Less than a year after the first Wegmans opened in Prince George’s County, it’s having an impact on the county’s changing supermarket landscape.
And competition in the historically low-margin industry could become even steeper when a new Walmart opens as planned in 2013 in Oxon Hill.
Safeway has announced the closure of three stores since May. Stores at 50 Watkins Park Drive in Upper Marlboro and 2346 Iverson St. in Temple Hills are scheduled to close July 9 and July 16, respectively, according to Craig M. Muckle, a spokesman for the Pleasanton, Calif., company. Safeway closed its store on Silver Hill in District Heights in May. The 125 displaced employees from the closing stores have been offered work at other Safeway locations, Muckle said.
While the Temple Hills and District Heights are closing because their leases are expriring, the Upper Marlboro store faced stiff competition from the Wegmans, which opened in the fall in Woodmore Towne Centre in Landover, about five miles away, Muckle said.
“It’s better to close it than upgrade and not get much return,” he said of the 25-year-old store, although Wegmans is not significantly cutting into sales at Safeway’s other stores.
Safeway, with its Eastern regional headquarters in Lanham, has 11 stores in Prince George’s, not including the ones scheduled to close, and holds 15.2 percent of the market share in the county, according to a June 2010 study by trade publication Food World. New data are due next week.
Muckle said the Upper Marlboro store has been “in the red” for many years and that attempts to do something with its layout were complicated by the dynamics between Safeway and the property’s landlord.
“With Wegmans, the window of opportunity had probably closed on us,” he said.
Wegmans stores offer particular competition to smaller grocers due to their size, said David J. Livingston, an analyst with DJL Research in Waukesha, Wis. The Landover Wegmans is larger than 130,000 square feet, while most Giant Food and Safeway stores are smaller than 100,000 square feet.
“When you’re adding that sort of square footage to an already competitive market, there’s going to be some casualties,” Livingston said.
Wegmans also has the advantage of being privately held, so it is not as concerned about market share as its competitors, he said.
“This allows us to take risks and be patient. We can focus entirely on the customers and employees,” said Jo Natale, spokeswoman for Wegmans, of Rochester, N.Y. “When we enter a market, we do a lot of research, and Prince George’s is not an exception.”
Natale said the Prince George’s Wegmans has met company projections, with sales growing weekly as customers return after their intitial visits.
Wegmans also has a store in Hunt Valley and plans to open a store in Frederick and Bel Air this year, with three more Maryland stores planned in Crofton, Germantown and Columbia, she said.
The new Walmart in Oxon Hill could further squeeze some of its competitors, as its prices are typically 15 percent to 20 percent lower than many other grocers’, Livingston said. Prince George’s already has four Walmarts.
Stores with historical ties to a region, such as Giant Food, with its headquarters in Landover, have some advantages, he said. But today’s price-conscious cconsumers show less brand loyalty than in the past.
Giant, which is 75 years old and owned by Netherlands parent Royal Ahold, has 19 stores in the county, holding 22.0 percent of the market share, according to last year’s Food World study. The company had $531.4 million in annual sales in Prince George’s, according to that report.
“We’re focused on operating to the best of out ability and sticking to what’s made us a market leader in the D.C. region,” said Jamie Miller, Giant spokesman.
He said Giant has seen the Washington, D.C., region become more competitive in the past few years, even as Giant continues its process of store renovations. Giant has remodeled 100 stores since 2008, Miller said. He said he could not comment on upcoming projects.
“We’re positioning ourselves to operate well for the next 75 years,” he said.
Safeway also remains committed to Prince George’s, Muckle said. Its annual sales in Prince George’s totaled $367.3 million at the time of last year’s survey.
He said Safeway is also redeveloping stores in Bethesda, Wheaton and Olney as part of a six-year project, which is coming to its end, and is considering renovating Prince George’s locations.
Shoppers Food & Pharmacy, which has 19.5 percent of the Prince George’s market and is in the process of moving its headquarters from Lanham to Bowie, also has been working with stores outside the county. This week it announced that a court approved its purchase of a Superfresh store in Ellicott City from the bankrupt Great Atlantic & Pacific Tea Co. Shoppers has 14 stores in Prince George’s and generated $470 million in county sales, according to the June 2010 survey.
A&P has been selling its Superfresh stores since May, which is benefiting many area grocers, Livingston said. The Montvale, N.J., company filed for bankruptcy protection in December.