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TULSA, Okla. (AP) — Two national chains, Costco and Trader Joe's, are scheduled to bring more grocery options to Tulsa in the span of two months, and, when they do, high-end natural grocers and other wholesalers will face stiffer competition, national and local experts say.
The Tulsa World (http://bit.ly/1nRaOR8 ) reports that each new store will be the retailers' first foray into Oklahoma — a market dominated by Wal-Mart, which has 27 stores and four Sam's Clubs, in the Tulsa metro area.
Trader Joe's won't compete with Wal-Mart directly, experts say. But Costco will.
Each store is moving into a wealthy neighborhood. For Trader Joe's, it's Brookside, which already has a cluster of grocery stores nearby — a Natural Grocers, a Reasor's and its natural competitor: Whole Foods.
The Trader Joe's will open on Feb. 26, the company said. It's a half-mile from Whole Foods.
"I'm sure they're happy as punch it's coming across the street," said Scott Mushkin, head retail analyst at Wolfe Research, a New York research firm.
Trader Joe's offers similar goods to Whole Foods at better prices, Mushkin said. The range isn't as wide, but there's more private label merchandise.
Trader Joe's is also a private company, and Whole Foods is public. That can create some disadvantages, Mushkin said.
Other companies now know Whole Foods' margin. Private Trader Joe's can withstand financial difficulties without having to please shareholders.
It's also moving into a higher-income area. The average household income in the neighborhoods to the south and east is well above $100,000, according to census tract data.
Mark Rooney, a retail broker for commercial real estate firm CBRE, said the area's wealth attracted Trader Joe's. The young families in the area want organic food, he said, but at less of a price.
"Whole Foods would be an expensive place for most young families to shop on a regular basis," Rooney said. "Therefore, these young families are shopping where they can buy things like organic groceries at the most affordable prices."
Mushkin agreed, pointing out differences in the shopping experience. He said shopping at Whole Foods is more of an experience, and that drives prices up.
"Trader Joe's — less of a selection, much more price competitive. If you're still wanting to eat healthy and eating on more of the budget, you're going right across the street to Trader Joe's," Mushkin said.
Costco is moving into a wealthy area near the intersection of two major highways — U.S. 169 and the Creek Turnpike. The neighborhoods to the south, west and northeast of 10220 S. Memorial Drive are full of households that make more than $86,000.
In one pocket, the average income is more than $150,000. And the area sees a heavy amount of traffic. More than 47,000 cars head south on Memorial Drive from 101st Street each day, and another 35,000 head the opposite direction.
Part of Costco's strategy is to grow in areas where Sam's Clubs and Wal-Mart dominate the market, including Texas, Oklahoma and the Southeast. Tulsa has three Sam's Clubs. There's another in Owasso.
Kerry Carbullido of Costco said the chain isn't just expanding in Tulsa. Her region, which includes Texas, Louisiana and Oklahoma, has two other openings — in a suburb of Houston and Lafayette, Louisiana.
"They like to be in neighborhoods where there are a lot of upper-middle-class consumers," Mushkin said. "They like to have access to higher-income people, but they also like the warehouses to be centrally located for small business."
Mushkin said Costco benefits from a better reputation than Sam's Club, whose reputation is hurt by its affiliation with Wal-Mart.
He said the wholesaler's success isn't just due to the food and other goods found at competitive prices but to some of the other brands it carries — Henckels knives, promotions with DirectTV, large discounts on televisions and Polo Ralph Lauren.
"They get access to some of the best brands," Mushkin said. "It orients people to an incredible merchandising experience.
They tend to price more common items lower than anybody. They'll price below Sam's on common items like milk."
Costco might be tucked in a growing, wealthy area, but it will also draw shoppers from miles away, Mushkin and Rooney said.
Rooney said the wide range of goods and their pricing will enable Costco to draw from miles away, like the retailers at Tulsa Hills shopping center do as a whole.
"They could draw easily 30 miles away, maybe more. Maybe 45 miles," he said.
That ability to draw people is why the city of Tulsa used its retail incentive program to lure Costco.
Clay Bird, director of the Mayor's Office of economic development, said Costco will be eligible for reimbursement for $2 million of the money it spent on infrastructure.
The retail incentives program is for new, national retail brands that will grow the sales tax base, according to city planning documents.
"Especially being the first one in the state, it'll be somewhat of a regional draw," Bird said. "It should pull in sales from surrounding municipalities without question."
He did acknowledge, however, that it could affect and cannibalize some other retailers' sales, but having it in Tulsa was a major victory for the city.
"If they were just across the street to the east, they would be in Bixby," Bird said. "We would lose that and all the revenue from the surrounding area."
Rooney said there could be some consolidation in the grocery market over the next few months after Trader Joe's and Costco arrive.
If there is any fallout from Trader Joe's entering the market, it could be in the high-end, organic sector, he said.
"There's a lot of competition in that part of the grocery market," Rooney said.
Akin's and Natural Grocers focus on health foods, and both have multiple locations in the Tulsa area. As do Whole Foods and Sprouts.
Costco could also take a bite out of the market share of the Wal-Mart brands.
"It could impact more than just one Sam's," Mushkin said. "It could impact all three."
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Information from: Tulsa World, http://www.tulsaworld.com
An AP Member Exchange shared by the Tulsa World.
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