Dive Brief:

• The race to snatch up stores belonging to Dominick’s grocery chain, which shuttered in 2014, is drawing to a close, according to a story in The Chicago Tribune. Now, grocers like Mariano’s and Jewel-Osco, which account for a combined 30% market share in Chicago, must find new growth opportunities in a saturated market with stiff competition.
• Discounters like Aldi, along with dollar stores, still have room to grow thanks to their smaller format and potential to thrive in underserved neighborhoods.
• “The problem is there's too many stores and there are only so many customers and so much shopping to go around," Mike Bousis, co-owner of Cermak Fresh Market, which operates 15 stores in the Chicago area, told the Tribune. 

Dive Insight:

When Dominick’s closed in late 2013, it left behind 72 stores in the Chicago area — many of them situated in prime locations. The former retailer’s competitors, including Jewel-Osco, Mariano’s and Whole Foods, bought up many of the most promising sites. Some of the stores owned by Albertsons, which owns Jewel-Osco and bought Dominick’s parent company Safeway in 2015, remain dark. This frustrates many locals and some have accused the company of anti-competitive behavior.

This buy-up was a rare opportunity for retailers to expand their presence in a nearly saturated Chicago market. Now these companies are once again faced with the challenge supermarkets across the U.S. face: How to grow sales through existing stores rather than buying or acquiring new ones.

E-commerce presents an opportunity to capture new consumers and get existing ones to buy more items. Online shopping tends to encourage large fill-in trips, since shoppers don’t have to pick and bag the groceries themselves and want to get the most out of any fees they’re charged. But it’s a difficult environment for retailers to make money in right now, because added labor costs tend to cut into sales. It’s also an increasingly competitive market, with Amazon accounting for around a quarter of all online grocery sales.

These considerations are no doubt weighing on Jewel-Osco and Mariano’s, who have yet to step into the e-commerce arena.

The stronger bet for these two retailers, along with others, is to invest in the store experience. Kroger-owned Mariano’s has excelled here, with industry-leading prepared foods, strong fresh departments and memorable extras like a grill that will prepare any meat or seafood purchase to the customer’s liking. Jewel-Osco, meanwhile, has lagged behind, but is fast making strides. Last year, it introduced an upscale specialty concept in the city’s Old Town neighborhood.

“We really want to put forth a new image,” the store’s real estate manager told the Tribune at the time.