.bodytext {float: left; } .floatimg-left-hort { float:left; margin-top:10px; margin-right: 10px; width:300px; clear:left;} .floatimg-left-caption-hort { float:left; margin-bottom:10px; width:300px; margin-right:10px; clear:left;} .floatimg-left-vert { float:left; margin-top:10px; margin-right:15px; width:200px;} .floatimg-left-caption-vert { float:left; margin-right:10px; margin-bottom:10px; font-size: 10px; width:200px;} .floatimg-right-hort { float:right; margin-top:10px; margin-left:10px; margin-bottom:10px; width: 300px;} .floatimg-right-caption-hort { float:left; margin-right:10px; margin-bottom:10px; width: 300px; font-size: 10px; } .floatimg-right-vert { float:right; margin-top:10px; margin-left:10px; margin-bottom:10px; width: 200px;} .floatimg-right-caption-vert { float:left; margin-right:10px; margin-bottom:10px; width: 200px; font-size: 10px; } .floatimgright-sidebar { float:right; margin-top:10px; margin-left:10px; margin-bottom:10px; width: 200px; border-top-style: double; border-top-color: black; border-bottom-style: double; border-bottom-color: black;} .floatimgright-sidebar p { line-height: 115%; text-indent: 10px; } .floatimgright-sidebar h4 { font-variant:small-caps; } .pullquote { float:right; margin-top:10px; margin-left:10px; margin-bottom:10px; width: 150px; background: url(http://www.dmbusinessdaily.com/DAILY/editorial/extras/closequote.gif) no-repeat bottom right !important ; line-height: 150%; font-size: 125%; border-top: 1px solid; border-bottom: 1px solid;} .floatvidleft { float:left; margin-bottom:10px; width:325px; margin-right:10px; clear:left;} .floatvidright { float:right; margin-bottom:10px; width:325px; margin-right:10px; clear:left;} With Wal-Mart Stores Inc. and Target Corp. increasing their grocery operations, other big-box retailers such as Menard Inc. and The Home Depot Inc. adding grocery lines, and small gourmet markets coming online, traditional grocery stores have had to rethink their strategy.

“The classic trade lines are becoming more and more blurred,” said Jerry Fleagle, president of the Iowa Grocery Industry Association. “What that has done is really change the dynamics as far as how people position themselves to the consumers.”

Nationally, chain supermarkets (operators of 11 or more retail stores) made up about three-fourths of all supermarkets and accounted for 91.3 percent of nearly $500 billion in grocery sales last year, according to the Food Marketing Institute. The top five chains accounted for about half of all supermarket sales, with Wal-Mart bringing in $92 billion in grocery sales last year. Though same-store sales increased for the larger national chains, same-store sales for about one-quarter of food retailers decreased and about half lost ground after sales figures are adjusted for inflation.

Des Moines also is experiencing the emergence of smaller gourmet markets including Gateway Market, the Market at Jordan Creek and Village Market in the East Village. Nationally, independent supermarkets account for 24 percent of all grocery stores and 8.7 percent of total sales.

Greater competition has caused traditional food retailers to look for ways to offer more service without increasing prices. According to the FMI, food prices are projected to rise just 2.5 to 3.5 percent this year, and historically, food inflation has been low as a result of competition. U.S. consumers on average spend less than 10 percent of their total income on food, the lowest proportion of any country.

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“No matter what type of facility it is, there are only so many people you have for that pot, so to say that any of those formats doesn’t hurt somebody is wrong,” said Ross Nixon, president and chief operating officer of Dahl’s Foods. “So what you do is you try to zero in on what your expertise is, what you do best and solidify the people who are doing business with you today.”

“There’s always concern (about competition) because (other supermarkets) are here for the same reason we are here,” said Chris Friesleben, a Hy-Vee Inc. spokeswoman. “They’re there to make money as well, but we don’t spend a lot of time wringing our hands over what they’re doing. We focus on what we’re doing and do it the best way we know how.”

Three major food retailers have dominated the Des Moines market for more than a half-century. Hy-Vee is the largest, with 177 stores throughout the Midwest. It ranks 18th among U.S. supermarket chains in 2006 with sales of $4.37 billion. Boone-based Fareway Stores Inc. has 93 locations in Iowa, Illinois and Nebraska and plans to open its 94th store in Norwalk this summer. Dahl’s has 12 stores and is focused on Greater Des Moines.

Fleagle said these companies have been successful at finding a niche in the marketplace.

“We think of ourselves as kind of a town center with that one-stop shopping convenience,” Hy-Vee’s Friesleben said. “Each store has a very unique look and feel that keeps up with the neighborhood it serves.”

Hy-Vee’s focus on service and convenience has been enhanced with recent additions at some of its supermarkets, including a community room for club meetings and store-planned activities, a complete baby line, including toys, strollers and natural products, and an upgraded dining area that’s designed for a casual experience. Some of its stores are also rolling out a dinner plan program, where customers can pick up a partially prepared meal that takes just a few minutes to finish at home.

“What the consumer wants is convenience,” Friesleben said, “and with the lifestyle that people have today, time is a premium and they want to do as much as they can in a one-stop shop, but they also want to feel like they’re very important when they do it.”

Hy-Vee has also placed a major emphasis on health and wellness this year, increasing its HealthMarket sections, hiring in-store dieticians and sponsoring a world-class triathlon in Des Moines.

Dahl’s niche is centered on its produce and meats, which Nixon said might cost slightly more than at other food retailers, but are high quality. In addition, the store has a long history as a neighborhood center, Nixon said, being one of the first to add in-store pharmacies, bakeries and delis in the mid-1900s.

Expanding on its pharmacy operations, Dahl’s, along with Hy-Vee, is starting to add in-store clinics, where customers can receive treatment for mild ailments at the same place where they pick up their prescription.

“It’s not trying to get it all, “Nixon said, “but trying to make things as customer friendly for the consumer as possible.”

Fareway has stuck with its sole focus on grocery items, particularly its high-quality full-service meat department. “The market is our backbone and has been for the 69 years we’ve been in business,” said Fred Greiner, Fareway’s president and chief operating officer. He said the company also focuses on customer service, including sacking groceries and carrying them to the customer’s car, and maintaining loyal employees.

“There is a place for the traditional-type grocery store,” Greiner said, “that offers the full customer service and quality products at a low price.”

As evidence, Greiner said, the company has added 25 stores since Wal-Mart first opened a store that directly competed with a Fareway store.

Fleagle attributes some of the traditional supermarkets’ success to their willingness to evolve and make adjustments based on consumers’ changing demands. At the same time, these stores have made slow changes with a minimal shift from their core operations.

Many of Hy-Vee’s latest concepts began to be tested in Sioux City in the spring of 2005, and the company has slowly rolled out the ones that work in one or two markets at a time. Dahl’s is testing out gasoline sales at its Merle Hay location and is making only minor tweaks to departments and layouts at its newer stores.

“We have a niche and move very little to the right and very little to the left, but don’t go off the road,” Nixon said.

For these stores, there is also a tension between adding new products and retaining enough space to keep the old products. For example, if Dahl’s increases its offering of bottled water because of its current popularity, it may have to reduce its selection of coffee and pop, which have had flat sales, Nixon said.

“The customer keeps raising the bar for us,” Friesleben said. “That’s what’s exciting about this business. What wows the customer today might not wow them tomorrow. We have to be two steps ahead to figure out what is the next ‘in’ thing.”