How Does It Work?
Grocery Outlet’s opportunistic buyers and independent operators bring bargains to the customer
Grocery Outlet’s operation uses a two-pronged approach: our relationship with our independent operators and our relationship with our manufacturers and suppliers. We buy products that are outside the traditional retail channel because of packaging changes, product overruns, and surplus inventories. We consign that inventory to our independent operators. Grocery Outlet then pays a commission to the independent operator based on a share of gross margin.
What is opportunistic buying?
Opportunistic buying is the core of our business model. Grocery Outlet buyers find top-quality, name-brand products they can sell at pennies on the dollar. Products are bought at such low prices because they won’t sell in any other traditional channel. We are one of the largest retail remarketers of excess inventory, including categories from grocery to wine to health and beauty care. On occasion, when the deal is right, we’ve even sold wedding dresses and motorcycles! We’re also one of the largest retail marketers of excess brand name and perishable products. That’s how we turn inventory challenges into outstanding values for millions of customers.
Our home office has a team of buyers who seek the best deals from our suppliers and manufacturers. The more products that sail through the checkout lines quickly, the greater the buyers’ success. Our buyers are seasoned, looking for deals and the treasure hunt that they know Grocery Outlet Bargain Market customers want.
America is deep in the age of thrift. Bargain-hunting has become much more common, and discount retailing has become a legitimate option for customers — no matter their income level.
“Twenty years ago, the typical bargain shopper was trying to stretch a small income and find an affordable way to feed a family,” says Co-CEO MacGregor Read. “This gave rise to Aldi, Save-A-Lot and a few other national discount chains. Today, Grocery Outlet serves that traditional cost-conscious customer plus the shopper who makes well into six figures who stops in at our store on their way to Whole Foods. Opportunistic buying is common today, and there is a demand for it in every market.”
Our customers are opportunistic buyers too. Some seek our bargains to stretch their budgets; others just enjoy chasing great deals. Shopping at Grocery Outlet is a treasure hunt. Many of the products on our shelves can be found at conventional grocery stores, but we’re able to sell them at Grocery Outlet Bargain Markets at much lower prices. Our customers love saving money on familiar brand names as well as new items – especially since Grocery Outlet offers a 100% guarantee on all of our products.
Independent operators do not buy the inventory from us; they receive inventory on consignment. They do, however, have a say in what’s in stock. Independent operators select the majority of merchandise in their Grocery Outlet Bargain Market at any time. They choose items that coincide with their local community’s preferences and demands. Some exceptional deals get sent to all stores, but most of what’s on the shelves is determined by that store’s independent operator. Once the products are sold, Grocery Outlet pays a commission to the independent operator based on a share of gross margin.
“In simple terms, we buy and the operator sells,” says Tom McMahon, Vice President of Sales and Merchandising. “The complications of the daily business are minimized if you keep that in mind. Sell as quickly as possible, turn the inventory and make a profit.”
Independent operators moving out the merchandise
A successful independent operator makes the most of the inventory decisions in its Grocery Outlet. Under a conventional grocery store business model, the corporate office makes most of the decisions about the merchandise its stores will stock. At Grocery Outlet, the independent operator carefully selects which items flow quickly from the distribution center through the receiving doors and out into the shopping carts.
Independent operators use several methods to push merchandise out the door. They interact with their customers and are active in their local communities. Additionally, they might mark down prices if the product isn’t moving fast enough. They put their biggest bargain items along the “Power Wall” for customers to see first. We call these deals “WOWs” because that’s what customers say when they see our low prices. “Elsewhere” prices are listed on big yellow shelf signs to show customers what they’d pay for those items at a conventional store.
Independent operators keep a close eye on how fast all merchandise sells. They can adjust pricing, taking care not to mark things down indiscriminately.