Inside the sprawling HEB plus! store at US 281 and Evans Road in San Antonio, customers browse colorful throw pillows, rugs, vases, frames, chairs, ottomans, doormats and bundles of dried lavender.
Mirrors and wall hangings are displayed near table linens, lamps and plant holders below a sign that reads: “Welcome to your happy place.”
The new department, dubbed Home by HEB, is one of the San Antonio-based grocer’s latest moves to grow its business. While adding store locations — which it’s doing as it pushes into the Dallas-Fort Worth area — is a key avenue to growth, in mature markets like San Antonio, growth can require something new.
“Integrating higher-margin categories like home into the mix allows HEB to plump up profits without stepping too far out” of its geographic footprint, said Carol Spieckerman, president of retail advisory firm Spieckerman Retail, based in Bentonville, Ark. “Retailers like Walmart and Target use grocery as a traffic-driving lure that translates to sales in more profitable categories. Grocers like HEB can reverse that game by layering on non-grocery categories.”
The strategy is not new. Supermarket chains such as Iowa-based Hy-Vee, Ohio-based Kroger and others have experimented with new formats that add home goods, apparel and even fitness equipment. They know expansion into such non food categories provides a means for increasing traffic, sales and profits.
HEB this year is pushing into the home goods segment. After launching the Home by HEB concept in April at its Walnut Avenue store in New Braunfels, the company has since expanded it to four other stores, in San Antonio, Brownsville, Burleson and Corpus Christi.
It plans to add it to about 27 stores across the state this year, including new stores in Frisco and Plano.
Two years of planning
Home by HEB has been in the works for nearly two years, said Sabina Israelian-Garcia, the company’s group vice president of general merchandise, drug store and beauty.
“We’re always looking at new categories and always making sure that we’re putting the best in front of our consumers,” she said.
At its store in San Antonio, the roughly 2,500-square-foot section within the 130,000-square-foot store includes more than 500 items and is among the largest Home by HEB departments.
It includes two brands: Haven + Key and Texas Proud. The former includes furniture, accent pieces and home textiles, and the latter features items made by Texas-based artisans and businesses, such as leather goods from Lucio Tailoring Co. in San Antonio.
The company is known for tailoring its stores to their surrounding areas, and the home department will be no different, Israelian-Garcia said.
Beyond local connections, HEB has long capitalized on the wellspring of Texas pride, and its foray into home decor Reflects that — wall art is emblazoned with the state flag, longhorn throw pillows are lettered with “Howdy,” and a display features “God bless Texas” sign.
“From a product perspective and a brand perspective, we will continue to innovate and evolve as time goes on, so customers can expect continued freshness of products over time,” Israelian-Garcia said.
Why it makes sense
In the San Antonio area, where the company last opened a new store in 2020, HE-B’s expansion into non food categories are necessary for increasing sales and profits, retail experts said. It and other grocers are facing more competition in an industry with razor-thin margins and must move beyond traditional grocery items to grow.
“Margins on nonfood, including homewares, are much better and can bolster HE-B’s profits,” said Neil Saunders, managing director of the retail division at London-based data analytics and consulting company GlobalData.
“If the offer is good, adding home products can help boost sales as shoppers will explore the range as they do their grocery (shopping) and will probably buy things on impulse,” Saunders said.
Amid high gasoline prices, it’s also important to customers to get more of their shopping done at a single store — “offering yet another rationale for category expansion,” said Spieckerman, the Arkansas-based consultant.
Another factor in diversification is that HEB has large stores, providing it with room to test various concepts, said Venky Shankar, director of research at Texas A&M University’s Center for Retailing Studies.
“They have the space, and post-pandemic when people want to indulge in looking around, why not try a few concepts?” he said.
While HEB has built a loyal following in part by emphasizing its Texas ties through its product assortments, competitors such as Walmart and Target are not nearly as proficient at that, said Jon Hauptman, senior director of e-commerce at Inmar Intelligence, a retail analytics company in Winston-Salem, NC
“They’ve built their entire business on appealing to local tastes and local needs,” Hauptman said.
But new product lines come with new challenges. Managing housewares and decor involves a different business model than managing groceries, Hauptman added.
The speed at which an item is put on a shelf and purchased is much longer for nonfood items, and higher gross margins are necessary to offset higher costs of bringing in and handling those items, he said.
“By bringing in the right people to do it and dedicating the resources and space in the store, it is possible to do it very well,” Hauptman said. “But it’s not easy.”
HE-B’s other efforts
HEB has experimented with other departments inside its stores.
Along with Home by HEB, the store at US 281 and Evans includes nearly 4,000 square feet dedicated to beauty items.
The company added the department in 2019. It includes cosmetics, hair products and skin care, along with test stations and an interactive screen where customers can pose for photos.
HE-B’s store at 651 S. Walnut Ave. in New Braunfels has the company’s first two-story True Texas BBQ restaurant, which provides another stream of customers who may come for a bite and stay to pick up groceries.
It also has small shops at some of its stores: Mia’s Mirror, Bonita Brows Bar, Diamond Decks and River City Flooring.
And the company is pursuing other avenues to boost its bottom line.
HEB is opening more health clinics, which offer primary care, nutrition and pharmacy services, and physical therapy.
In May, it added its first clinic in Austin after opening locations in San Antonio and Houston, and said it “plans on rapidly expanding throughout Texas with both primary care and nutrition services over the next few years.”
The clinic openings are reflective of “retailers’ pushes into solutions and services, particularly in health and wellness,” Spieckerman said.
Also in Austin, HE-B’s Central Market in April opened what it calls a “meatless butcher,” the company’s response to increasing demand for plant-based foods. If it works there, it could be rolled out to HE-B’s other stores.
The company is also investing in curbside and delivery services by building more facilities and devoting more square footage within its stores to stocking and preparing orders.
“Convenience is another major expansion area for retailers,” and curbside and delivery services “add to HE-B’s convenience arsenal,” Spieckerman said.
Such moves are important as competition keeps growing for online shoppers. In recent days, for example, Kroger has re-entered San Antonio with a delivery-only service.
HEB opened an e-commerce fulfillment center in Leander in mid-July, the fifth it has constructed since 2018. The company plans to add more such facilities across Texas, including in Plano, as it pushes into the Dallas-Fort Worth market with its first namesake stores.
It has operated its upscale Central Market stores in North Texas since 2001 but not HEB stores. Its namesake stores in Frisco and Plano are scheduled to open later this year, and two others under construction in McKinney and Allen are slated to be finished next summer.
HEB also continues to expand in its existing markets, including in the San Antonio area. New stores in Cibolo and near Fair Oaks Ranch are in the works.
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