Grocery shopping is a $17.5 billion-a-year industry in Dallas-Fort Worth, marked by fierce competition and consumer-driven change that forces chains and independents to constantly evolve.

In the last year, the region’s Gen X and millennial moms proved that online grocery shopping is here to stay, and grocery retailers plowed tens of millions of dollars each into new and improved stores and behind-the-scenes technology.

Curbside pickup became a winner with parents and anyone wanting the convenience of drive-by shopping at Walmart, Kroger or Central Market. And Amazon started using its Whole Foods Market stores to fulfill online orders. Grocers are also muscling their way into beer and wine deliveries.

While no new chains entered the North Texas market in 2018, German grocer Lidl said the Lone Star State is still on its radar.

Its chief rival across Europe, Aldi, has remodeled and expanded 40 of its 55 stores in Dallas-Fort Worth so far, giving it more space to add private labels, fresh foods and organics. H-E-B's Central Market opened its sixth local store and is working with developer KDC on its Uptown location at Lemmon and McKinney avenues that's been empty for two years.

Target started using its newly acquired delivery service Shipt. A new, smaller Sam's Club is opening later this year on Lower Greenville in Dallas.

As for the region's dominant players, Walmart and Kroger continue to rank No. 1 and 2, according to exclusive annual data obtained by The Dallas Morning News from Arizona-based Metro Market Studies. They account for a combined 43 percent of grocery spending, or 47.6 percent if Sam's Club is added in.

Tom Thumb, which will soon open a store on the ground floor of The Union apartment and office high-rise development in Dallas' tony Uptown neighborhood, did manage to gain market share as the region's third-largest chain. Its share grew to 8.7 percent, up from 8.1 percent the year before.

Tom Thumb, owned by Idaho-based Albertsons, is making another bold move with a store just east of downtown Dallas that will open next year on the street level of an apartment high-rise near a Dallas Area Rapid Transit rail stop in Deep Ellum.

There are many reasons grocers continue to spend money in North Texas, said Bobby Gibbs, analyst at Oliver Wyman in Dallas.

1 / 3Construction continues on The Union on Sept. 20, 2018 at the corner of Field Street and Cedar Springs Road in Dallas. The high-rise office and apartment buildings will include a Tom Thumb grocery store.(Ashley Landis / Staff Photographer) 2 / 3Construction continues on The Union on Sept. 20, 2018 at the corner of Field Street and Cedar Springs Road in Dallas. The office and apartment buildings will include a Tom Thumb grocery store. (Ashley Landis / Staff Photographer) 3 / 3Fuel pumps at a Tom Thumb Express store on Sept. 20, 2018 at the corner of Live Oak and Texas Street in Dallas. A 10-story apartment building called The Gabriella is being built across the street, and it will feature a Tom Thumb on the street level in 2019. (Ashley Landis / Staff Photographer)

“In some places like New York City and Philadelphia, stores are at risk from online shopping, but Dallas has an interesting set of economics to support both,” he said. “The costs to operate here are lower vs. other markets our size, and the market is more spread out. It’s a good test market and dense enough. Plus, this market is more resilient.”

Dallas-Fort Worth’s diverse economy and steady population growth — 143,000 new residents last year alone — translates into a bigger overall grocery market. That means declines or flat market shares may not translate into sales volume drops.

Market share

Still, there is market share movement in the most recent data, according to Metro Market Studies. Joining Tom Thumb with market share increases are Kroger, Costco, Market Street, El Rancho Supermercado and WinCo Foods.

Kroger added five stores over the year, and Costco's gain reflects almost a full year of having a store open inside the Dallas city limits.

Market share held flat for Sam's Club, Trader Joe's and Whole Foods. The numbers, based on sales through the first quarter, don't yet reflect the full impact of Amazon's filling online orders from Whole Foods stores, which it started in February.

Chains posting small share declines are Walmart, Target, Albertsons, Fiesta Mart, Brookshire, H-E-B Central Market, Sprouts Farmers Market, Save-A-Lot and Aldi.

Throughout the year, Aldi temporarily closed stores for five weeks at a time to expand product space by about 20 percent. The expansion allowed stores to double the size of its bread and pastry aisle, adding specialty items such as gluten-free foods or convenience-sized four-packs of brioche hamburger buns. Refrigerated cases were also added, doubling the selection of fresh meat and vegan frozen foods.

Aldi's store expansion and remodels will be completed locally next year. The $66 million local investment comes as rival Lidl opened its first U.S. stores this year. Lidl's entry, so far only on the East Coast, grabbed the attention of traditional U.S. grocers along with Amazon's $13.7 billion purchase of Austin-based Whole Foods.

Technology

“When Amazon purchased Whole Foods, that triggered an innovation arms race,” said Gary Hawkins, founder and CEO of Los Angeles-based Center for Advancing Retail & Technology. “A massive amount of change is happening really fast in the grocery business.”

Some retailers won’t have the resources to keep up with the industry’s transformation, he said.

Amazon Go’s cashierless stores in Seattle and Chicago and tests by Kroger and Walmart of driverless delivery cars are examples of how the pace of change is exponential, Hawkins said. “Growth of technology and innovation in the grocery space is only going to get faster.”

Online grocery sales went from zero a couple of years ago to a forecast of $100 billion by 2022, according to a recent report by the Food Marketing Institute and Nielsen.

The Amazon Go store in Seattle, Sept. 19, 2018. The e-commerce giant uses its headquarters city as a living laboratory, trying out new retail and logistics models. (Eirik Johnson / New York Times)

Walmart and Kroger are spending vast amounts of money to keep up, including setting up innovation labs. H-E-B is building one with Favor in Austin. Sam’s Club opened a lab in downtown Dallas this year, while Walmart put innovation hubs in Plano and Austin.

