Volume 17, Number 4 April 2003 Feature Article Gas Stations: Surviving in the Shadows of the Hypermarkets by Nancy Murdakes Brown, Suntide Commerical Realty

n our fast-paced industry we all know membership wholesale clubs that have begun sell- that if we cannot adapt to the changing condi- ing petroleum) throughout the country. “Like it or Itions in our world, we might as well just pack not, this phenomenon is part of the petroleum in- up, go home and call it a day! During the past few dustry today, and the indications are that it’s going years, the retail category that has become very to play an even more significant role in the future,” familiar with the word “change” is the petroleum wrote Keith Reid of National Petroleum News. retailer, both the mid-size convenience store How will the emergence of hypermarkets impact (c-store) chains and smaller, local independent the hundreds of convenience stores in our neighbor- c-stores. Over the last ten years, “hypermarkets” hoods and those mid-size c-stores along our main have emerged (mass retailers, big box retailers, and Gas Stations continued on page 2 SHOPPING CENTER SNAPSHOT Champlin Retail Centre

Location: Southeast corner of Highway 169 and 120th Street, Champlin, MN Month/Year Opening: GENERAL MERCHANDISE 174,000 SF October 2003 FFE=868.2 Owner/Managing Agent:

Ryan Companies US, Inc. .

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Architect: Ryan Companies U 6 16 16 16

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F 48 137 RETAIL 18,000 SF 11 Construction Contractor: 14 7 Ryan Companies US, Inc. GLA: 210,000 sf Construction Style: Steel, brick, rock face, standing seam metal and EIFS Current Occupancy: 83% Additional Facts/Narrative: In addition to SuperTarget, Ryan # of Stores: 5 is proposing three free standing pad sites for sale or lease and one multi-tenant building for lease. This shopping center is the Anchor Tenants: SuperTarget most significant retail development in the city of Champlin and Market Area Served: Champlin will serve basic goods and services to this community. GAS STATIONS continued from page 1 arteries of the Twin Cities? Those who can pendent c-stores going to survive with this hypermarkets fit on every street corner? adapt to change are bound to weather the emerging phenomenon? Most likely, many No! The main goal for the c-store operator storm, however for those who cannot, local independent c-stores will begin clos- is to be visible, make the customer happy the future appears dim. We have not yet ing their doors as it will be difficult to keep and satisfy their needs in a timely and seen the complete impact that these up with this massive competition. The efficient manner. The c-store chains are hypermarkets will have on mid-size news is brighter for the mid-size c-store not making large profits on their petro- c-store chains and local independents, chains. Even with the emerging multitudes leum sales, which is why the inside store since there are not as many hypermarkets of competition over the next several years, merchandise can be priced higher to make in as there are nationally. Cer- their goal is to be operating as usual. Many up the difference. High volume is the tainly we will start seeing local changes in states legislatures (including Minnesota) name of the game! This is common in the this industry. Currently in Minnesota, are becoming more cognizant of these local independents c-stores that are trying Rainbow Foods has fuel stations at a num- their best to compete with the mid-size c- ber of their stores in the Twin Cities, Cub People have become increasingly store chains, such as Holiday Stores and Foods has one in Rochester, Costco has Speedway Super America. In fact, at two in St. Louis Park and Coon Rapids, aware that their time is worth Holiday c-stores, you will find that even Sam’s Club has one in Woodbury and more than the money saved by the inside merchandise is priced as com- Wal-Mart intends to add more fuel stations searching through coupons petitively with many . “Not throughout the country. Even Target has or going out of their way for the everyone,” comments David Hoeschen, considered entering the gasoline game as Director of Real Estate for Holiday Com- an extra service to their customers. lowest gas price per gallon. panies, “counts every penny to get the lowest cost in gas, eggs, cheese, milk and Retailers such as Wal-Mart, Rainbow hypermarkets selling gasoline at below Foods, and Meijers entered into the Gas Stations continued on page 3 cost and are implementing new laws to petroleum business due to one simple fact: limit or even prevent this occurrence to they want to provide one-stop-shopping control predatory pricing. Upcoming Events for all. In today’s economic conditions, people will find themselves going to these Supply and Demand MSCA programs will be held at 8 a.m. hypermarkets not only for their daily (registration at 7:30 a.m.) at the The demand for gasoline has increased due Radisson South Hotel unless otherwise necessities, but also to fill up their cars to to increased populations in the entire indicated with an asterisk. save a buck or two! Wal-Mart customers United States and in Minnesota. Each Pre-registration ends at noon the day prior. are able to find great deals on merchandise household may easily have more than one Any registrations received after that from clothing to health and beauty, to food will not be guaranteed pre-registration. or two cars. During the last two years both Program topics are subject to change. items, all the way to filling up their tanks the mid-size c-store and the local indepen- with gas. Everyone wants a bargain, right? dent have increased their gasoline prices So why not lure the customer into their due to a decrease in the oil supply, not parking lots by offering low gas prices and because they wanted to gouge their cus- then providing them with all they could tomers. The theory behind raising gas prices ever need at low, low prices. was the hope that fewer people would be Wednesday, May 7 Selling Below Cost filling up their vehicles, so that the gas Headline Speaker supply would not diminish. On a positive Does it matter that many of the hypermar- Wednesday, June 4 note, supply issues for oil are not as con- kets can sell gasoline below their cost? Not Industry Trends cerning due to the strike in Venezuela if it is legal, since they more than make up Monday, June 16* ceasing, where much of the oil was housed. the cost in merchandise sales. Remember, Annual Golf Event the hypermarkets main objective is mass Is there still a need for the mid-size conve- Wednesday, July 9 volume, not margins. How are local inde- nience store? Yes. Can Wal-Mart and other Personal Development Wednesday, August 6 As a member of MSCA, your company is entitled to use Development the “Member of MSCA” artwork while it is an active Wednesday, September 10* (Afternoon) member of the Minnesota Shopping Center Association. Retailer Panel You are encouraged to use the logo on letterhead, Wednesday, October 1* (Afternoon) envelopes, web sites, newsletters and any other Mall Program appropriate print advertising. For your electronic Wednesday, November 5* (Afternoon) copy of the “Member of MSCA” logo and usage rights Retail Report and restrictions, please contact the office at Tuesday, December 9* (Evening) (952) 888-3491. STARR Awards/Year End Ceremonies msca news 2 www.msca-online.com Featured Corporate Sponsors

