Dive Brief:

• Meijer is building a small-format grocery store in downtown Detroit, according to Crain’s Detroit Business. The 42,300-square-foot location will be part of a mixed-use development on East Jefferson Avenue, and will open in fall 2019.
• Median income for the area surrounding the store is just $22,672, with 172,000 residents living within a five-mile radius of the location, Crain’s reported. That’s roughly half the number that live around Meijer’s two Detroit supercenters. However, sources tell Crain’s the area is growing rapidly, and that it sees a significant number of workers during the day. Also, the smaller location won’t need as many customers as its much larger stores in order to sustain it. 
• This is the second urban grocery store Meijer has announced this year, according to MLive. This summer, the retailer announced it will build a 37,000 square foot store in downtown Grand Rapids called Bridge Street Market.

Dive Insight:

Meijer has taken a crack at opening smaller stores in the past. Meijer Marketplace stores, which at roughly 100,000 square feet were about half the size of its supercenter locations, began opening in 2010 and were seen by the company as an engine for the company’s growth in high-density, profit-rich urban markets. But Meijer built just two of the stores, both in Illinois, and quietly closed down the locations last year.

That disappointment could have turned Meijer off smaller formats, but the Midwestern retailer is smart enough to recognize a promising idea. The big difference between its Marketplace format and these new locations in Detroit and Grand Rapids is that the former was a mini supercenter format, whereas the latter will be dedicated grocery stores.

The opportunity for urban grocery stores is clear. Across the country, cities are drawing affluent millennials in from the suburbs. According to researchers at the University of California and the University of Pennsylvania, 23 of the country’s 25 largest cities have seen growth in the number of college-educated residents under age 45 since 2000. Neighborhoods are growing, but many are underserved by grocery stores, which typically face high rents and other hurdles to establishing locations.

Grocers like Whole Foods and Target are tapping into this demand with small-format stores, while convenience stores like Sheetz and Street Corner are building gas-free formats centered on prepared foods, snacks and consumables.

Meijer hasn’t unveiled specific plans for its Detroit grocery store, but it’s likely the location will follow the game plan the retailer set down for its Bridge Street Market store in Detroit. This includes a fresh-focused selection highlighted by a deep selection of produce and prepared foods. Local selections will be a focus. Every year, Meijer purchases $100 million worth of local produce. Rick Keyes, Meijer’s CEO, told MLive recently that the company will tailor its entire assortment to the tastes of area customers.

Meijer, said Keyes, is still focused on building and promoting its supercenters, but he also noted the company is likely to roll out more of these smaller grocery stores in the future. Will they succeed? Meijer knows the grocery business, and it’s tapping into what’s potentially a very lucrative trend around freshness, premium products and urban locations. But hurdles remain, and this move will likely be a significant change for a retailer used to thinking big.