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Bargain
business
Store definitionsConventional supermarket: The original supermarket format offering a full line of groceries, meat, and produce with at least $2 million in annual sales. These stores typically carry approximately 15,000 items, offer a service deli and frequently a service bakery.Superstore: A larger version of the conventional supermarket with at least 40,000 square feet in total selling area and 25,000 items. Superstores offer an expanded selection of non-foods. Food/drug combo: A combination of superstore and drug store under a single roof, with common checkouts. These stores also have a pharmacy. Warehouse store: A low-margin grocery store offering reduced variety, lower service levels, minimal decor, and a streamlined merchandising presentation, along with aggressive pricing. Generally, warehouse stores don’t offer specialty departments. Super warehouse: A high-volume, hybrid format of a superstore and a warehouse store. Super warehouse stores typically offer a full range of service departments, quality perishables and reduced prices, e.g., Cub Foods. Limited-assortment store: A bare-bones, low-priced grocery store that provides very limited services and carries fewer than 2,000 items with limited-if any-perishables, e.g., Sav-A-Lot. Other: The small corner grocery store that carries a limited selection of staples and other convenience goods. These stores generate approximately $1 million in business annually. Convenience store (traditional): A small, higher-margin store that offers an edited selection of staple groceries, non-foods, and other convenience food items, i.e., ready-to-heat and ready-to-eat foods. The traditional format includes those stores that started out as strictly convenience stores but might also sell gasoline. |
Sav-A-Lot, WinCo has gigantic stores. “WinCo decided to
go with size to make the price statement,” says
consultant Hambleton. “WinCo is so big — 93,000
square feet, two acres under a roof.” Thanks to
efficiencies of scale, Hambleton says, “They actually,
objectively, have the lowest prices in the grocery business;
lower than Wal-Mart.”
WinCo, which does little advertising, is intentionally
low-profile, according to Michael Read, vice president of
public and legal affairs for the employee-owned discounter. The
grocer, whose roots are in Cub Foods and Ware-Mart, has 54
stores in Oregon, Idaho, Washington, Nevada and California, and
annual sales estimated at $2.5 billion. The firm also has two
huge distribution centers in Oregon, in Woodburn and Myrtle
Creek. At least for now, Read says, most of WinCo’s
future growth is aimed at California.
Other grocers with discount or warehouse stores in Oregon
include Food 4 Less, owned by Fred Meyer parent Kroger, with
markets in Coos Bay, Cove and Milton-Freewater. Family-owned
C&K Market’s 51 stores in Oregon and Northern
California include two warehouse store operations; it’s
based in Brookings.
Price Less has markets in Myrtle Creek, Sutherlin, Winston and
White City, and Shop Smart has stores in Harbor and Cave
Junction.
There’s a tendency to include both Costco and Wal-Mart
on the list of discount grocers. But Hambleton and other
industry analysts point out that for both retailers groceries
are only a part of their business model. “I would not
immediately put then on a list of discount grocery
stores,” he says. “Discounters, yes.” Still,
groceries, sundries and fresh products account for 60% of
Costco’s total sales — $31.1 billion a year.
OREGON’S FLOURISHING DISCOUNTERS RAISE INTERESTING
QUESTIONS about the people who shop there. Is the stores’
burgeoning presence an indicator of growing poverty, an
increasing number of middle-class residents in a budget
squeeze, or lots of bargain-hunters?
The number of Oregonians who live at the poverty level
(defined in 2005 as $16,090 annual income for a family of
three) continues to climb. The poverty rate hovers around 12%
of the population, and in some counties it’s far higher.
According to 2003 state statistics, 18.3% of Malheur County
residents live at the poverty line or lower; the rate is around
15% in Klamath, Josephine, Coos and Lake counties. At the same
time, per-capita income in Oregon lags in the rural areas. In
2004, when per capita annual income was more than $35,000 in
the Portland Metro area, it was less than $25,000 in a sizable
portion of the state.
At the same time, consumers appear to be getting more frugal.
A 2003 survey by the Food Marketing Institute, an industry
organization, found “an ongoing consumer shift toward
value retailers — not only for monthly stock-up shopping
but for routine trips.” The same survey said stable
food spending reflects both low inflation in food prices and
cost-consciousness.
Hambleton, an economist, notes that food is cheaper today than
it was 30 years ago, thanks to efficiencies in production,
processing and transportation. “The average household
today is spending 10% of its total income in the grocery store;
30 years ago it was 15%,” he says. Although he contends
that there aren’t more poor people among food shoppers
today, he adds, “To put it bluntly, yes, there are
markets that discount groceries will fit better.”
Grocery Outlet’s Wylie, talking about the demographic
the company seeks when it locates a store, clearly isn’t
describing the upper-middle class. “We’re looking
for a female maybe mid-30s and higher, mid- to lower income,
although we have some locations that do very well where
there’s a broad mix of incomes.” He says the
chain’s stores normally do well “where
there’s quite a bit of multifamily housing, families with
children, and a good mix of minority and non-minority
persons.”
Wylie tends to divide the chain’s customers into two
groups. There are the “need” shoppers who are on a
definite budget and shop for the 40% discount that Grocery
Outlet says it averages. He calls the other group
“treasure hunters,” people who view shopping there
as a treasure hunt, finding big discounts on wine or imported
cheese.
At the Beaverton WinCo recently, any treasure hunting that
Jennifer Wabnitz was doing was strictly a hunt for bargains.
She says she shops at WinCo for one primary reason: “Six
kids.” But she could as easily answer “to save
money.” She estimates she saves hundreds of dollars by
shopping at WinCo for her children, ages 3 to 18, herself,
husband Steve, and the family dog.
“A gallon of milk is $2 here,” Wabnitz says.
“You really have to try hard to find it for that anywhere
else. And we use six gallons a week.” She says
WinCo’s lack of frills doesn’t bother her. “I
don’t mind packing groceries to save money. They provide
a cart. What more do you need?”
Have an opinion? E-mail feedback@oregonbusiness.com
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