New HEB concept store puts the super back in market

DSN Retailing Today, July 19, 2004 by Debbie Howell

WACO, TEXAS -- With the lines between food and general merchandise retailing continually blurring, Texas grocery chain HEB has raised the bar in a test of a new store prototype that devotes significant floor space to supercenter-type goods, from toys and home entertainment products to area rugs and higher-end TVs.

Two of these large-format stores, called HEB Plus, opened recently in Texas with a third slated for 2005. The first opened in February in San Juan, near the border town of McAllen, followed by a second in April near Waco in central Texas.

At 109,000 square feet, these stores are larger that HEB's typical supermarket that ranges up to 70,000 square feet and generally carries 50,000 SKUs. About 10,000 items have been added, mostly in general merchandise, along with new service features, such as ear piercing, party planning and a cooking demo station.

"It's one of our new prototypes," said Leslie Lockett, manager of public affairs for HEB's central Texas region. "HEB conducted focus groups and surveys to understand shoppers ... with this new format we responded to some of those responses."

Lockett said part of the strategy relates to tailoring assortments and services to neighborhood interests. She declined to respond to comments that the Plus store is HEB's answer to the threat of Wal-Mart's supercenter expansion. Although HEB dominates the Waco market in grocery sales, Wal-Mart is the No. 2 player. The nearest Wal-Mart store is four miles away, with a new supercenter under construction less than a mile from the HEB Plus store, which replaced an older store.

HEB's aggressive move into general merchandise is the latest by a traditional supermarket chain to test supercenter-type formats. Other examples are Kroger's growth of its Marketplace concept and Loblaw's supercenter evolution in Canada.

"This format is a response, in a sense, to the broader selection that Wal-Mart has been able to offer," said Neil Stern, senior partner with the retail consulting firm McMillan Doolittle, of the new HEB format. "The No. 1 challenge for all supermarket chains is Wal-Mart and its continued incursion into the food business."

Similar to the learning curve Wal-Mart tackled when it began selling food, HEB and other conventional grocers face related issues in expansion of general merchandise. Part of the challenge relates to knowing what items and categories to carry, though Stern is among many who are confident of HEB's success, given its expertise in food.

"First, they are a great grocery merchant," Stern said. "They've also demonstrated patience in what they're doing, so I think they're committed to learning."

HEB has been one of the few supermarket chains to actually withstand Wal-Mart competition fairly well. The privately owned company is also known as a trend-setter, excelling in ethnic food merchandising, private label and innovative formats, such as its Central Market gourmet food stores in Texas' largest urban markets.

A visit by DSN Retailing Today to the HEB Plus store in Waco earlier this month showed once more how HEB is setting a new standard in supermarket retailing. The store--which doesn't carry every category found at a supercenter but does go deep into select segments such as party, toys, infant goods, books, entertainment and cookware--appears positioned as a one-stop destination for household needs. Amenities of the 24-hour store include a drive-through pharmacy, bank, sushi bar, one-hour photo center, floral department, beauty counter and gift registry, while gas pumps were still being installed at the time surveyed.

Different colored circular or rectangular banners segregate the store into miniature shops, including large sections devoted to Beauty, Drugstore, Card & Party and Baby running along one side of the store, adjacent to other general merchandise departments that included Toys, Home & Outdoor, Books, Video and Music. At the opposite end, near produce, is a Cook & Grill section featuring grills, cookware, kitchen appliances, tabletop, kitchen gadgets and other cooking supplies.

Aisles were extremely wide, with impulse items interspersed in dump bins, on display racks and grouped in pallet drops. A feature wall of higher-ticket items upon entrance to the drug side of the store included such products as luggage, large area rugs, a pool deck box, garage tool storage rack and electronic insect killer.

Large and higher-end items could be found, including a $3,999.99 high-definition television from Sharp, the most expensive item in the store on the date surveyed. A sampling of other bulky or big-ticket items included infant carriers, high chairs and cribs, a sofa/loveseat set, home decor accessories, a Haier air conditioner, patio furniture, several gas grills, Black & Decker power tools, DVD players, televisions and other home entertainment products, and computer fax/printers. Many of the large items required taking a pull ticket to a cashier to buy.

Of the new categories the store highlighted, assortments were broad and extensive. The baby department, for example, included everything needed to care for and outfit an infant, including food, bedding, clothing, toys and large accessories.