Is Grocery Outlet on its way to becoming the TJX of grocers?
Through a special arrangement, presented here for discussion is a summary of a current article from Frozen & Dairy Buyer magazine.
One online commentator referred to Grocery Outlet Bargain Market as “the supermarket version of Big Lots,” but new stores might be better described as “the T.J. Maxx of grocery stores.”
“New customers are often shocked at the quality, not only of the products, but of the stores,” says frozen buyer Diana Curtis.
Acquired by a private equity firm in 2014, the “nation’s fastest-growing extreme-value grocery retailer” made its biggest move to date late last year when it entered the red-hot Los Angeles market. With fast growth set for Southern California and the Mid-Atlantic region, Grocery Outlet is on pace to expand from 251 stores to 376 by the end of the decade.
While meeting head on with Aldi’s recent entry into SoCal, key differences between the two chains mean there’s probably room for both.
For starters, while Aldi keeps prices low by offering mostly private labels, Grocery Outlet sells national brand products purchased “opportunistically” — surpluses, seasonal closeouts, discontinued items, packaging changes, etc. While products sometimes aren’t up to a supplier’s standards (the sticks on the corn dogs are crooked, the zip-top package won’t reseal after opening or a flavor doesn’t meet strict manufacturer specifications), the majority are exactly what shoppers would find in a conventional supermarket. Nonetheless, prices on name brand products continue to average 40 percent to 70 percent less.
About 30 percent of Grocery Outlet’s frozen and refrigerated product mix include staples like butter, frozen pizza and ice cream that can’t be bought opportunistically. While earning less of a discount than the opportunistic buys, the full assortment enables customers to do most of their shopping at the chain without having to visit another supermarket.
But the opportunistic buys make each store’s margin and deliver the experience. A typical store carries between 4,000 and 4,400 SKUs at any given time, reports Weldon Weatherly, VP of fresh meat, frozen and refrigerated foods. But because inventory changes so frequently based on what’s available at the time, “by the end of the year, each store will have scanned approximately 120,000 unique SKUs, which really speaks to the treasure hunt experience we offer.”
DISCUSSION QUESTIONS: How would you rate the expansion potential of Grocery Outlet Bargain Market? Do you see similar market dynamics supporting off-price grocers as those favoring off-price apparel chains?