Benson-Orth Associates, Inc. THANK YOU! RLK-Kuusisto Ltd. Industry Focus: Site design and Industry Focus: To be the best shopping Great Clips, Inc. center developers’ general contractor. approval of commercial/retail multi-use Industry Focus: America’s largest and developments. Company Vision: To create loyal customers. fastest growing salon brand. Company Vision: Creating extraordinary “MSCA is important to us for two reasons. communities. First, the organization is growing. Second, I Company Vision: To be the #1 dominant haircare brand. like the commitment MSCA has made to “MSCA brings together the complete give back to the community. This fits with “Retail real estate is all about relationships, team of developers, design professionals our philosophy.” - Michael Monson and nobody delivers retail relationships in and construction experts. It is a great Minnesota like MSCA.” - Dean Wieber opportunity to network with associates Glimcher Properties/ and stay current with trends, public Northtown Mall Park Midwest opinion and physical design.” Commercial Real Estate - John Dietrich Industry Focus: To be a recognized leader in the ownership, management, Industry Focus: Retail property Welsh Companies, LLC acquisition and development of enclosed management, project leasing, land sales regional and super-regional malls and and brokerage. Industry Focus: All facets of commercial community centers. real estate. Welsh is a full-service, multi- Company Vision: To provide customer disciplined real estate service provider and Company Vision: To ensure maximum service, manage and lease like we own it. investor. performance by continuing to provide stores “The relationships built from MSCA are and services that meet the needs of our Company Vision: To be the pre-eminent ‘priceless’.” - Doug Sailor growing trade area. real estate service provider/investor in the Midwestern United States. “MSCA is an outstanding information A COMPLETE LIST OF resource on the latest statewide develop- MSCA’S 2003 SPONSORS “MSCA provides an educational, social ments and trends and provides excellent IS ON THE BACK PAGE and business development forum all in networking.” - Nancy Litwin one venue.” - Robert Pounds GAS STATIONS continued from page 2 Professional other necessities.” People have become even before they happen! For example, to increasingly aware that their time is worth gear themselves up for emerging Showcase more than the money saved by searching hypermarkets, both Holiday and Super through coupons or going out of their way America have, over the last few years, The Professional Showcase is an excellent for the lowest gas price per gallon. invested their capital to increase their store opportunity to present information on your Mid-size c-store chains, such as Holiday size significantly, improved their employee company’s projects, services or products to Stores and Speedway Super America, had training, and ensured that their stores are the MSCA membership at the monthly in the past, positioned themselves in our fully stocked with a variety of merchan- program meetings. dise, are well-lit, and clean inside and out. neighborhood side streets. Now to be truly Two complimentary program registra- competitive they need to strategically place They must give the best impression from the moment the customer drives on to their tions and an announcement at the themselves along arterial roads that con- program held that day nect to major arteries (highways, freeways, lot! And if absolutely necessary, these etc.). Hoeschen explained that it is impera- mid-size c-stores will match the gasoline 6 foot skirted table for attendees to tive to have strong exposure to massive prices of their hypermarket competitors. review before and after program For the local independent c-stores, if they amounts of cars traveling by daily. “Our c- Listing in that month’s program flier stores must be near strong traffic areas in have limited capital to invest in their Company can distribute handouts on order to attract high numbers of people, buildings, their chances to succeed will be tables (quantity suggested 150) which result in larger sales volumes” he compromised. added. The petroleum retailers know their Yes, “change” is the one thing that remains Requests for specific months will be business is extremely complex and multi- constant in our world! How the petroleum honored on a first come, first served basis. faceted and they must be able to properly retailers react to this notion can be the key All showcases are subject to approval. Call adapt to the changes in market conditions to their success or demise. (952) 888-3491 for more information. www.msca-online.com 3 msca news If you have additional tidbits, Industry Tidbits please forward them to Tim Hilger, newsletter co-chair, at [email protected] by Tim Hilger, Diversified Acquisitions, Inc.

