The building was pristine. The staff was top-notch. The need was immense.
The Market @ 25th opened its doors in late April after years of anticipation in the East End neighborhood long deemed a food desert. Its establishment brought two things that are scarce in Church Hill: new jobs and fresh food.
“Shop a lot and shop often,” local businessman and philanthropist Steve Markel, the store’s owner, told hundreds of customers waiting to rush through the doors at the grand opening. When they finally did, the store’s challenges began.
Prices induced sticker shock. Excitement turned to exasperation, and word of mouth began working against the new business. The perception spread through the neighborhood: Prices at the new store are high. Really high.
Norm Gold, the store’s developer and operator, said he knew he had a hole to dig out of from that point.
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To some, the prices fueled suspicion that the store had a preferred clientele — namely, white residents who have moved in droves into the historically black neighborhood in recent years. Advisers relayed the feeling to Markel and Gold. One told them the store “reeks of gentrification.”
After six months, the independent grocer has suffered millions in operational losses that Markel has personally covered. With sales lagging, the store laid off five employees at the end of September and, through attrition, its staff has shrunk by a quarter since opening.
It is struggling to lure shoppers away from chain grocers and big-box stores that can beat its prices and offer a wider array of specialty and bulk items.
Markel and Gold say they believe the store will find its footing and chart a path to long-term sustainability, becoming a model for other small independent grocers in economically deprived areas.
Conventional wisdom says it can’t be done. Basic economics are not on the store’s side. In what is a gentrifying neighborhood, human nature may be working against it, as well. Experienced hands whom Gold has sought counsel from have told him as much.
“I’ve been told it’s impossible for this store to be successful by an individual who did this for decades,” Gold said. “He said, ‘You can’t do it. You’re not going to be able to get everyone to shop in the store.’ Literally, he told me, ‘Give it up; you’re not going to do it.’ The goal for Steve [Markel] and me is to create a model that can be replicated elsewhere. We are going to do it. We just have to go through some bumps to get there.”
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Markel, vice chairman of the Henrico County-based specialty insurer Markel Corp., and his wife, Kathie, announced in 2016 that they would bankroll the construction of a grocery store in the city’s East End.
The area is home to some of the city’s poorest families. Residents have lower life expectancies than in wealthier parts of the city, a disparity Markel said necessitated investment aimed at improving health outcomes.
To that end, Markel helped finance the mixed-use development at 25th Street and Nine Mile Road. It includes 42 apartments, retail and office space and a new culinary school that J. Sargeant Reynolds Community College plans to open in 2020.
The 25,000-square-foot grocery store is the centerpiece of what Markel said this past spring was a “philanthropic” venture.
“The grocery store is really a symbol of creating a healthy neighborhood and a vibrant neighborhood,” he said. “Not only was it about food and vegetables and fruit, it was about jobs.”
The store opened with 98 employees. It now has 75. Openings would be filled “when sales pick up,” Gold said.
One employee, Rochelle Russell, is a loss prevention officer. The job pays $18.50 an hour but is worth far more to her. A felony conviction has limited her job prospects in the past.
Now, she’s moving into a three-bedroom home with her daughters. When she does, she’ll reach a goal she set for herself to move out of the apartment she had rented for more than a decade. That wouldn’t have happened without the store or the job, she said.
“To have the opportunity I was presented with, it doesn’t come along for someone with my background every day. This job is everything. And it’s even more of a reason why I want the store to succeed, not just because the community needs it, but because I need it.”
The Market @ 25th’s tagline — “a market with a mission” — suggests an ethos beyond the bottom line. Some customers, especially those with long-standing ties to the area, have bought into that mission.
Velma McMillian-Cartwright, 51, has shopped at the store since its opening. A former resident of Church Hill, she now lives in South Richmond but goes to the market after her dialysis appointments three or four times a week to pick up something healthy to eat. To her, the store represents growth worth supporting in the neighborhood.
“Even though you move away, when you have ties to a community and you see a community try to better itself and grow and provide jobs from within, why not be supportive?” she said.
“This store is much needed. If my limited income can help somebody keep a job, that’s what I want to do.”
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On an afternoon in late October, customers leaving the store universally praised its customer service and emphasized its importance to the community.
Whether its prices were right drew varying responses.
“They aren’t bad to me,” said Demond Brown, a customer who said he used to shop at the Community Supermarket on Mechanicsville Turnpike until last summer. The Market @ 25th’s meat department, in particular, won him over. “I’m able to get everything I need here.”
Others felt differently. Sherry Burden, who lives a few blocks from the store, said she only picked up certain things at the market or scouted for sales before visiting because she thinks it’s too pricey.
“I don’t want them to close, I just think they should work on bringing the prices down,” Burden said. “But if they’re not making the money, I understand they’ve got to do what they’ve got to do.”
