Rite Aid Encounters a Learning Curve in Food

It doesn’t matter what kind of store you have, a drug store, dollar store or auto parts retailer. Add food and you’ll improve business in short order, right?

Not so fast.

The experience of Rite Aid is a reminder that it takes time and expertise to fashion a compelling food offering, despite the gold-rush appeal of food to so many operators.

This became clear shortly after Rite Aid became involved in a 10-store test of co-branded outlets in the Greenville, S.C., market with limited-assortment store operator Save-A-Lot. While that test hasn’t produced a winning formula in all locations, it interested Rite Aid in broadening food across its store base. However, Rite Aid has faced a range of hurdles, including the needs to become more familiar with perishables handling and to better manage margins.

Probably the biggest problem has been lack of seasoned personnel for these categories. As Rite Aid CEO John Standley said last October: “We have a team out there that doesn’t have a lot of food experience.”

Standley, however, does have a food background, and he said the company has arranged to work with outside consultants to gain necessary expertise.

Rite Aid will also incorporate food in a more targeted manner by varying the assortments based on individual store strategies.

The company is expected later this year to outline plans for growing its food offerings.

Rite Aid is far from the only non-supermarket retailer facing hurdles in establishing a food presence. Often it takes years to fine-tune offerings. That’s been the experience with Dollar General Market, the small-format grocery chain run by the dollar store retailer, which was launched back in 2003 but stalled in growth after a change in the parent company’s ownership in 2007. In the past year, however, the retailer has been remodeling and adding units with notable success.

Going back further, Wal-Mart toiled for years to fine-tune its various food formats, including supercenters, before making significant progress.

Reminders of these early hurdles help balance the impression that food is a no-brainer for retailers.

Food does make sense for many operators, especially those with a large number of convenient locations. But it’s not a slam-dunk. As Rite Aid has shown, retailers need to gather food expertise, develop a strategy that accounts for differences across the store base and prepare for a learning curve. All of this takes time and commitment.