H-E-B President Scott McClelland Remains Hopeful Amidst a Changing Market
SAN ANTONIO, TX - With online shopping options blowing up the retail game, brick-and-mortar retailers’ viability is in question. Do consumers still want to go to a physical location and buy their groceries in-person? One retail exec thinks so. At a recent economic forum, H-E-B president Scott McClelland took a stand for conventional retailers, claiming that brick-and-mortar is not going the way of the dinosaur—provided they adapt to the changing retail landscape.
“[In the future], there’s going to be brick-and-mortar [stores], and there’s going to be online. We think we can do both, but the brick-and-mortar [store] has got to be exciting and interesting and compelling for you to want to come in,” McClelland said at the Houston Northwest Chamber of Commerce’s annual Economic Outlook Forum on March 29.
Amazon’s purchase of Whole Foods in 2017 changed the retail game, prompting stores like Walmart and Kroger to test out autonomous delivery programs. The programs are all in an effort to capture consumers’ attention and dollars in the changing market. The millennial demographic, in particular, is willing to accept extra costs in return for convenience, according to The Community Impact.
McClellan conveyed that H-E-B must focus on improving the efficiency and profitability of its online delivery service to remain competitive. At the moment, H-E-B’s online delivery services costs the retailer $10 per customer, though customers only pay $5. The retailer’s online delivery services include both Curbside pick-up and Delivery options, though the services have encountered a few bumps in the road.
“Unfortunately, today our online experience still has some friction,” McClelland said.
The Texas market has been especially tough for conventional retailers last year, seeing job growth for food and beverage stores in the Woodlands, Houston, and Sugar Land areas dip by .3%—a loss of around 700 jobs—according to a February economic report by employment agency Workforce Solutions. Parker Harvey, Principal Economist of Workforce Solution’s Gulf Coast Workforce Board, attributed the job loss partially to the closing of several Randalls grocery stores in the Greater Houston area last year.
Harvey wasn’t all doom-and-gloom, however, stating that other grocery store chains are further expanding their presence in the region. He said he expects to see smaller employment declines as other retailers fill the gap left by Randalls.
“Longer term, it’s difficult to say how grocery and clothing retailers will fare,” Harvey said. “Between Amazon Go, a cashierless concept, and the purchase of Whole Foods, the traditional grocery space is likely to remain under pressure.”
However, despite the current market’s troubles, H-E-B has been expanding over the past few years, opening two stores in the Spring and Klein area.
“We’re really inundated in the Spring and Cypress and North Houston area,” McClelland said. “At the same time, if you look at Kroger and Walmart, they’ve pretty much stopped building altogether because they’re concerned about Amazon.”
One way to snatch back business from online mega-retailers is to offer shoppers conveniences and accoutrements that online retailers can’t deliver. H-E-B is trying this route by opening up a sit-down noodle restaurant and an in-store optical shop in its Spring location.
“We all have to adapt rapidly or risk being left behind,” McClellan commented.
Will brick-and-mortar withstand the online retail tsunami? AndNowUKnow will keep you posted.