This week’s announcement that Rainbow Foods would close its doors in Austin on April 11 brought a mixed reaction Tuesday from business people and shoppers.

Wednesday, February 16, 2000

This week’s announcement that Rainbow Foods would close its doors in Austin on April 11 brought a mixed reaction Tuesday from business people and shoppers.

Joe Abuhekal, owner of Tobacco Bell, a store specializing in cigars, fine tobacco products and related gifts, said it is impossible to calculate how much traffic he would lose with the grocery store’s closing.

Others echoed Abuhekal’s sentiments; that while Target may have contributed more random business traffic, the smaller businesses draw randomly amongst all the customers in the Target center. When Rainbow Foods suffered a decrease in customers, it was enough to notice a drop in business as Rainbow Foods’ traffic slowed.

"I never calculated the number of customers I drew from Rainbow or Target, but I know Target was a higher draw," Abuhekal said. "Speciality stores like mine, with a brand name anchor, would draw moretraffic; the random customers that see my store and maybe smoke or like cigars or that just walk in and buy a pack of cigarettes.

"Small businesses are always concerned about losing great business down the road, in the same area," he said.

Abuhekal and his business neighbor, Troy Irvine of Quizno’s, feel the initial high prices Rainbow brought to Austin turned away some business, only to lose customers across the highway. Irvine, director of operations for the young sandwich shop franchise, knows the price of catering to a clientele, and more importantly setting up a business to be successful. Yet common sense also figures greatly into the equation.

Both Abuhekal and Irvine mentioned economic studies regarding competitive markets, as intricate as Austin’s, citing market research done for their respective businesses.

"The prices were high, but later came down – actually came down a lot – but if you lose people right away, it’s hard to get them back," Irvine said.

Getting to know your surrounding businesses also is a key; the Target development features specialty stores rivaling many indoor malls. Abuhekal said he met the owners of Quizno’s very early after their stores’ respective openings.

"I’m very lucky to have hit it off right away," Abuhekal said. "We have never had Quizno’s in the city, but when I met the management, they were nice guys; they made me try to do better with my business."

Abuhekal, while unable to comment on decisions by Rainbow’s management because of corporate policies, did say that customer familiarity is one of a business’ greatest assets; a near Pavlovian response to a particular store of business. If customers don’t feel informed of a business’ new location after many years at another, the customers aren’t going to wait around.

"When the customer walks in automatically to that location, if they can’t find the store, they will look for something else," he said. "It’s an automatic response, especially f you don’t tell the customer that you are moving down the road.

"If the other store is open right now, but this one isn’t open anymore, you’re going to lose a lot of customers," Abuhekal said, noting up to 30 percent of a store’s clientele could be lost if customers fail to find the new site.

The short distance that Rainbow lies from Cash Wise Foods and Hy-Vee Food Store created a virtual complex of grocery stores. Adding Supervalu’s share of clientele from Austin’s eastside and many agree that Rainbow Foods may have overestimated the "convenience" factor, as much of the supermarket’s success has been achieved in the Twin Cities, where with a higher population, the flow of commuter traffic becomes greater.

With the ease of customer access and service and the combination of convenient services such as in-house banking, laundry and dining to name just a few, an influx of business can occur. After recent renovations added assorted services to the existing stores owned by Hy-Vee and Cash Wise, Rainbow’s customer services, which were found almost exclusively at the store when the doors opened, suffered.

For instance, both Hy-Vee and Cash Wise opened in-house banking facilities and other customer amenities provided in today’s supermarkets, adding a feature not available at Rainbow’s store.

Mary Larson, an employee of Lighthouse III in the Target development and a Rainbow Foods shopper, said a supermarket in the college city of Grand Rapids, Mich., offers numerous products and draws a substantial amount of business for its diverse services and merchandise.

"Our boys go to college in Grand Rapids and we went over there and it is just ‘wow,’" Larson said, describing the ultimate in one-stop shopping, "a combination Rainbow Foods, Target, with a bank and clothing with a hardware store.

"You could go in that building, Meijer, and get everything you needed."

Initially, Rainbow Foods came to Austin with a higher average total on customer’s bills. Lighthouse III located in the Target development, specializes in spiritual items. Larson said she would not have suspected the store’s inclusion into the nearby market.

"I thought it was strange they were settling here, because I thought there was enough to choose from," Larson said. "Especially since Cash Wise had just recently remodeled and put in the bank and put in a restaurant there, an eating area.

Larson said she would eat lunch with her daughter in the dining area within the Rainbow Food store while grocery shopping. She noted the employees were friendly as was the quality of the food and the store’s cleanliness. Larson said she saw an increase in Rainbow’s business after Christmas.

"I think about the time they lowered their prices, things began to pick up there. Before that, I didn’t really see that many people at the store" she said.

On Austin’s eastside lies Supervalu, a business that was heading upward at the time of Rainbow Foods’ opening in the city. According to Supervalu manager Jim Baldus, his store was enjoying gains of 5 percent to 10 percent following facility renovations, which added convenient services to Supervalu’s customer shopping experience.

"There’s no way Austin can support three major grocery stores, let alone in that area," Baldus said. "When (Rainbow Foods) opened, that cut into the growth."

He added the store draws customers from Austin’s eastside and surrounding areas and was quick to admit that only time will tell if customers lost to Rainbow’s venture into the city’s market will find Supervalu again.

Just as Rainbow Foods is owned by Fleming, who holds Sentry Foods and Supersaver Foods among its entities, the Supervalu company owns both Cub Foods and Cash Wise grocery chains.

Having ownership of two grocery stores within a city can effectively cut costs, as the same supplier is used for both Supervalu and Cash Wise stores. This measure can streamline transportation costs a company incurs, ultimately benefiting the consumer. After a time, when the prices at Rainbow Foods came down, consumers ultimately were caused to benefit, coupled with Hy-Vee, Supervalu and Cash Wise’s expanded facilities.

According to several market analysis, Austin has more grocery stores per capita than the seven-county metro area. With the big three supermarkets on Austin’s northwest side, and Supervalu in the east section, the city has an enormous access to consumer goods. The buying power allotted shoppers from larger inventories is larger than the Twin Cities and surrounding counties.

"It’s deceiving, but it’s fact," Hy-Vee manager Paul Boisjolie said, quickly dismissing any liability Supervalu faces. "You had better count Supervalu. It has a market draw in their location.