Grocers aren't stocking up on new stores in Chicago, leaving many shoppers with fewer places to fill their cart.
There are 262 grocery stores in Chicago and close-in suburbs, the lowest number since 2009, according to an urban grocery report by retail brokerage Mid-America Real Estate Group. Grocers occupy just over 9.3 million square feet of space, also an eight-year low.
The study includes existing and planned stores in Chicago and areas just outside the city. The boundaries of the area examined extend east to Lake Michigan, west to Harlem Avenue, north to Touhy Avenue and south to 127th Street.
The study area lost 16 stores and a combined 544,512 square feet of space since the previous report in 2015.
The pullback by grocery stores comes amid upheaval in the grocery industry, as customers' preferences — including how, when and where they buy food — evolve.
"It's certainly a sign of the times," said Dan Tausk, a principal at Oakbrook Terrace-based Mid-America and the report's co-author. "The market is changing, and I would expect that to continue."
Besides uncertainty about the Amazon effect, several other factors have contributed to the slowdown, including bankruptcies and exits from the Chicago market by some brands in recent years, most notably Dominick's. Many shuttered stores have been replaced by scaled-down grocery stores, leaving the remaining space for other types of retail. And some former grocery spaces have languished.
"In the past you'd see a grocer go out and another grocer go in," Tausk said. "Now we're lucky if half is backfilled by a grocer."
Some of the same trends working against traditional grocery retailers are playing out nationally, said Jon Hauptman, senior director of retail for grocery consulting firm Willard Bishop.
"In general, markets throughout the county have been over-stored and over time, we're seeing the implication of that," Hauptman said.
Retailers are realizing they don't need giant stores to serve a large number of shoppers and can generate greater profits with less square footage, Hauptman said. At the same time, consumers also are buying more food from nontraditional grocery stores, such as chain drugstores and dollar stores, he said.
"A lot of sales go to those stores under the radar," he said.
Despite some high-profile openings on Chicago's South Side in the past year or so, including the Englewood Whole Foods Market and the Bronzeville Mariano's, the South and Southwest sides have lost four stores. amounting to about 153,000 square feet of grocery space, according to the report.
The near west suburbs lost 262,000 square feet, including two Meijer closings and an Ultra Foods closing.
Perhaps the biggest blow to the Chicago grocery industry is the ongoing demise of the Central Grocers cooperative, which filed for bankruptcy in May after almost 100 years of business. In bankruptcy filings, Central Grocers said it couldn't keep up financially with the changing consumer demands for more "gourmet" shopping experiences. It also acknowledged losing market share to online retailers.
Beyond operating as a wholesaler for more than 400 independent stores in the Chicago area, Central Grocers was also the parent company of Strack & Van Til and Ultra Foods stores in Illinois and Indiana.
The bankruptcy prompted the closing of three Ultra stores and a Strack & Van Til store within the Chicago market, as defined by Mid-America, totaling more than 326,000 square feet.
The Ultra store closing in south suburban Calumet Park, in particular, ripped a void in the community, with few other grocery options nearby.
Mid-America has conducted its urban grocery study every two years since 2009. The report includes all stores of 10,000 square feet or more, as of Aug. 1.
Jewel-Osco has the most stores in the study area, with 51, followed by Aldi, with 49.
The average Chicago store size remained virtually unchanged from two years ago, at just over 35,000 square feet, but is likely to decrease by 2019, Tausk said, as smaller-format stores continue to squeeze into densely populated neighborhoods. That includes Target, which continues rolling out smaller-sized stores that include grocery sections in the Chicago area and in other large U.S. metro areas.
Chicago is likely to see the continuation of huge flagships that tend to do well, such as recently opened stores by Whole Foods in Lakeview and Jewel-Osco in the Gold Coast.
What's likely to lose momentum is the trend of brands such as Mrs. Green's and Plum Market sticking a toe in the water with one or two locations, Tausk said.
Larger-scale rollouts by groups such as Germany's Lidl, which recently entered the U.S., are more likely to succeed in Chicago, Tausk said.
"I don't see this market being ripe for new market entrants other than a monster like Lidl, which has a smaller format and powerhouse corporate backing," he said.
Fresh Thyme Farmer's Market has opened eight smaller-format stores averaging 28,000 square feet in the Chicago area, although just two are within Mid-America's study area and only one in Chicago. The Downers Grove-based company is about halfway to a goal of opening 18 Chicago-area stores in a seven-year period.
That remains the plan, though CEO Chris Sherrell acknowledged it won't be easy, given the fierce competition in Chicago. Many consumers are still learning about the brand, he said.
"Our mission to expand remains the same, but it's not without headwinds," Sherrell said.
It could be years before Amazon's impact on the industry becomes fully understood. Amazon will take over Whole Foods' vast network of stores and distribution centers. It also could add locations just for pickups of online orders and hybrid buildings that serve both as stores and distribution centers, Tausk said.
"The impact of Amazon grocery stores could be dramatic," he said.