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Costs Going Up

BY CSA STAFF

Annual study tracks cost of building and outftting stores

The cost of building and outfitting stores is on the rise, according to Chain Store Age’s 2013 Store Construction and Outfitting Survey.

The annual survey, conducted by Leo J. Shapiro & Associates, Chicago, is based on results from retail companies across the country. Along with building costs, it examined store size, expansion plans, energy expenditures and the cost of store outfitting systems, including lighting, signage, fixtures, roofing, flooring, and heating, ventilation and air conditioning (HVAC).

The companies that participated in the survey were divided into five categories: convenience stores, supermarkets, home centers, specialty apparel and big box (includes department stores and other large-format stores).

CONSTRUCTION COSTS: The cost of building stores was divided into two categories: building shell construction costs for freestanding locations, and tenant fit-out costs for stores in malls and other types of centers. For the second consecutive year, costs increased in both categories.

In the freestanding store category, the cost for building a store shell (includes concrete slabs, structural steel, structured masonry, roof, HVAC, exterior wall assembly and insulation, but excludes dirt work, utilities and interior fit-out) averaged $62.77 per square foot for all retailers surveyed.

By retail sector, supermarkets had the highest building costs, at $77.06 per square foot, followed by convenience stores, at $60.45 per square foot.

Big-box stores averaged $48.00 per square foot, while home centers had the lowest building costs, at $44.25 per square foot.

The cost of tenant fit-out work for stores in shopping centers (includes drywall, ceiling, floor, wall finishes and interior construction, but excludes the fixture package) averaged $56.53 per square foot for all retailers surveyed.

Specialty apparel retailers averaged $57.61 per square foot, followed by big-box stores, at $49.00 per square foot. Building costs both for home centers and convenience stores averaged $33.00 per square foot.

OUTFITTING COSTS: Store-outfitting costs were up compared with last year in a majority of the surveyed categories, including ceilings, display fixtures, interior signage, roofing, HVAC and exterior signage. Flooring and lighting costs were flat compared with last year. (While the chains that participate in the survey vary year to year, comparisons are used to suggest general trends.)

Display fixtures held on to their standing as the most costly physical-support system, averaging $9.17 per square foot for all retailers surveyed, versus $8.09 per square foot last year. Specialty apparel retailers paid the most, averaging $11.57 per square foot. Home centers averaged $7.00 per square foot.

Heating, ventilation and air-conditioning costs averaged $2.61 per square foot, up from $1.81 per square foot last year.

Roofing costs also saw an increase, averaging $3.59 per square foot, compared with $3.20 last year. Big-box retailers averaged $4.41 per square foot.

Ceiling costs averaged $1.81 per square foot, up from $1.51 in last year’s survey. Home centers had the lowest costs, at $0.42 per square foot.

Interior signage averaged $0.93 per square foot, inching up from $0.84 last year. Exterior signage averaged $1.43 per square foot, compared with $1.11.

The cost of interior lighting was flat compared with last year, with an average of $3.20 per square foot for all retailers surveyed. Supermarkets had the highest costs, paying an average $3.85 per square foot.

Flooring costs were also flat, averaging $2.76 per square foot for all retailers. Specialty apparel retailers, however, averaged $3.77 per square foot.

STORE SIZE: in the supermarket category, new stores (defined as locations opened during the past 12 months or those presently under construction) averaged 47,000 sq. ft. By comparison, size of existing supermarkets averaged 48,333 sq. ft.

New convenience stores averaged 7,708 sq. ft., while existing stores averaged 7,955 sq. ft.

Big-box retailers are building bigger. New construction averaged 82,500 sq. ft., versus an average store size of 80,000 sq. ft. New home centers also had a larger footprint, at 50,417 sq. ft., while existing stores had an average of 44,286 sq. ft.

ENERGY: Energy costs averaged $2.03 per square foot for all retailers surveyed, up from $1.94 per square foot last year. Specialty stores once again had the highest energy costs, at $2.69 per square foot, followed by big-box stores at $2.36 per square foot.

Energy costs per square foot averaged $1.98 for supermarkets and $1.58 for convenience stores. The lowest energy costs were in home centers, at $1.30 per square foot.

Some retailers are utilizing alternative energy as a way to combat rising costs and help the environment. For all chains surveyed, 18.6% report using some type of alternative or renewable source. By category, the use of alternative sources was most prevalent in home centers (42.9%) and supermarkets (33.3%).

Solar power ranked as the most common renewable energy source, used by 11.9% of all surveyed chains, followed by geothermal power (5.1%) and wind power (1.7%).

GREEN: the majority of retailers are still building green, but their numbers are on the decline, according to the survey results. nearly 70% (69.5%) of all chains report using environmentally friendly materials and practices in construction, down from 78.3% last year.

The use of green materials was strongest in big-box stores, with 88.9% of surveyed retailers on board, followed by supermarkets (80%), home centers (71.4%) and convenience stores (66.7%). specialty stores were the laggards, at 50%.

