FD Buyer: Grocery Outlet Grows
Through a special arrangement, presented here for discussion is a summary of a current article from Frozen & Dairy Buyer magazine.
Some of the numbers at Grocery Outlet, the 175-store chain based in Berkeley, CA, just boggle the mind.
At any given moment, wall-to-wall, the typical store has only 4,500 unique SKUs. But over the course of a year, the stores together will churn through more than 200,000 unique SKUs as they ring up $1.2 billion in sales.
For the uninitiated, Grocery Outlet is best known for helping about 2,500 manufacturers nationwide sell "problem products" and closeouts at discounts averaging 40 percent to 50 percent to eager shoppers. Most stores are individually owned and range between 16,000 to 18,000 square feet.
Sales have nearly doubled since 2006 and plans call for another dozen stores to be added in the West this year. What’s more, it recently acquired the 13-unit Amelia’s Grocery Outlet in New Holland, PA, to gain a foothold in the east and a new equity partner promises accelerated growth.
Keep in mind that the buyers have little if any idea where most of next week’s merchandise is coming from. Planograms? Outside help with shelf re-sets? What’s that?
About 70 percent of its mix are closeouts or over-runs but that’s still down from close to 80 percent in the middle of the last decade as fresh meat and other items were added in recent years.
"Where we have felt the need to add these convenience items, we put the right retails on them to be at or below the most aggressive retailers in the marketplace," said Weldon Weatherly, director of refrigerated foods. "But the lion’s share of our business is still opportunistic. These items have to be priced right; if we’re priced well on them, there’s a halo effect and it gives customers confidence that we are priced right in the rest of the store."
The main reasons closeouts arrive are a packaging change, an over-aggressive launch or a start-up looking for a place to start. Added Mr. Weatherly, "Then there are cases where the proliferation of private label has knocked items off the shelf. There is a lot of pressure on branded folks — particularly second or third tier — and we are all about brands."
In handling the unpredictability of its mix from week to week, Grocery Outlet counts on vendors to fill in any deficient categories, but also accepts shelf contraction as well as growth regularly based on buying opportunities.
"Most of our vendors and shoppers liken our stores to a treasure hunt because they never know what they’re going to find," said Paul Miller, director of frozen. "People generally know they’re going to find products at a great price, and they may buy more than they need while it is there."
Discussion Questions: Do you see grocery closeout concepts going more mainstream in the years ahead? What challenges may Grocery Outlet face as it expands its concept?