slated for bfresh.

So what's different about Heirloom? Whereas bfresh focused on natural products and low-price messaging, Heirloom seems to be positioned as more of a high-end specialty market. Foodie features include a produce chef that will slice fresh veggies on demand, extensive craft beer and wine offerings, plant-based foods and artisanal bread from local bakeries. The store promotes itself as a "real food" experience for shoppers.

Meanwhile, endless aisle technology and mobile checkout could win over shoppers who seek convenience in their urban neighborhood and may not be able to find everything they need within the small store. It’s an unexpected element for a small-format market, and will allow shoppers to tap into Giant Foods’ larger inventory – and raise the profile of Peapod in Philadelphia.

Urban markets are one of the few store growth opportunities left for grocers these days. But capitalizing on that opportunity is tricky, with high building and operating costs, tough-to-please shoppers and non-traditional spaces — including those with multiple levels — often weighing on retailers. Whole Foods has a history of running strong urban markets, while Target, Dollar General and other retailers are planting new store concepts in cities across the country.

Across the U.S, grocers are building smaller stores. Ahold Delhaize is investing in smaller format stores for other banners, including Stop & Shop, which recently opened a smaller format store that will focus on fresh, fast and local offerings. Hy Vee’s new Fast & Fresh banner opened its first store in Iowa in December, and the 10,000 square-foot store is designed for efficient shopping with high-quality, freshly prepared food items and other grocery staples. 

In contrast to traditional grocery stores, small formats cost less to operate and allow for more local and experience-driven features as customers order more of their groceries online and more inventory stays in warehouses and distribution centers. The rise of small format stores from big-name grocers will likely continue, especially those like Giant Heirloom that are equipped with grocery technology to promote e-commerce while still connecting with customers on a personal level.