reported a 4.4% CEO, Julian Day told the press that the top disposable diapers, photographic film, increase in 4th quarter earnings. Compa- executives he hopes to fill out his team toothpaste and pain remedies. It buys the rable store sales at Target stores open for with will want shares in the company that most Revlon, RJR Tobacco and a number more than one year decreased 1.1%, com- they will lead. of other number one ratings. It is “dab- pared to 6.2% at Marshall Field’s and bling” with stand-alone pharmacies. It lost In the battle among the top three ware- 9.3% at Mervyn’s. $2 billion in “shrinkage” (theft) last year, house clubs, Costco, Sam’s and BJ’s and if this shrinkage were sales the $2 Fleming Companies, Inc. announced Wholesale Club, BJ’s is starting to feel the billion would rank as the 694th largest the sale of 17 Food4Less stores to Save competitions inroads into its market share. company on the Fortune 1000 list. As big Mart Supermarkets for $82 million in BJ’s reported that this year’s earnings may as it is, it has a list of top competitors cash. In addition, Save Mart Supermarkets fall as much as 27% below what analysts including Target, Costco, Family Dollar, have agreed to purchase another 11 projected. Costco and Sam’s are adding and Publix Grocery who hold their own Food4Less store locations in California. more upscale products and are planning on against the Bentonville goliath. Wal-Mart expanding more into BJ’s primary market Carl’s Jr. Restaurants announced an is presently reformatting its Sam’s Clubs to East Coast markets. upgraded new design for its new namesake make them more profitable and competitive. restaurants. Upgrades include extensive The cost of workers’ comp can even Fleming Cos. is now struggling with landscaping, visibility into the dinning impact the largest of retailers. Costco, the another problem. It had a falling out with room area, an improved drive-thru, a con- world’s largest wholesale club retailer its CEO, Mark Hansen, and they are look- temporary interior design, improved light- reported that soaring workers’ compensa- ing for a permanent replacement. He was ing and exposed roof trusses. tion claims in California reduced quarterly criticized for overextending the company’s earnings by 5%, which is worse than the Krispy Kreme corporate announced that financial leverage by an aggressive acqui- company or stock analysts predicted. One- it is acquiring its franchisee in Kansas sition program. Fleming also announced third of its work force is in California, City, Wichita, Topeka and Springfield that they have filed a $1.4 billion claim in which accounted for two-thirds of its (MO) assets. Kmart’s bankruptcy case in an attempt to workers’ comp claims. The injury rates in reclaim payment for profits it is owed Wal-Mart reported that comparable California are proportional to the size of under a cancelled contract. same store sales for all store types for the the work force, but the cost of the claims in latest quarter were up 5.1%. This repre- California are rising alarmingly. Weekly February same store sales: Gap sented the following breakout for: Wal- benefits last year were $490 per week, this reported an 8% increase; Wilson’s The Mart stores were up 5.7% and Sam’s year they increase to $602 and they in- Leather Experts reported an 8% increase; Clubs up 2.3%. Wal-Mart reported as of crease again in 2005 to $840 per week. Kohl’s reported a 4.6% decline; Christo- January 31, 2003 that it had: 1,568 Wal- pher & Banks reported a 10% decline; The Fortune Magazine for the week of Mart Stores; 1,258 SuperCenters; 525 Sears reported a 9.4% decline; March 3rd featured an interesting article on Sam’s Clubs; 49 Neighborhood Markets Wal-Mart. Wal-Mart’s sales last year Abercrombie & Fitch reported a 4% in the US. There were an additional: Ar- exceeded $240 billion. It is the largest decline; JC Penney’s reported a 2.1% gentina with 11 stores; Brazil with 22 company in the world based on sales. Wal- decline. stores; Canada with 213 stores; China with Mart believes it can double its sales in 5 26 stores; Germany with 94 stores; Korea Benetton announced that it will soon years and possibly triple them in 10 years. with 15; Mexico with 597 stores; Puerto begin placing small microchips that con- The Bentonville retailer is the largest em- Rico with 52 stores and the United King- tains transmitter capabilities to allow it to ployer in 21 states. It is the largest grocery dom with 258 stores. track its garment from manufacturing to retailer in the world and it accomplished the point of retail sale at one of its 5,000 Movie Gallery reported that 4th quarter this in 15 years. It sells the most dog food, stores. Benetton will imbed 15 million same store sales of 6.2% exceed expecta- “smart tags” allowing it to manage the tions. The addition of 324 former Video What category of consumer inventory and delivery systems more effec- Update stores contributed to the overall products enjoys the highest level of tively. Privacy advocates are cautioning profitability. Movie Gallery is planning brand loyalty? Nothing comes close to retailers not to infringe on customer pri- 175 to 200 new stores for 2003. pet food, according to a study by vacy after the sale. Kmart announced that it will set aside InsightExpress in Stamford, CT. 53% of Ikea made the announcement recently 10% of the shares it will issue when it those who buy pet food are unswayed that they will open their first Minnesota emerges from bankruptcy for use to lure by coupons, price promotions, or other new executive team members. Kmart’s inducements to switch brands. Tidbits continued on page 5 msca news 4 www.msca-online.com Retail Profile Rockler Companies Incorporated

