32 United States The Economist June 4th 2022
Americans are used to perks such as
having someone to bag their groceries for
them. “There is an almost old-school ser-
vice that has been a part of the model that
hasn’t really existed in Europe for some
time,” says Simon Johnstone of Kantar, a
research firm. But this does not come at no
cost. Cheaper own-brand products have
penetrated less, making up less than a fifth
of sales by value, compared to more than
40% in Europe. “We know that American
supermarkets have to start cutting down
the assortment, we know that they have to
start moving to more automated process-
es,’‘ says Mr Johnstone.
Another problem is that America’s su-
permarkets, despite often lacking compe-
tition locally, are less concentrated nation-
ally. Regional firms may have the power to
squeeze customers, but they do not have
the size that European supermarkets have
to resist price increases by suppliers. Their
suppliers are raking it in. Last month Ty-
son Foods, America’s biggest meat suppli-
er, announced its latest quarterly profits
were 74% higher than in the same period
last year. Meat prices have spiked so much
that in January the Biden administration
announced a plan to try to boost competi-
tion in the industry.
For retailers, however, sharper compe-
tition is now arriving. Last month Wal-
mart’s chief financial officer, Brett Biggs,
told cnbc, a broadcaster, that its custom-
ers are increasingly looking for cheaper
products, squeezing margins, which in
turn squeeze the firm’s profits. Shops such
as Costco, and Walmart’s Sam’s Club,
where customers can buy in bulk more
cheaply, are thriving.
Among the supermarket chains ex-
panding fastest in America is Aldi, a Ger-
man discounter, which has more than
2,000 shops. They are Spartan but afford-
able. Another is Trader Joe’s, a Californian
company now owned by the family of Al-
di’s founder, famous for its $2 range of
wine (Two Buck Chuck). Both operate
smaller supermarkets, typically around
15,000 square feet (1,400 square metres),
with more limited ranges, and far more
private-label products that cost much less,on shelves that are refreshed more often.
Customers adore them.
Amazon, as well as owning Whole
Foods, an upmarket grocer, now runs 29
“Fresh” supermarkets, mostly in suburbs
of large cities. At these stores shoppers
need not use a till at all, instead being auto-
matically charged as they pick items off the
shelves and walk out. Until recently, home
delivery of groceries in America (unlike
Europe) has often relied on gig-economy
workers walking round ordinary super-
markets—a costly model.
But that is also changing. Walmart’s
head of e-commerce, Tom Ward, is Britishand has brought ideas pioneered in Brit-
ain, such as “dark stores”, where goods are
packed exclusively for delivery. In Arkan-
sas, Walmart has even experimented with
dispatching groceries by drone. On May
24th it announced that the programme is
expanding to five more states.
How much these ideas will change how
Americans shop is unclear. Cutting pro-
duct lines is often unpopular; big cars and
big fridges still support a model of big groc-
ery stores with surprisingly high prices.
Still, as consumers fret about inflation, the
pressure on American supermarkets to in-
novate and cut costs is bound to grow.Food for thought
Average daily cost of a healthy diet*
Selected countries, 2017, $Source: UN Food and Agriculture Organisation*Providing adequate calories and nutrients
for an active and healthy lifeBritainSpainGermanyFranceUnited States0 1 2 3I
n 2018, like many other department
stores,Macy’s in Burlington, Vermont,
closed its doors. In 2021 it reopened as a
school. Toxic chemicals had been found
at Burlington High, and the empty Macy’s
offered an airy stopgap until a new build-
ing could be ready in 2025. Pupils have
grown used to studying in a library creat-
ed out of the china department, where
books sit on backlit display shelves, and
eating lunch below a Michael Kors sign (a
teacher has stuck a “café” sign next to the
designer’s name). They especially like
riding on the vast glass escalators, says
Lauren McBride, the principal.
Across America empty shops in malls,
notably the “anchor” spaces once filled
by department stores like Macy’s, are
being put to new use. As people spend
more on dining out and holidays and less
on clothes, such stores’ sales have
shrunk. The pandemic, which drove
shoppers online, accelerated that de-
cline. Macy’s in Burlington was one of
100 or so closures announced by the
retail chain in 2016; more followed.
JCPenney has shut 175 shops since 2020.
Lord & Taylor has gone online-only.
Green Street, an analytics firm, esti-
mates that of more than 1,000 empty
anchor boxes in America around 80% are
in “b” and “c” malls (with lower sales per
square foot than high-performing “a”
malls). More malls were downgraded
during the pandemic, says Vince Tibone,
an analyst. Because some tenants have
lease clauses that allow them to pay less
rent if anchors depart, and an empty
shopfront is off-putting, mall landlords
are eager to get new tenants “even if they
aren’t the sexiest”, he says.
Those now inhabiting old department
stores range from offices to theatres. In
March the city council in Springfield,Massachusetts, approved plans to grow
cannabis on the second floor of an old
Macy’s in the city’s Eastfield mall (and
sell it on the first). The Medical Universi-
ty of South Carolina has set up clinics in
the old JCPenney at the Citadel Mall in
Charleston, which still has shops. Ellen
Dunham-Jones, a professor of architec-
ture at Georgia Tech, who keeps a data-
base of retrofitted malls, says 32 enclosed
malls have been wholly or partially rede-
veloped for health care. (Most redevel-
oped malls, she says, are mixed-use.)
Health-care businesses can make
good use of large stores and malls be-
cause many hospitals were built in plac-
es where there is little room to expand.
Malls offer a lot of parking space (a bene-
fit enjoyed by Burlington High’s pupils
and teachers). In suburban areas malls
are often well placed for ageing pop-
ulations that need more doctor’s ap-
pointments and fewer new shoes.New uses for old storesMall makeovers
WASHINGTON, DC
Department stores become schools, clinics and even cannabis farmsThe lesson department