How Big is the Grocery Industry?
Americans’ buying behavior has changed, and the niche for extreme discounting is hot
According to the National Grocers Association, independent grocers account for one percent of the nation’s overall economy, with $131 billion in sales.
Compare Grocery Outlet with independent grocery stores in general. The independent stores that make $100,000-$200,000 in weekly sales averaged 1.77% in net profit margins in 2013, according to the Independent Grocers Financial Survey conducted by the National Grocers Association6. By comparison, an average Grocery Outlet Bargain Market in 2014 averaged over $130,000 per week in sales with higher than industry average margins.
If you meet our financial and experience qualifications, we look forward to providing you with contact information for independent operators you should speak with to hear directly from them how their businesses have positively affected their lives, both financially and in quality of life.
The rise of the independent discount grocer
Bargain shopping is hot these days. The Great Recession in 2008 caused consumers to focus on frugality, and they quickly discovered that they could get a lot of what they needed and wanted by shopping at discounters. This awareness of the intrinsic value of bargain shopping is not a trend. It’s here to stay.
“Our market works well because the discount channel was legitimized five to 10 years ago,” says Co-CEO MacGregor Read. In other words, people care less now about being seen in a discount store.
Shoppers also like finding unusual bargains — hard-to-find items for a very low price. The thrill of the hunt and the delight of surprising finds are part of what makes the shopping experience fun.
“The customers can also find unique novelty products in addition to our vast offering of brand-name merchandise. When they see them and they notice that they’re half price, all of a sudden you’re making up to a good margin on that specific item,” says Eric Liittschwager, an independent operator in San Francisco.
Grocery Outlet does carry staple items. Do we stock everything a conventional store has? Not yet. Do we stock the staples and bargains to make us the first stop on a grocery shopping trip? Increasingly, yes.
How the grocery industry is changing
The Food Market Institute reported in 2014 that shoppers frequent 2.5 different grocery retail channels fairly often7. Twenty-nine percent of those respondents reported visiting conventional discount stores. As loyalty has dropped for supermarkets and supercenters from 2011 to 2014, it has steadily increased for discount grocers.
Amazingly enough, the report demonstrates that the percentage of shoppers who say they don’t have one primary store where they shop for groceries has quintupled since 2011, from less than 2 percent to nearly 10 percent in 20148. That’s great news for us, because more have chosen not to make supermarkets and supercenters their one-stop shop. They are hunting for deals first, and then going to big supermarkets to fill in the gaps. Discounters are filling a bigger share of refrigerators, freezers, and pantries. In other words, there’s never been a better time to open a grocery store with Grocery Outlet.
“Grocery shopping is very habitual,” says Chief Marketing Officer Glenn Lunde. “The super store model is built with 100,000 square feet, and our footprint is much smaller. We have to convince people that we’re worth the extra trip, and we do that by providing incredible deals that save customers a lot of money. We convince people that we should be their first trip, and that’s getting easier to do every year.”