Becky Yerak’s column in today’s Trib describes the sales success of Dominick’s (a Safeway unit) in downtown Chicago. The economics are too good to give up, even if theft is an issue when the groceries are upstairs and the employees are downstairs.

(And yes, I have photos of the Lincoln Park and West Loop stores here).

Dominick’s thinks outside its deli

?BECKY YERAK
Published March 2, 2004

When Dominick’s planned the deli section of a store in Lincoln Park, its eyes were bigger than shoppers’ appetite for convenience food.

“We used to talk about `home-meal replacement.’ That was the wave of the future. Everything you needed in a box …” recalled Michael Mallon, Dominick’s vice president of real estate. “Believe me, there’s a lot of business in home-meal replacement, but not as much as we originally set up in the store.”

So the Safeway Inc. chain downsized the deli, added a Starbucks and a bakery, and watched sales rise 20 percent. “More importantly, profits picked up also,” Mallon said at an International Council of Shopping Centers event last week.

Dominick’s landed the spot at Fullerton and Sheffield Avenues because it agreed to build a two-level store in the mixed-use development, owned by DePaul University.

“It’s the first two-level grocery store in the Chicago area,” Mallon said. The store does “in excess of $500 per square foot.”

But “shrinkage”–stolen merchandise–is a bigger problem in a two-story store. In fact, Dominick’s labor costs at the site are 2 percentage points higher than at single-level stores.

As a result, developers seeking tenants for a two-level store should brace for tougher rent talks. Nonetheless, “we’re looking at other two-level locations in Chicagoland,” Mallon said.

Meanwhile, near the West Loop, sales at Dominick’s at Madison and Halsted Streets “are way beyond our expectations,” Mallon said. “We’re doing in excess of $550 a square foot.”

A Dominick’s going up downtown at Columbus Drive, Illinois Street and St. Clair Street will be “something Chicago has not seen,” Mallon added. With roof-top parking for 150 cars, a cart escalator, and valet and dropoff, it “will be the flagship store for Dominick’s,” he said.

The immediate area’s average household income exceeds $150,000.