Fred Meyer thrives in diversity; retailer shuns one-size-fits-all stores

DSN Retailing Today, Sept 8, 2003 by Doug Desjardins

After its 1999 merger with Kroger, many analysts wondered how Fred Meyer would change and if the supermarket operator would use the chain as a template tot future expansion. That hasn't happened--at least not yet--but Fred Meyer isn't suffering from its association with Kroger in terms of its unique position in retailing.

In the food area, the 134-store chain is still providing superior quality in an upscale environment that features full service delis, coffee shops with a sidewalk cafe atmosphere and in-store cooking demonstrations.

"If you compare Fred Meyer, Wal-Mart and Meijer, Fred Meyer does a superior job in every area," said George Whalen, president of Retail Management Consultants in San Marcus, Calif., and a frequent visitor to Fred Meyer stores. "And they really do an exceptional job with food."

One of the most interesting things about Fred Meyer's stores is their diversity.

While other supercenter operators focus on giving units a uniform look, Fred Meyer outlets come in several different sizes and formats that seem to morph to their surroundings. During a recent trip to the chain's corporate home in Portland, Ore., Food Retailing Today visited six stores and found that each one had a unique look.

That variety is probably an outgrowth of the chain's propensity to try to new things. Many of its stores are sectioned off, with food on one side and general merchandise on the other, but some have food in the middle with general merchandise on both sides, the result of a format it tested in the 1990s.

While nearly all its stores are supercenters, a few of them are more like standard supermarkets, including its store in downtown Portland. "This is probably the smallest store we have in the whole chain; a cashier noted when explaining the absence of general merchandise. The store, which is shoehorned into a business district, does have a small home section at the rear and a large home electronics department just beyond the checkout stands in front.

The store was small, but it did feature two things that seem to be a common denominator for Fred Meyer: a large deli area with a huge variety of fresh meat and fish and a communal area that encouraged shoppers to linger.

FRT found the best example of this at a Fred Meyer northeast of downtown Portland. The cavernous outlet had the typical Fred Meyer layout with the department store on one side and the supermarket on the other, a reminder of the days when a wall separated the two. But this store included a large Kivu coffee shop, a deli area with a well-stocked display of fresh meats and seafood, and a small "Cook and Tell" booth where a chef gives daily cooking demonstrations.

In the nearby suburb of Beaverton, FRT found another variation dubbed Fred Meyer Marketplace. The store is in a smaller box and features a smaller selection of general merchandise that includes home furnishings and bedding. Most of the floor area is dedicated to the supermarket and has all the amenities of supercenter food departments.

Fred Meyer also seems to rely on technology as much as, or perhaps even more than, its major competitors. Every store we visited had a large number of easily negotiated U-Scan self-checkout systems that were getting plenty of use.

While Fred Meyer still holds a unique position in the sprawling Kroger empire, some of the ideas that make it work so well are being implemented in other areas. A report issued in July by Merrill Lynch on competition in the Atlanta market noted that Kroger has "a large and growing general merchandise offering [in Atlanta stores] thanks to its acquisition of Fred Meyer supercenters and its hot procurement area."

The Fred Meyer name game

Before its merger with Kroger, Fred Meyer exported its banner to Arizona when it converted 17 Smitty's Marketplace stores into sawed-off supercenters. Those stores now operate under Kroger's Fry's Marketplace banner but are much different than standard Fred Meyer units in the Pacific Northwest.

The Fry's Marketplace stores are more focused on general merchandise, with about one-third of the floor space dedicated to products like home electronics, sporting goods, toys and some basic apparel items. The store we visited last year outside Phoenix also had a bank, a full pharmacy and a large outdoor living department with plants and patio furniture.

The Fred Meyer Marketplace store FRT visited in the Pacific Northwest is smaller and more like a supermarket with about 10% general merchandise such as bedding and small home electronics.