The store’s employees say they hear some customers bicker that items are more expensive than the Family Dollar across the street or the Walmart Supercenter that opened in 2017 in Eastgate Town Center on Laburnum Avenue near Nine Mile Road in eastern Henrico County.
Beating Walmart’s prices is impossible, said Gold, the former chief operating officer at FeedMore, the hunger-relief umbrella organization that operates the Central Virginia Food Bank, Meals on Wheels and the Community Kitchen.
The independent store simply does not have the buying power of a major retailer. Because of that, it cannot sell items for as low without eating into, or erasing completely, the razor-thin profit margins that grocery stores operate.
Asked about the prices, Gold counters that the store’s basic items — milk, bread and eggs — are comparable to Food Lion and Kroger. In late October, a dozen large eggs the store carried cost 75 cents. A loaf of white bread cost $1.19. A gallon of 1% milk was $2.79.
Lowering prices on the basics has meant the store must make up ground with higher prices on other specialty items, like gluten-free and vegan offerings, Gold said.
In October, the store began surveying shoppers via feedback cards to learn what items people thought were too expensive. Using the cards, Gold said his team lowered certain items to be cheaper, then followed up with customers who shared their contact info to try to bring them back to the store.
Every customer counts, Gold said. To meet its budget, the market must generate $225,000 in sales each week. That’s equivalent to about 1,300 people a day spending an average of $25.
Through its first six months, the store has hit $125,000 in sales “on a good week,” Gold said.
He estimates that 870 to 1,100 people have visited the store on a daily basis during the period, depending on the time of the month.
Customers have spent an average of $21 in the first few weeks of the month. That figure decreases to $15 in the latter half of the month, Gold said, a drop-off he attributes to benefits running out in the Supplemental Nutrition Assistance Program, commonly known as food stamps.
Gold has taken other measures to boost foot traffic. The market began selling cigarettes after hearing complaints from some customers who wanted to pick up a pack when they came to buy beer. In another change driven by community input, Gold devoted space to a dollar aisle. Shoppers can now find all manner of items priced at $1, directly across from the wine selection.
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At the end of September, Gold invited representatives from 55 partner organizations in the neighborhood to a meeting. The store needed more customers, he told them, and he needed ideas to bring them in.
What he heard during the two-hour debriefing surprised him, Gold said. Yes, prices came up. But something else did, too: gentrification.
“A lot of people felt the perception was that way in the community, that the store was strictly here because gentrification is coming this way and the store is going to be profitable to take advantage of the gentrification,” Gold said. “That’s not at all what the store was meant to be about.”
Fear of a Whole Foods or an Ellwood Thompson’s Local Market spin-off planting its flag in Church Hill was prevalent in some corners of the neighborhood before the store’s opening, said Curtis Lee, a member of the Market @ 25th’s advisory board.
The advisory board met in the year leading up to the store’s opening. It drove the decision to incorporate the neighborhood’s history in the store’s décor and layout, a deliberate effort to communicate the store was meant to serve the community, Lee said.
“For years and years and years, Church Hill has been subjected to people coming in and forcing their will,” Lee said. “We wanted to make sure the store was all-inclusive for everyone — for the residents that have lived here for generations and the residents who are moving in now.”
Now the store’s outreach coordinator, Lee is a conduit for all manner of complaints or compliments about the store, from high prices to what items are kept in stock. He relays the feedback he hears to Gold and the store’s management team.
When changes are made in response to that feedback, Lee said that chips away at any lingering perception that the store is not catering to African American residents.
“That helps tear down the narrative that this is for the new families moving in,” Lee said. “It’s going to take time.”
Markel said the store is meant to serve everyone in the neighborhood.
“One of the goals of this store is for it to be a melting pot for everyone in the community. We’re not trying to serve one group to the exclusion of another. We want to try to be welcoming to everybody.”
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With the holidays approaching, Gold said he expects to see an uptick in sales.
After the meeting with partner organizations, he convened a new working group to develop a strategic plan for attracting more customers in the new year.
“For us to flourish and continue to serve as we are with our mission, people really need to support the store,” Gold said.
A profitable store may be years away, but Gold said he is focused on reducing the losses on a monthly basis. Markel said he remains committed to keeping the store afloat as long as its losses decrease over time.
“I’ve known from the beginning this was going to be tough, and I’ve known from the beginning that no one else has done this successfully,” Markel said. “To measure success in this project, we’re not talking a year or two, we’re talking about five or 10.”
Markel said the bottom line is not the only gauge of the store’s success.
“I prefer to measure the outcomes in terms of the customer service and the people walking through the doors, the stories you hear about people having a good experience, the jobs we’re creating and the families that now have livelihoods,” he said. “Whether that costs $100,000 or $1 million or $3 million is kind of irrelevant.”