Chain Follows the Money to Areas with Little of It
By George Anderson
A headline in yesterday’s Wall Street Journal nicely sums up Save-A-Lot’s strategy for success: No-frills grocer goes where other chains won’t.
Catering to consumer households with annual incomes of $35,000 or less, Save-A-Lot has struck a chord with many looking to stretch their grocery dollars. The chain, mostly made up by licensee operators, currently has 1,229 stores in 39 states and has plans to move into California.
While growth has been strong in recent years, Save-A-Lot has found that it has had to scale back its plans this year. Instead of opening 90 new stores as originally planned,
the chain will open half that. Rising energy prices, increased competition and the need to remodel stores have served as a drag on the company’s profits. (See RetailWire 7/21/05,
Save-A-Lot Losing Some Momentum)
In its search for new store sites, Save-A-Lot has found that urban areas offer great potential. While others have passed on areas that they saw has generating too few sales and having too much crime, Save-A-Lot has stepped up its store openings in cities such as Baltimore and Wichita.
The Wall Street Journal article referenced a U.S. Department of Agriculture report, which found the density of grocery stores is lowest in urban areas where food stamp use is high.
Bill Moran, president and chief executive officer, Save-A-Lot, said he expects urban locations to eventually make up half of the chain’s stores. At present about 25 percent of Save-A-Lot stores are located in urban areas.
Save-A-Lot began opening its first stores in Baltimore in 2002 at a cost of about $750,000 and it has five stores now operating in the city limits and it is looking to possibly open additional locations. Two of the stores Save-A-Lot has opened since it first began doing business in Baltimore have closed.
Moderator’s Comment: Do you see the demand for operators such as Save-A-Lot continuing to grow? To which retailers do “hard discounters” such as Save-A-Lot pose
the greatest competitive threat? What will the chain and others entering low-income urban markets need to do if they wish to be successful?
The economic data certainly points to continued growth for operators such as Save-A-Lot. According to the latest report from the U.S. Census Bureau, those
living in poverty were up for the fourth straight year in 2004. The percentage of Americans living below the poverty line stood at 12.7 percent in 2004 compared to 12.5 percent
the year before. –
George Anderson – Moderator