Grocery Trends Favor Growth in Discount Channel

Increasing consumer comfort with discount shopping and a concurrent erosion in consumer loyalty to traditional food retail channels is providing rapid growth opportunities for Grocery Outlet, the retailer said.

In a blog post designed to attract independent store managers to consider franchise opportunities, the Emeryville, Calif.-based discounter said its stores were averaging more than $140,000 in revenues per week and that its operators were experiencing higher profit margins than industry averages.

Grocery Outlet

Independent Grocery Outlet owner-operators sell consigned merchandise from the company, which relies on purchasing excess inventory from consumer packaged goods companies at an extreme discount. Grocery Outlet pays its operators a share of the profits. The company is seeking to open at least 25 new stores this year, and is on the hunt for entrepreneurial store owners and managers to join its program.

The company said its model is suited to succeed in a food retail marketplace disrupted by a trend among consumers to shop multiple outlets, including price players.

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

Related:Grocery Outlet to Open 25 New Stores in 2018

Consumer spending patterns have also changed, with consumers saying they visit around 2.5 different retail grocery channels seeking variety or price “at least fairly often,” Grocery Outlet said, citing figures from the Food Marketing Institute.

“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,” the company said.