As Sprouts Farmers Market grows its presence across the country, the grocery chain is benefiting from a new site selection process that’s more precise and localized, company executives said during the Bank of America Consumer and Retail Conference on Tuesday.
About three to four years ago, Sprouts revamped its analytics around selecting where to open new stores and partnered with a third-party platform to develop a model that prioritized local expertise over operational expertise, CFO Curtis Valentine said during the event.
The new model looks at the interplay of target customers, competitors, trade barriers and drive times, Valentine said.
Last year was the first year when all the stores the grocer opened followed the new strategy, Valentine said, noting that these locations have had strong performance so far.
Valentine reiterated Sprouts’ desire to open 1,200 stores.
“We know where we want to be,” he said. “And then within that, it's not just the three-mile ring or the trade area, but it's the actual cross street where we feel like we'll do the best within that three-mile ring.”
Coinciding with its updated site selection process is Sprouts’ rollout of its smaller store format, which began a few years ago. The format “resonates really well with customers” and helps differentiate the chain, CEO Jack Sinclair said during the Tuesday conference.
“They like the fact that they can get in and out quickly,” Sinclair said. “They like the fact there's a sight line all the way through the store.”
Sprouts previously told Grocery Dive that the condensed store model, which averages 23,000 square feet compared to the company’s traditional 30,000-square-foot layout, improves its box economics, brings in higher margins, lowers labor costs and cuts construction costs by 20%.
Sprouts has also brought new experiences into its stores, like coffee shops and smoothie bars. Its in-store smoothies, which are only available in a few locations, have gone viral, Sinclair noted. Some on TikTok have dubbed them as the “Erewhon smoothie dupe.”
Sprouts currently has more than 440 stores in 24 states and plans to open seven locations in Florida this year as part of its rapid store fleet expansion.
Even with the best site selection, Valentine acknowledged that Sprouts doesn’t have enough stores to reach everyone, which makes e-commerce an important part of the grocer’s strategy.
E-commerce accounts for around 14% of Sprouts’ sales, with delivery comprising about 80% of orders, Valentine said. Sinclair said he expects the online business to grow “a little bit over the next five years or so” but at a slower pace compared to recent years.
Instacart, the grocer’s longest e-commerce partner, has the largest share of its online business and those online shoppers tend to buy more than in-store customers, Valentine said. Sprouts added DoorDash in 2022 and Uber at the end of 2023.
Online baskets at Sprouts, which feature the same pricing as in-store, mostly have the same mix as in-store baskets — which is somewhat surprising, Valentine said.
“You would assume or expect maybe [fresh] to be a little bit lower online, but it speaks to the trust that our customer has with us as it relates to fresh product,” he said.
