Grocery Outlet gives independent operators freedom to choose inventory

Posted Dec 14th, 2016

Independent operators stock products on consignment basis tailored to their customer demographic

Before Aaron and Alix Crocker became independent operators at Grocery Outlet’s Lompoc, CA, location, natural and organic merchandise was mostly an afterthought. But the Crockers found that many customers were gravitating to Grocery Outlet’s varied selection of Natural, Organic, Specialty and Healthy (NOSH) products, so the couple gave the items a more prominent location in the store to satisfy the needs of their customers.

Grocery Outlet Franchise NOSH section in store
A significant percentage of the customers who visit Grocery Outlet’s Downey, CA, location are drawn to the NOSH (Natural, Organic, Specialty, Healthy) section.

This strategic decision points to many advantages of the Grocery Outlet business model: a diverse catalog of deeply discounted products; the flexibility independent operators have to make buying decisions for their store; and the hands-off approach from corporate that encourages independent operators to be more nimble in reacting to changing customer desires.

How does Grocery Outlet work?

Grocery Outlet’s team of experienced buyers secure substantial markdowns on surplus name-brand merchandise, all in mint condition, and independent operators tweak their margins to pass the savings on to their customers. The better the margins, the more revenue the operators take in. Operators pay a percentage commission back to Grocery Outlet and the rest is theirs to keep, so there is no limit on earnings potential.

Equally important, independent operators stock inventory on a consignment basis allowing them to keep a full assortment of ever-changing inventory available to their customers.

The Grocery Outlet profit-sharing model works by having independent operators pay for staffing and utilities while store build-out and consigned inventory is largely provided by corporate. Such a model also lowers the barrier to entry, so experienced grocery retail store managers and directors need not be intimidated by capital costs to become an independent operator with Grocery Outlet.

Diversity of inventory caters to customers’ diverse needs

Grocery Outlet’s variety of inventory attracts a wide demographic of customers. Mike Bodwell, independent operator of Grocery Outlet’s Merced, CA, location, says the store gets a mix of bargain- and budget-minded shoppers and customers with more disposable dollars who still love hunting for deals. “It’s really nice because you can market to everybody,” Bodwell says. “There are not a lot of people who don’t want to save money.”

Grocery Outlet operators stock wine
Grocery Outlet’s selection of discounted wines and spirits is a big draw for many customers.

Eric Liittschwager, independent operator at Grocery Outlet’s San Francisco Visitacion location, also sees customers looking for flour, sugar, milk and eggs on their EBT card to get through the month. “On the other end of the spectrum,” he says, “there are those looking for good deals on wines, premium vodka and ribeye steak.”

Liittschwager adds that the rotating product offerings encourage customers to visit more often to see what’s new. The varied products also allow independent operators to educate customers about healthy alternatives and foods they might not have tried before.

The independent merchandising choices at each store mean that no two Grocery Outlet stores are alike in what they sell or how they sell it. This is a win-win; customers can go bargain-hunting at many Grocery Outlet locations, while independent operators don’t need to worry that another location five or 10 miles away is going to undercut their bottom line.

Grocery Outlet serves the local community in meaningful ways, and is frequently the only grocery store in urban “food deserts.” Grocery Outlet can sell name-brand goods with steep discounts, even in the natural and organic section. Alix Crocker says she is grateful for the many customers who thank her for the opportunity to afford healthy and nutritious groceries for their families.

Grocery Outlet’s lucrative business proposition is a win for many independent operators who use the company’s appetizing product selection as one of the cornerstones of their business operations.

Learn more about Grocery Outlet

If you’re interested in starting a grocery store and would like more in-depth details about the Grocery Outlet independent operator opportunity, download our free information report. You can also learn more by visiting our research pages.

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