business news in context, analysis with attitude

by Michael Sansolo

Given all the changes swirling around the business world, it should hardly be surprising - in fact, it should be encouraging - to stumble on out-of-the-box solutions.

Only this story doesn’t involve e-commerce, drones or social media. It’s simply about a different way to go to market and, for that reason, it’s a story well worthy of consideration.

A press release came out last week announcing a new recruitment drive by Grocery Outlet stores that turns the entire model of independent retailing on its head. Even if you aren’t in that universe, it’s a paradigm-breaking proposal you need ponder.

Grocery Outlet’s Bargain Market stores run very differently. The stores, found mostly in the far western US and also Pennsylvania, feature extreme values thanks to what the company calls “opportunity buys.” In other words, all kinds of products on which others would pass.

As the company describes it, “We buy products that are outside the traditional retail channel because of packaging changes, product overruns and surplus inventories.” Grocery Outlet has a track record of making this work. The company will soon turn 70 and rings up $1.6 billion in annual sales.

Given the well-documented economic hardships in many parts of the US and the coming storm of even more extreme value merchants, it’s easy to see the appeal of the company’s marketing plan. Only that’s not the most surprising part of the Grocery Outlet story.

Independent operators in the Grocery Outlet world have only one job: selling. The company does all the buying, owns the real estate and even owns all the products in the store. Everything is sold on consignment so the operator’s focus is simplified.

The operator has a small investment in the store and its equipment—usually up to about $200,000 according to Grocery Outlet. (All details of the company and the plan are on the company's new website.

Here’s the thing: I love the world of independent operators and consider them some of the most creative, most community minded businesspeople I have ever met. I have the good fortune of working with people like those at IGA and marvel at their ability to survive competitive challenges largely thanks to their hometown savvy and progressive partnerships with their wholesalers.

Still, I have to believe this recruitment drive by Grocery Outlet will and should merit a little discussion among independent groups and chains everywhere.

First, the merchandising model so long employed by Grocery Outlet fits better than ever with the bargain hunting needs or whims of shoppers from urban to rural areas. Extreme price models are becoming increasingly important given today’s competition and economic realities, and Grocery Outlets’ formula may be a powerful weapon for fighting back.

In addition, shoppers are becoming increasingly aware of the enormity of food waste in the US and might see some attraction to stores that view excess products as “opportunity” not landfill-bound.

Lastly, and maybe most importantly, this recruitment drive may cause important discussions elsewhere. In a time of challenges from Amazon to Aldi, from Lidl to Save-A-Lot, traditional models need re-examination and, in some cases, a new direction.

I really don’t expect 10,000 independents to sign on with Grocery Outlet tomorrow, but I have to believe all sectors of the industry can find some aspects to consider from this company’s creative approach and aggressive growth strategy.

The status quo needs a good jolt every now and again. Maybe this is that time to ponder the path less traveled. There might be something good down there.

Michael Sansolo can be reached via email at . His book, “THE BIG PICTURE: Essential Business Lessons From The Movies,” co-authored with Kevin Coupe, is available on Amazon by clicking here. And, his book "Business Rules!" is available from Amazon by clicking here.
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