Shops Within Outlet : Ralphs’ New Giant Dwarfs Superstores

Grocery chains always seem to be in the market for that superlative term to set them apart as bigger and better. Hence the evolution from mom-and-pop to market to supermarket to superstore and now the rage in Europe, hypermarkets, where clerks speed through the aisles of cavernous stores on roller skates.

When Ralphs Grocery decided to open its first store here last January, it needed a name that would give a sense of something even bigger than a superstore: the Giant.

At 70,000 square feet, the store is nearly twice as large as Ralphs’ superstores and is roughly equivalent to 1 football fields. It has given rise to another descriptive handle: upscale super warehouse store--upscale because of such service departments as deli, bakery and fish; warehouse because of the atmosphere and shelving, and super, of course, because of the size.

And Ralphs has something even bigger in mind for shoppers in Los Angeles and Orange counties. When it begins opening stores in 12 former Zodys locations in August, they will house as many as 18 shops and kiosks offering goods and services.

These 100,000-square-foot stores “are really too big for us to occupy by ourselves,” said Byron Allumbaugh, chairman and chief executive of Compton-based Ralphs.

Across the front concourse near the checkout stands will be retailers selling cookies, frozen yogurt, ice cream, costume jewelry and cosmetics or such services as dry cleaning, photo developing and video rental. In most cases, customers will be able to enter the shops only from the main store.

Ancient Romans might have called it bread and circuses.

Economies of Scale

The Giant concept is the latest wrinkle in a market often described as the nation’s most competitive. For retailers, larger stores offer economies of scale that can boost profitability. And when margins are as razor thin as they are in Southern California, where price wars are an everyday thing, bigger often translates into better value for customers.

To be sure, the huge new locations won’t appeal to everyone. Many customers are willing to pay a premium in return for pampering and a less mall-like atmosphere. But grocers big and small in Southern California indicate that they’ll be keeping a close eye on the Giant.

“The sizzle we’re selling . . . is that nowhere else, at least in the Western U.S., does a tenant have the chance to be within 40 feet of a bank of 20 checkout stands where there’s anticipated foot traffic of 25,000 to 30,000 people per week,” said John Koenig of Koenig & Wood Development Co. in Long Beach.

The firm is subleasing the extra space from Ralphs in 12 former Zodys locations and in turn is negotiating leases with tenants. Two other former Zodys stores are smaller and will resemble the Bakersfield store, which does not have other tenants. (HRT Industries has closed its 32-store Zodys discount chain over the last few months.)

At the Bakersfield Giant, yellow and red banners hanging from the high ceiling trumpet Ralphs’ low-price theme. Shoppers wheel oversize carts first through a large produce section, then through aisles nearly 10 feet wide. In modified warehouse fashion, many items are stacked in the original cartons, with the excess stored above the shelves. Bags of fast-moving items such as flour and sugar are stocked on the aisle floor.

Along the store’s periphery are separate service counters, including a bakery where goods are made from scratch daily and a fish case, which stocks as many as 75 varieties of fish and seafood, some flown in from around the world. The store stocks 32,000 items, whereas a normal Ralphs superstore would carry 20,000 items. (Each brand and each size is an item.)

At the checkout, signs urge shoppers to bag their own groceries as a cost-saving measure.

“A store like this attracts the serious shopper with large grocery orders--family people who have to be concerned with a budget, rather than the drop-in shopper after a loaf of bread,” Allumbaugh said recently during a tour of the store.

“This is a very low-margin business that operates efficiently on high turnover. Giants are designed for extremely high volume.”

Mary Massa, a Bakersfield resident, shops the Giant for its variety and low prices on such items as tuna and mayonnaise but complained that checkout lines tend to get long at peak times. She added that she has no particular loyalty to any store in the area and lets convenience be her guide.

Bob Vibe, owner of Fike’s Finer Foods, a gourmet specialty store one mile west of the Giant, said his business hasn’t suffered any significant loss since Ralphs came to town.

“Several of our customers have gone over to the Giant, looked it over and said they’re not interested in shopping there because it’s so big and there’s no service orientation,” Vibe (pronounced VI-bee) said. “We’re a very full-service store. Our customers aren’t going to be interested in bagging their own groceries.”

He acknowledges, however, that the Ralphs store has done very well, taking business mostly from other chains.

Despite slumps in Bakersfield’s two economic mainstays--oil and agriculture--Allumbaugh said the Giant “has surpassed volume expectations.”

Used French Concept

Allumbaugh got the idea for the Giant stores in France, where one-stop grocery and discount shopping is thriving. In the country’s 550 hypermarkets, some as large as 250,000 square feet, customers can buy everything from groceries to garden tractors, books to bicycles and clothes to computers--all under one roof.

Similar stores exist in the United States. Bigg’s Hyper Shoppes, a 2-year-old Franco-American venture of the Euromarche hypermarket chain, Lazard Freres & Co. and Super Valu Stores of Minneapolis, among others, operates near Cincinnati and reportedly plans to open three more locations soon, including one in Denver.

Carrefour, France’s largest hypermarket chain, also is scouting sites in the East Coast. Meijer Inc., a privately held company in Grand Rapids, Mich., has operated combination food and general merchandise stores in the Midwest since 1962. “You could probably call us a hypermarket,” said spokesman David E. Lukens. “One-stop shopping seems to be what the customers of the ‘80s are looking for.”

Gemco, a division of Lucky Stores with 80 membership department stores in California, Arizona and Nevada, also operates on the one-stop-shopping principle, offering groceries plus apparel, appliances, jewelry and other general merchandise in stores averaging 100,000 square feet. A spokeswoman said the division was founded 27 years ago, long before the hypermarket concept was developed.

Roger E. Stangeland, chairman of Vons Grocery in El Monte, Ralphs’ closest competitor in terms of market share, views the Giant stores as “another retail format to position ourselves against.”

Will Expand Concept

Vons’ strategy will be to expand its Pavilions concept--75,000-square-foot combination food and drug stores--and to continue to seek acquisitions. Five Pavilions are open, and two more are under construction.

(In terms of the number of Southern California outlets, Vons, with 152, ranks third behind Alpha-Beta and Safeway; Ralphs is fifth with 127.)

Stangeland doubts whether a true hypermarket has a place in Southern California, with its array of membership warehouse stores, discount stores and other conventional stores.

“In Europe, when a hypermarket gets positioned, it’s less likely to have other competitive formats eroding its business,” Stangeland said.

Observers expect the addition of 14 Ralphs Giants to have a big effect on Southern California competition.

Willard Bishop, a Chicago supermarket consultant, views the Giants as “an interesting variation” in retailing, akin to membership warehouse stores such as Price Club.

“Both have something very much in common--they’re extremely entertaining places to shop,” he said. “People ease the pain of shopping by going to more entertaining places.”