by George Taniwaki

I was driving on NE 8th Street in Bellevue last Saturday. As I was approaching 156th Ave. NE, I saw two of those ubiquitous sign spinners on opposite corners. I missed the light, so I had time to see that they were both advertising that the nearby Haggen Northwest Fresh was closing and everything was 30% off.

This is an unfortunate end to a misguided attempt by Haggen to compete with Whole Foods. Here’s the story.

When I moved to Bellevue in 2000, there were several supermarkets in my neighborhood. The closest is a small QFC, part of the Kroger chain, located inside the Crossroads Shopping Center, just north of the food court. Cater-corner to it was another small supermarket, an Albertsons. (I say “was” because it closed within a few months after I moved in and was eventually replaced by an Ace Hardware and a Bartell Drugs.)

A few blocks north of that is a Trader Joe’s, a chain that specializes in a small selection of fancy foods at low prices. Another few blocks north of that was an Uwajimaya, a local Asian food chain. (It moved a few years ago. More on that later.) A few blocks west of the Trader Joe’s is a Fred Meyer, another Kroger chain that sells a variety of department store goods and groceries. A few blocks north of the Fred Meyer (on the same street as Uwajimaya) is a Safeway. In addition, there are lots of small convenience stores and ethnic food stores in the neighborhood.

Supermarkets

Figure 1. Map of east Bellevue showing locations of largest grocery stores from 2000 to 2013. Map image courtesy of Microsoft, logos courtesy of respective firms

There’s no shortage of places to buy food in east Bellevue. That’s why I was very surprised in 2001 when Haggen announced it was opening a big TOP Food and Drug just north of the Crossroads Shopping Center. Haggen is a regional supermarket, headquartered in Bellingham, WA.

Prior to the opening of the TOP store, I bought most of my groceries at Fred Meyer or Safeway. They were farther from my home than the QFC or Albertsons, but had a better selection of private label goods (aka store brands) and a bigger selection of fresh produce.

When the TOP store opened, I immediately switched to it. But I am not a loyal shopper. I shop for groceries every few days and will pull into a store whenever it is convenient (based on direction I am driving, time of day, etc.). Thus, I continued to occasionally shop at the other stores.

After a few years, I noticed that the prices were higher at TOP than the other stores. But since it was close to home, it remained my primary store. However, the parking lot at TOP was not as full as in the past. Price sensitive shoppers were abandoning the store.

****

The competitive landscape got tougher in 2004, when Whole Foods Market, a purveyor of high quality, high price groceries, built a large store near downtown Bellevue. This caused a lot of people to switch their purchases of meats, cheeses, and wines to Whole Foods. These are items that have high margins. This especially hurt a nearby competing store, called Larry’s Market, which ultimately led the entire chain to fail.

The space where Larry’s Market was became a Big 5 Sporting Goods store for a while, then was empty, and finally in 2011, Uwajimaya moved into part of the space. The remaining space was taken up by Total Wine, the biggest liquor store you have ever seen.

Uwajimaya realized that it was not a direct competitor to Whole Foods and could safely open a store across the street from it. In fact, the two stores are somewhat complementary. Also, even though Whole Foods in on a busy street, it is hard to get to. You can’t make a left turn out of the parking lot, forcing extra driving regardless of which direction you come from. Uwajimaya is easier to get to. Finally, Uwajimaya is one block from the Home Depot, a store I visit a lot. So I drive past the Uwajimaya frequently and thus shop there often.

****

In 2011, Haggen received a large capital infusion from Comvest Group, a private equity firm. Comvest decided that the TOP location in Bellevue would not be successful unless it switched from competing on price (apparently, TOP stands for Tough On Prices) to competing on quality. Thus, they changed the name of the store from TOP to Haggen Northwest Fresh and spent what I estimate was over $200,000 to remodel the store.

The remodeling effort took about three weeks. During that time, the store was open, but was a chaotic mess. So I stopped going the TOP and instead shopped at QFC and Trader Joe’s, two store that I rarely visited in the past.

I came back to the new Haggen store after the remodel. The biggest changes were to increase the spacing between stands in the produce aisle to give it the look of a faux farmers’ market, expand the wine section, and add a big exhibit stand in the center of the store. To make space for all this, they cut back on the private label brands, the very items that I visited the store for.

The other change they made was an effort to brand each of the sections of the store with names. For instance, the fish counter was renamed Lummi Bay Market and the deli counter was renamed Dot’s Kitchen. The idea was developed by the Hartman Group a local consulting firm, that called it a “store within a store” concept. Unfortunately, there didn’t appear to be any budget to change the look of the counters themselves, the offerings, or training for the personnel. So other than the new signage, nothing appeared to have changed. It seemed a waste.

Apparently, sales at the remodeled store did not meet expectations, so they began mailing $5 off coupons to customers. This must have been very expensive, and counter to the new high price, high quality image they were seeking. Ultimately, I decided to continue to patronize QFC and Trader Joe’s and only rarely stepped into the Haggen.

****

The remodel has been a disaster for Haggen and Comvest and led to the store’s closure. Hopefully, the company can find its footing and achieve success in its other stores. I liked the TOP store when it first opened and am sad it failed. The retail business is tough and is undergoing a revolution with companies like Trader Joe’s and Whole Foods taking the high-end, ethnic food stores catering to the immigrant population, and services like Amazon Fresh making inroads in the grocery delivery business.

****

Several months ago a Walmart Neighborhood Market opened west of our house. It occupies the space of a failed Kmart store that had been empty for years. Then last month, a new Grocery Outlet opened just across the street from Crossroads Mall in what previously had been a high-end appliance store that closed during the housing crisis. Apparently, there are still people who think the grocery business is worth investing in.

Advertisements