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Discounters you should meet

Looking to inject value for your customers? Perhaps a visit to some of these great discount stores will spark ideas to get you started

to discount at Loblaw and Metro, plus Walmart’s ever-present low-price message are bringing value to the fore again. Throw in declining inflation and the need to drive volume, and price will be at the top of every store’s agenda over the next six months. To coincide, my column this month looks at discount stores—specifically discounters south of the border.

Why U.S. discounters? Because you’re probably already familiar with America’s fabulous conventional grocery chains (Publix, Wegmans, Kroger, to name a few). But the U.S. is also home to fascinating, yet often unheralded, discounters. Case in point: the five stores below. Each has its strategy, but all promise value and low prices to keep customers coming back.

Aldi
In Europe, Aldi has a well-earned reputation as a disruptor, taking away share from conventional grocers wherever it sets up. But Germany’s Aldi has also quietly built a business of significant scale stateside, too. Currently in the middle of an aggressive three-year expansion plan, Aldi U.S. aims to have 2,000 stores by 2018, ahead of the entry of Lidl, its hard discount rival in Europe.

Aldi’s main selling point is everyday low prices. But it offers customers a lot more than that. Stores boast a contemporary design and carry high-quality, private-label products, including ranges in trending categories such as gluten free, better-for-you, natural and organic.

Another Aldi strength is limited selection, which provides efficiency-based economies of scale. Plus, stores are relatively small, (typically 15,000 sq. ft.) allowing the company to expand fast.

Kroger’s Food 4 Less
If Aldi runs one of the smallest discount formats, Kroger has one of the largest with its Food 4 Less banner. Typical stores are over 60,000 sq. ft., allowing the chain to compete with a wide range of formats, including discount stores, warehouse clubs and mess merchants.

Like most discounters, Food 4 Less offers a no-frills, low-cost environment. But it also has a strong fresh food offer, a fresh bakery and deli—services that many discount stores skip.

The wafting smell of fresh bread aside, no one will confuse Food 4 Less for a conventional supermarket. Throughout stores, slogans constantly remind shoppers of the low prices. If that doesn’t do the trick, the front-of-store “wall of value” will. It’s packed with low-priced items that underpin Food 4 Less’ credentials as a place to save money.

WinCo Foods
Another retailer in the large-format value space to watch, and one that constantly impresses me, is WinCo Foods.

With 107 stores across eight western states, including Idaho, California and Texas, WinCo bills itself as “the supermarket low price leader”. Yet with stores typically over 150,000 sq. ft., WinCo is more of a hypermarket and feels somewhat like a warehouse club. But there’s no membership fee and stores are open 24 hours.

A few other things help WinCo’s performance. The company’s relentless focus on cost and keeping waste to a minimum, for example. Also, WinCo is owned by employees, which helps drive up productivity.

Recent strong performance has given WinCo’s leadership the confidence to open more stores, including a smaller 55,000-sq.-ft. test in Portland, Ore.—at a former Food 4 Less supermarket.

Smart & Final
Like Sam’s Club and Costco, Smart & Final aims to meet the needs of both household and business customers. The company, headquartered in California, does well with smaller businesses, home offices and community groups. Stores feature a mix of individual products and club packs, offering great depth of range in catering-based categories. Also aiding sales: convenient locations and prices that aim to be significantly lower than conventional grocery stores.

At 20,000 sq. ft., Smart & Final stores are smaller than most club outlets. But as we’ve seen with Aldi, being small has advantages when expansion is on the table. Smart & Final already has over 300 stores, and a further 150 potential locations have been identified.

Grocery Outlet
With more than 250 stores in California, Idaho, Nevada, Oregon, Pennsylvania and Washington, Grocery Outlet sells name-brand products at 40% to 70% discount compared to conventional prices. Most stores are independently operated and close to a dominant shopping centre. A 15,000- to 20,000-sq.-ft. footprint provides flexibility in terms of site location, and the absence of service counters keeps things simple for owner-operators.

One way that Grocery Outlet lowers prices is through opportunistic sourcing. For instance, it buys up surplus inventory and product overruns. Fresh food, though, is a key part of the merchandising mix, helping to drive traffic. Most stores also feature a NOSH (natural, organic, specialty, healthy) aisle, replicating a feature that has become an integral part of conventional grocers’ formats.

So there you have it. Five fabulous discounters. If driving a stronger value message is part of your plan over the next few months, these operators are definitely worth a visit. Seeing how they bring their value strategies to life in pricing and promotion, category plans and customer communication could prove useful as you look to develop your value proposition. CG

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