Beating the Odds: Grocery Outlet Is Thriving While the Retail Industry Struggles

Posted May 18th, 2018

See why Grocery Outlet is expanding as other traditional retailers struggle

The past few years have been a choppy ride for many retailers. There’s often news about how companies such as Bed Bath & Beyond and Toys “R” Us are having financial difficulties.

These traditional retailers are facing intense competition from all sides.

They struggle to compete with retail giants such as Amazon, Walmart, and Home Depot in pricing and product selection and they don’t have the niche products to attract customers looking for unique items.

Is this the end of the retail industry as we know it?

The good news is, there are still plenty of opportunities for brick-and-mortar retailers if you can cater to the needs of your customers.

Grocery Outlet, for example, has been featured in Forbes to illustrate how retailers can succeed in today’s retail landscape.

7 Reason Grocery Outlet Is Thriving in the Retail Space

Grocery Outlet is made up of a chain of 300 privately owned supermarkets and is expanding rapidly. Compared to other independent grocery retailers, Grocery Outlet stores are generating higher than industry average margins, averaging over $140,000 in revenue per store per week.

grocery outlet store

Grocery Outlets offer fresh produce and grocery items at prices below retail, as well as unusual bargains that aren’t found at regular supermarkets.

Here are seven reasons behind Grocery Outlet’s rapid expansion and the financial freedom achieved by its independent operators:

1. Meeting the bargain shopping mentality

The Great Recession in 2008, prompted consumers to examine their spending behaviors and started the trend of frugality and bargain shopping.

In fact, bargain shopping has stopped being a “trend” and has integrated into consumer mentality. For example, most people no longer feel awkward or embarrassed when they’re seen shopping at a discount store.

2. Satisfying the thrill of unusual bargains

Shoppers love to discover hard-to-find items at bargain prices. The thrill of the hunt makes the shopping experience fun, distinguishing Grocery Outlet from typical big-box retailers or online stores.

Grocery Outlet meets this demand by purchasing excess inventory from consumer package goods companies at an extreme discount.  

3. Adjusting to the shift in consumer shopping behavior

Shoppers routinely visit an average of 2.5 grocery retail channels “at least fairly often.” Consumers no longer consider supermarkets or supercenters as their one-stop-shop for produce and household items.

In fact, more consumers are indicating that they don’t have one primary store at which they shop for all their groceries. They are more likely to go to multiple retailers so they can get the preferred products or the best deals.

While loyalty has dropped for supermarkets, it has been steadily increasing for discount grocers as shoppers often start by hunting for deals first and then going to supermarkets to fill the gaps. As such, more shoppers are making Grocery Outlet their first stop.

4. Operating on a unique business model

Grocery Outlet can sustain a competitive business model because of the way it sources products.

With a large number of stores, Grocery Outlet has the bargaining power to purchase excess inventory (discounted, overstock, closeout) from reputable, national consumer packaged goods companies and then pass the savings to their customers.

Also, Grocery Outlet builds strong relationships with its suppliers, allowing the company to buy opportunistically and maintain a high-profit margin.

5. Catering to local customer demands

Grocery Outlet’s independent operators have the flexibility to select merchandise based on what their customers need.

As such, the independent operators can buy exactly what’s in demand and cater to their customers instead of having excessive inventory sitting on the shelf.

Also, thanks to the bargain pricing, Grocery Outlet stores are filling the market gap in many urban neighborhoods that have been struggling with the lack of supermarkets and affordable fresh food.

6. Building on an established process to attract and train talent

Grocery Outlet has a unique business model that attracts talented store managers to become independent operators.

The business opportunity allows experienced store managers to have operational autonomy, a share in the profit, give back to the community, and a chance to work with their families.

7. Establishing trust with strong values and a family-oriented approach

As a company, Grocery Outlet values trust, integrity, and respect — which are practiced by corporate and instilled into the day-to-day operations of each store.

The company encourages independent operators to involve their own families in their businesses. Many of them are husband-and-wife teams and some also employ family members.

There are also a few “second generation” Grocery Outlet stores where grown children of the original owners have taken over the operation of the business.

Also, you often see the entire family involved in store promotions and community activities.

Two boys stand to the right of a hand-operated prize wheel labeled ‘Wheel of Bargains’ under a tented shelter on a sunny patch of concrete.
Trevett and Noah Wheeler working the Wheel of Bargains at a store event for their parents, Paul and Sara Wheeler, who are independent operators of Grocery Outlet’s Citrus Heights, CA, store.

The community involvement allows the independent operators to establish trust within the market and build a loyal customer base.

The opportunity to succeed in retail

Despite the current challenges, there are many opportunities in the retail industry for those who understand the business and the market.

If you have extensive experience in the retail business, managing grocery chains or big-box stores, you can become a Grocery Outlet independent operator and seize the incredible opportunity that’s opening up in the grocery retail space.

You’ll gain operational autonomy, break the income glass ceiling, have the chance to work with your family and give back to the community.

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