In August, Kroger started testing a self-driving van with partner Nuro to make deliveries as part of a pilot program from its Fry’s supermarket in Scottsdale, Ariz. Walmart is piloting an automated distribution center in California and is using robots in some stores to unload trucks in the back room and to inventory shelves in stores.

Walmart is spending $277 million in Texas this year. It’s remodeling 45 stores, including 18 in North Texas. It also opened a new store in Fort Worth in July. But its big focus is online shoppers.

D-FW has 91 Walmart stores with online grocery pickup. Big orange towers that automatically dispense general merchandise orders have been installed in 20 stores, and four more will be in by year-end. Seven additional stores will have towers in early 2019.

Walmart just opened its second refrigerated automated grocery kiosk in Sherman, about 60 miles north of Dallas. The first 20-by-80-foot vending machine opened last year in Oklahoma City, and both are in Walmart store parking lots. It’s a self-service way to pick up online grocery orders any time of day. Customers order and pay for groceries online. Walmart employees do the shopping and load customers' orders in the kiosks.

Amazon, H-E-B and Kroger are trying to get customers accustomed to buying beer and wine online.

In June, Amazon started delivering beer and wine in Texas by obtaining permits and licenses from the Texas Alcoholic Beverage Commission for five of its fulfillment centers in Texas.

Walmart has a 20-by-80 foot refrigerated kiosk in the parking lot of a Walmart in Sherman at 401 E. Highway 82. The structure holds online grocery orders that shoppers can pick up on their way home. A code unlocks doors to their groceries. (Ryan Trimble / Walmart)

H-E-B, which purchased Austin-based on-demand delivery startup Favor in February, answered Amazon by launching beer and wine delivery to customers in Austin, San Antonio, Corpus Christi and Houston. In September, Favor started delivering beer and wine from H-E-B's new Central Market at Midway and Northwest Highway in Dallas.

That store opened with online grocery curbside service, which was also added to its Lovers Lane store. Plano’s Central Market will get curbside in January, the company said.

Kroger is planning to bring its new wine delivery service to Dallas soon, said April Martin Nickels, its Texas spokeswoman. Home Chef, a meal delivery service that Kroger bought in May, will be available in D-FW in 2019.

This year, Kroger developed another service it calls Ship. It’s designed for customers to restock nonperishable goods that households run out of regularly. That’s now available in North Texas.

Online grocery pickup, a service that Kroger and Walmart were early to offer in this market, has been expanded to 80 local Kroger stores with five more expected by year-end.

New store development really took a back seat in the market this year. Kroger opened one Marketplace store in Arlington and has one planned for McKinney in 2019. Kroger is remodeling 14 stores this year and will have reset 33 center stores by the end of the year, Martin Nickels said.

Even Aldi, known for its no-frills smaller stores and private-label groceries, decided to offer online delivery through Instacart. Scott Huska, Aldi regional vice president, said the company is finding that customers will shop stores three times a month and use Instacart a fourth time for convenience.

1 / 3Shoppers browse the produce section of a newly renovated Aldi grocery store on Gaston Avenue on Sept. 20, 2018 in Dallas. (Ashley Landis / Staff Photographer) 2 / 3Four-packs of brioche buns are displayed at the newly renovated Aldi grocery store on Gaston Avenue on Sept. 20, 2018 in Dallas.(Ashley Landis / Staff Photographer) 3 / 3Scott Huska, vice president of the Denton Division of Aldi, Inc., greets shoppers in a newly renovated Aldi grocery store on Gaston Avenue on Sept. 20, 2018 in Dallas. (Ashley Landis / Staff Photographer)

Lidl’s plans

Lidl still owns future sites here, even though its focus remains on East Coast expansion. In September, it opened its 56th U.S. store in Charlotte, N.C., and it has three more scheduled in New Jersey through November. It’s too early to provide a Texas time line, said Will Harwood, Lidl spokesman.

Analysts believe Lidl, which has stumbled some and changed its U.S. management, will eventually find success with American consumers.

“I’m confident it will happen in the U.S. for Lidl,” said David Gordon, research director of PlanetRetail RNG. “Aldi and Trader Joe’s have successfully introduced private-label shopping to the customer.”

German retailer Lidl opened a U.S. headquarters in Arlington, Va., in June 2015 with plans to start operating grocery stores in the U.S. The first stores are in North Carolina, South Carolina and Virginia. Lidl continues to open stores on the East Coast. It has locked up several future store locations in North Texas. (David Keith / Lidl)

Battles between deep discounters Aldi and Lidl resulted in hard lessons for Walmart in Germany. Walmart CEO Doug McMillon predicts “they’re going to squeeze the value gap” in the U.S.

Traditional U.S. grocers were more prepared for Lidl’s entry. But Lidl is learning and supplemented private-label foods with more brands important to local shoppers, Gordon said.

Aldi has been doing that, too. In Texas, it sells popular homegrown brands such as Blue Bell ice cream and Shiner beer. Newly remodeled stores in Dallas also sell craft beer brand Revolver Brewing's Blood & Honey, which is brewed in Granbury.

Danielle Dolinsky, an analyst at PlanetRetail, said a low-cost business model only works with scale — another reason Texas is important to Aldi and Lidl.

“They want to go head-to-head with H-E-B and Walmart,” she said.

Twitter: @MariaHalkias

This story has been corrected to reflect that Walmart's automated distribution center pilot is in California, not Maine.