Retailers are a creative lot, and there are many unique approaches to serving shoppers evident throughout the industry. However, there aren’t many companies as unique as Emeryville, Calif.-based Grocery Outlet, or that have as bold a vision for growth.
As the name implies, Grocery Outlet is an off-price retailer of food and consumables focused on delivering value to shoppers. It operates small-format stores where shoppers can find a limited assortment of predominantly branded merchandise, about half of which has been purchased opportunistically, offered at prices that the company refers to as “shocking values.” Elements of the company’s strategy are evident in the operations of retailers such as Big Lots, 99 Cents Only, Save-A-Lot, Trader Joe’s and Costco. But no one does it quite the way that Grocery Outlet does, as evidenced by the company’s approach to ownership, entrepreneurship, operations and accountability, which in turn drives the company’s financial performance and supports the long-term view that the United States could support nearly 5,000 Grocery Outlet stores. The likelihood of that happening revolves around the fact that the company doesn’t have store managers; instead, it has independent owner-operators.
“The best way for anyone to understand what we do is just walk into a store and ask for the operator and talk to them,” says Eric Lindberg, CEO of Grocery Outlet. “It is the difference between managing a store and owning a business. We think we are providing the American dream in the form of running a business, with the best of two models coming together.”
Grocery Outlet does things that the independent owner-operators, known as IOs, can’t do, such sourcing merchandise, managing the supply chain and maintaining robust technology systems, Lindberg explains.
“The IOs provide for us the things that we can’t do centrally, which is hire and manage locally, give back to the community in a way that is unique and authentic, live in the community, and make decisions at the point of intercept with the customers,” he notes.
That’s what Grocery Outlet refers to as “small business at scale,” and it has proved to be an effective combination with accelerating momentum. The company ended last year with 380 stores after adding 35 new locations. The combination of new stores and a full-year same-store sales increase of 12.7% — the company’s 17th consecutive annual increase — enabled the company to grow overall sales by 22.5% to $3.13 billion.
This year, plans call for between 35 and 38 new stores spread between Grocery Outlet’s core West Coast markets and its newer northeastern market. It’s part of a strategy to expand by 10% annually in existing and contiguous markets, while also entering new areas. Grocery Outlet went public in June 2019, and since then has maintained the view that it can open 1,900 stores in existing and contiguous states. Over the long term, the company believes that the market potential exists to establish 4,800 locations nationwide.
Expansion Eastward and Beyond
Grocery Outlet is largely a West Coast phenomenon, but going forward, it expects considerable growth to occur in the Northeast, a market it entered via a small acquisition a decade ago. There are currently 19 Grocery Outlet stores in Pennsylvania, but over time Lindberg foresees 150 to 200 stores in that state, as well as in nearby New Jersey, southern New York, Maryland, Delaware, West Virginia and Virginia.
“Then we have an opportunity to go north into New England, and we can go into the Southeast,” Lindberg says. “We think the Southeast would be a fabulous market for us to penetrate, and we’ve already done some work going west into the Pittsburgh and the Ohio Valley area.”
As the company penetrates eastward, it relies on what Lindberg calls a very robust supply chain, consisting of nine facilities: five dry facilities, and four other facilities operated by Atlanta-based Americold. To make it all run and take the company to the next level, in January Grocery Outlet named former Sobeys executive Tim Scott its chief supply chain officer.
“As we grow and expand, we think Tim is our guy for the next 15-plus years as we look at our supply chain supporting the East, continued growth in the West and probably a new geography yet to be identified,” Lindberg notes.
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