n 1954, Nordy Rockler started a mail Twin City locations in Burnsville, Minne- Rockler Companies, Inc. continues to be order woodworking supply company tonka, Maplewood and South Minneapolis. a privately held company and is run by Iin Minneapolis, known as Minnesota In addition to retail outlets, Rockler Ann Rockler Jackson, CEO and Dave Woodworkers Supply Company. The first Companies, Inc. has set up a web site and Laporte, President. Scott Mason, Store retail store opened in Minneapolis in 1978, an online newsletter so they can reach Development Manager, recently became a and was then known as The Woodworker’s more customers. They also have a catalog, member of MSCA. Steven Mosborg with Store. Among the products featured in the which has grown immensely and is now Park Midwest Commercial Real Estate is store were specialty veneers and hardware mailed to thousands of woodworkers na- their designated broker both locally and items such as knobs, pulls and table slides. tionwide. Additionally, they publish nationally. Woodworkers responded positively to Woodworker’s Journal, which is a leading Web site: www.Rockler.com having a place where they could always publication dedicated to offering plans, get what they needed. techniques, product review and tips to Over the last several years, the company woodworkers. Rockler has developed a has seen steady growth. In 1998, the com- number of exclusive products and reaches pany increased its commitment to offer out to both long-time woodworkers and What’s hard-to-find hardware by changing the those new to the craft. name of both its retail and catalog opera- The protot