Closing the Grocery Gap

SACRAMENTO, Calif. -- Convenience store retailers not marketing to inner city residents are missing out on a golden opportunity for increased sales as supermarkets provide free bus service from urban neighborhoods, where often the perception -- and the reality -- is that local c-stores are overpriced.

Inner-city supermarkets, according to a report released yesterday by researchers at the Center for Advanced Studies in Nutrition and Social Marketing at the University of California Davis, can improve profit margins and the health of the communities they serve by offering shoppers free transportation to and from the store.

"It's a way for supermarkets to do well by doing good," said Diana Cassady, assistant professor of epidemiology and preventive medicine and senior author of the report, funded by the California Nutrition Network.

The "grocery gap" in inner-city neighborhoods has long been of concern to public health experts. A 1995 study of 21 major metropolitan areas nationwide conducted by researchers at the University of Connecticut found a third as many supermarkets in low-income areas compared with high-income areas.

Cassady helped conduct a market analysis of low-income neighborhoods in five California cities -- Bakersfield, Fresno, Long Beach, Oakland and San Diego -- and concluded that a supermarket-sponsored shuttle service would be financially viable in any of the areas. Depending on the area, estimated annual shuttle-driven revenues per city ranged from $545,700 to $1.5 million. The estimates assume, conservatively, that 20 percent of households without cars in each study area would use a shuttle once a week to buy $25 in groceries.

"We hope these findings will encourage more inner-city supermarkets to provide shuttles," Cassady said. "Residents of lower-income and minority neighborhoods in many urban areas face a double bind that limits their access to fresh, healthy food, especially fresh fruits and vegetables. Not only are full-service supermarkets scarce in many inner-city areas, but many residents of these areas lack cars to get to supermarkets in other parts of town."

The supermarket industry cites higher security costs, greater employee turnover and a bigger shrink factor in high-poverty neighborhoods. According to Cassady, loss and retrieval of shopping carts can cost a small grocery store chain $300,000 a year.

Convenience stores, on the other hand, have excellent distribution networks, a demonstrated history of providing fill-in grocery needs and good corners to serve a high volume of customers. But inner-city stores often fail to leverage these operational advantages by reaching out to a targeted demographic.

The study found that customers travel to another part of town to find a supermarket, or said they were forced "to buy groceries at a small convenience store offers a poorer selection at a higher price." For residents without cars, the situation is especially tough.

Shuttle programs, the report said, could solve these problems for consumers that can't find a neighborhood convenience store to meet their needs. In the process, the increased business is improving the bottom line for inner-city supermarkets. Stores benefit from additional shopping trips from new and existing customers, increased sales from larger purchases, reduced shopping-cart losses, free publicity (signs inside and outside the vans) and improved community good will.

In its report, "Supermarket Shuttle Programs: A Feasibility Study for Supermarkets Located in Low-Income, Transit Dependent, Urban Neighborhoods in California," UC Davis researchers detail two examples of successful shuttle programs: Numero Uno Market, a small chain of supermarkets serving inner-city Los Angeles neighborhoods, that maintains its own fleet of vans to give customers a free ride home with their groceries; and three Ralphs supermarkets, also in the Los Angeles area, that contract with a shuttle company to offer the same service.

One Numero Uno store owns nine vans that transport about 2,298 passengers a week, the report notes. The store is among the top-grossing supermarkets in the Los Angeles area. The cost of the van program, including drivers' wages, maintenance and all other operation costs, is less than 1 percent of the store's gross revenues, researchers found.

The shuttle service offered by a Ralphs store in Hollywood, Calif. has a constant waiting line, said Terry O'Neil, director of public relations for Ralphs Grocery Co. Vans run daily from 9 a.m. to 8 p.m., and offer a free ride home to any customer with a store receipt for $25 or more. Customers arrive at the store by their own means.

O'Neill credits the shuttle with significantly reducing shopping cart loss at the store, and with generating good will among customers. "If you walk and you're buying for a family, you can't get your groceries home intact and fresh," he said. "We offer the shuttle as a customer service to these shoppers, and many of them have thanked us."

One section of the report is meant to serve as a template for any supermarket interested in launching a shuttle program and demonstrates how a store can calculate the break-even point for launching a shuttle service.

"Some of our members already utilize shuttles in their businesses and have found them to be successful and profitable," said Peter Larkin, president of the California Grocers Association. "This study provides further information and guidance for those who are interested in expanding the concept into their businesses. The study should be very valuable for the industry. Shuttles not only benefit certain inner-city stores, but also help address the health concerns of the customers they serve."