Adventure, savings at extreme-value chains

September 25, 2009

Can grocery shopping be adventurous, exciting, and economical? Is such a concept too good to be true?

Can grocery shopping be adventurous, exciting, and economical? Is such a concept too good to be true?

Conventional supermarket shoppers might think their hunt for a good parking space and a sale item in stock is thrilling enough for their taste, and that their trade-downs from favorite brands are a big enough compromise to save money in this recession.

But lucky shoppers in selected markets have found alternative stores (nope, not dollar stores or massive supercenters) that give them the emotional kick and incentive to shop with enthusiasm—because they know they’ll save dough, and they’ll be bringing home different items on each trip to fill their pantries.

Welcome to the extreme-value retail segment—populated by the banners of Aldi, Grocery Outlet, Save-A-Lot and Winco—which, according to the RetailNetGroup consultancy, is expected to grow at twice the rate of the U.S. chain retail average over the 2009-2011 period. Senior analyst, Aaron Chio, writes that more than 70 million Americans are stressed for income (unemployed, underemployed or retired); this explains why extreme-value stores are currently in the economy’s sweet spot.

As enthusiasts of these stores would tell you, sharp prices are only part of their appeal. Their ever-changing assortments (categories are consistent, most brands are not) bring serendipity to shopping, their efficient formats save time on each trip, their generally convenient locations and hours (most Winco stores are open 24 hours) help fit shopping into any lifestyle, their focus on food safety (Grocery Outlet has a 30-minute recall drill) build trust, and their day-in day-out values help moms bring home foods that satisfy everyone in a household.

In our view at, they’re growing fast because they give moms a feeling of success in a period when that vibe is hard to come by. Each chain within this segment has its own go-to-market strategy, but collectively they represent a concept that sustains in every economic period, but truly shines in tough times. These stores are far more refined than, say, the pioneering deep discounters once led by Drug Emporium—which were driven by opportunistic deals, limited food-and-beverage assortments and cost-plus 16% pricing—but also burdened shoppers with forced traffic patterns, dim lighting and pure drudgery.

What if food stores overall took a page from the ever-changing mix that’s natural within extreme-value stores today? We think they could bring more adventure and consumer engagement to their shelves with a new assortment model that culls the #5, 6, 7 brands within categories in order to bring in opportunistic buys (think imports, smaller innovative suppliers). Maybe these items come in quarterly and last just a few weeks, but their role would be to bring some much-added sizzle to the mundane chore of grocery shopping, build baskets and pique interest on a systematic basis.