Similar to last year, retailers do not show much interest in LEED (Leadership in Energy and Environmental Design) certification. only 8.5% said they were pursuing certification, on par with last year.

By retail sector, interest in LEED was greatest among home centers, with 28.6% pursuing certification, and convenience stores (16.7%). in the big-box category, 11.1% are going for LEED certification.

The EPA’s Energy Star certification program, which focuses on energy efficiency, fared slightly better, with 10.2% of all retailers in the survey pursuing certification.

Not surprisingly, Energy Star certification was most widespread in the supermarket category, where 26.7% of retailers are seeking it, and in home centers, at 14.3%.

PURCHASING CRITERIA: When it comes to the criteria that go into selecting flooring, roofing, signage, ceilings and HVAC (but not including lighting), life-cycle costs ranked as the top concern for all retailers surveyed (47.5%), followed by energy concerns (33.9%), maintenance concerns (33.9%) and durability (30.5%).

Less important concerns were aesthetics (27.1%) and first costs (22%).

Looking at the results by category, life-cycle costs was the top criteria for supermarkets, specialty apparel and big-box stores. Durability, however, was the top (58.3%) consideration in convenience stores, while 71.4% of home centers ranked energy efficiency as their top priority.

Looking at lighting specifically, energy efficiency ranked as the most important factor in selecting new equipment for all retailers surveyed (70%), followed by life-cycle costs (44.1%).

By category, convenience stores (75%), supermarkets (80%) and home centers (85.7%) all ranked energy efficiency as most important in purchasing new lighting. But aesthetics came out on top in big-box stores (66.7%) and specialty apparel (43.8%).

All the charts from the 2013 Store Construction & Outfitting Survey, including some not featured here, can be found online at chainstoreage.com.

AT A GLANCE

  • Construction costs for freestanding stores average $62.77 per sq. ft.
  • Building shell/fit-out costs for in-line tenants average $56.53 per sq. ft.
  • Energy costs average $2.03 per sq. ft.
  • Life-cycle costs and energy efficiency top concerns in purchasing store outfitting systems
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MARKETING/SOCIAL MEDIA

Walmart leads grocery paid-search ads — but for how long?

BY By Deena M. Amato-McCoy

Walmart leads the pack when it comes to paid search advertising in the grocery category.

That’s according to new research from AdGooroo. The search marketing intelligence provider analyzed 124 non-branded grocery store and grocery delivery keywords from June 2016-May 2017.

During this period, Walmart was the highest spender, investing $850,000 over a 12-month period. This was a staggering jump from only $51,000 between May 2015 and June 2016. Jet.com, which was acquired by Walmart in September, spent an additional $82,000 during the same timeframe, up from a mere $3,000 in the 12 months preceding June 2016, AdGooroo reported.

Walmart's position at the top seems to be safe for now, as Amazon ranked ninth, with $134,000 spending for the current period, while Whole Foods ranked 18th, spending $51,000 over the same time period. However, the Amazon-Whole Foods partnership, along with Amazon's strong overall search presence, should worry Walmart, the report stated.

Additional findings include:

Aldi ranked second among all advertisers in the grocery category, spending $441,000 from June 2016 to May 2017, up from $40,000 during the preceding period. Notably, from March to May 2017, the grocer spent an average of $119,00 per month, up from an average of $9,000 per month. This suggests the company was ramping up its online presence in preparation of its US expansion.

Safeway ($365,000), Kroger ($283,000) and Fry's ($232,000) rounded out the top five among advertisers in the category.

Walmart also led among all advertisers in click-share, capturing a 19.1% share of total clicks on the 124 category keywords over the 12-month period.

Aldi again ranked second, with an 11.6% click-share, followed by Kroger, which captured 7.6% of all clicks.

Amazon ranked 9th in click-share, capturing 2.8% of all clicks while Whole Foods ranked 19th with a 1.2% click-share.

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ECOMMERCE

Amazon’s drone future looks sci-fi

BY By Deena M. Amato-McCoy

Drone deliveries by Amazon could one day originate from an unusual-looking starting point.

The online giant has filed a patent application for "multi-level fulfillment centers," designed to accommodate the landing and takeoff of "unmanned aerial vehicles." The application, which was recently published by the U.S. Patent and Trademark Center, includes a number of sketches that illustrate exterior and interior views of differently shaped buildings. One resembles a huge beehive. Another calls to mind The Jetsons. The application notes that the centers could possibly be located in an urban setting.

Besides illustrating how employees would load drones with merchandise, the drawings also show mini UFO-like devices taking off from and landing in various pods within the buildings. (It's worth noting that products and other creations outlined in patent applications do not necessarily turn into reality.)

The warehouses will also feature multiple landing and deployment locations to accommodate the take off and landing of the UVAs. With a vision to erect the buildings in dense, highly populated areas, the building would also keep the flying devices from jeopardizing the safety of pedestrians at street level, reported The Verge.

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