While Wal-Mart and Tesco are embroiled in a battle royale over the super-convenience concept on the West Coast, Kentucky-based Houchens Industries has quietly been having its druthers in the college town of Bowling Green, Ky.
"This was part of senior management at Houchens coming up with the next generation of grocery-and-convenience store of the future," said Stephen Reed, director of operations at Crossroads Market, Houchens Industries’ Southern version of the super-convenience store. "It’s our version of what Tesco is doing in California, and what Wal-Mart is doing in Phoenix."
While it was only recently that Wal-Mart officially rolled out its Marketside concept—opening four pilot stores in Phoenix—and just a year ago that UK-based Tesco unveiled its Fresh & Easy stores in California, Crossroads has been humming along for almost four years.
After the first Crossroads store opened in Bowling Green, Houchens’ planners waited more than a year and a half before following it with a second store. In the testing phase, Crossroads’ planners were "basically discovering customers’ acceptance to the concept in our part of the country," Reed said. "We spent a year and a half tweaking the model. It took three years to get to feeling really good about it."
To date the company has opened five Crossroads stores, with six more in the hopper. "We’re at the point now where we’re looking to roll out more," Reed said. "And we’re a very conservative company."
Posting about $2 billion in annual sales, Houchens operates supermarkets, grocery stores, convenience stores and other retail concepts under a handful of nationwide brands, such as Jr. Foods, Crossroads, IGA, Houchens Markets, Save-A-Lot and others.
The Crossroads stores fall under the Houchens Foodgroup umbrella, though all of the retail brands are part of the employee-owned Houchens Industries, which collectively operates more than 450 stores.
Like Tesco’s 10,000-square-foot Fresh & Easy stores and Wal-Mart’s 15,000-square-foot Marketside stores, Crossroads Market stores boast a large format with 10,000 square feet. And like its West-Coast counterparts, Crossroads offers a strong mix of grab-and-go while focusing on grocery items in limited redundancy.
But here’s the crucial distinction: Crossroads knows its market. The stores aren’t looking to push upscale, healthier products on a Kentucky consumer who still loves the Southern succulence of fried chicken. Sure, fresh foods and healthy items are abundant here, but there’s not an overt tilt to health and wellness.
"Our offerings are very conventional foodservice," Reed said. "We’re not heavily focused toward any one demographic. We apply things appropriately in Kentucky."
Crossroads stores also align with the super-convenience concept by packing ample groceries into a scaled-down grocery format. Unbranded fuel is offered at six to 16 bays per store.
"We’re what you would describe as a super-convenience store or neighborhood grocery store with petroleum," said Reed, who also oversees other Houchens’ brands like IGA and Junior Foods. The Crossroads brand hinges on three concepts: convenience, value and a pleasant experience.
"Number one is saving our customers time," Reed said. "We want to be the most convenient location they can choose to pick up their food or fuel or a ready-to-eat meal.
"Number two is value," he said. "We want to let people do some secondary shopping and pick up dinner on the way home, but we also want to give them supermarket pricing in a convenient location."
And number three: "We want to give them a pleasant shopping experience—fast, friendly and fresh."
The stores cater to distinct consumer species: the grab-and-go convenience shopper on the prowl for traditional convenience offerings and the hurried grocery shopper hunting for dinner or a take-home meal.
"That customer who is there for convenience purposes doesn’t always want to comingle with those other customers," Reed said. "We get them into separate areas that make the items they want more accessible."
Entry on one side of the store leads to grocery items, while entry from the fuel islands leads to the convenience area. Internally, the two sections bleed together but are still largely distinct.
The checkout areas are skived roughly the same: Grocery shoppers are funneled to a self-checkout lane and manned lanes, while convenience store customers have the same options on the opposite side of the store. Shoppers can easily matriculate from one area the other, but at its essence the checkout is designed to keep the two shoppers separate.
Fighting gas margins, rising minimum wage, interchange fees and other constraints, Houchens has been able to offset some of the costs by using self-checkout. Less than a year ago the chain installed Pan-Oston’s Utopia self-checkout system in the convenience area.
"We were surprised," Reed said. "Our customers had never seen or expected self-checkout in a convenience store setting. But folks are pretty well indoctrinated to the concept—it didn’t take long for them to use it."
Pan-Oston’s Jim Vance estimated that Houchens has seen a 17% improvement in same-store sales at other Houchens retail concepts using Utopia self-checkout, as well as 13% improvement in new customers.
Reed figured the numbers at Crossroads are shaping up about the same. Depending on the configuration, Utopia self-checkout systems can be cash-only, e-pay only, or both.
"Just the basic model is $12,000 to $13,000," Vance said. "It’s a product that’s somewhat standard, but we make it so you can add on to it to create your own. If there are a lot of customers, maybe 60% or 70%, that are (electronic-funds transfer), there’s no need to pay the additional cost for cash-paying equipment."
Crossroads is also using Pan-Oston’s C-Flex counter system, allowing the stores to rearrange and customize shelving, counters and cabinets. "You can basically customize your whole storefront just by ordering parts," Vance said. "It’s like Lego’s—you can shape it to meet your needs without totally shutting down your store and ripping things out and redoing it."