Blurring From Two Sides

As Dollar General antes up with groceries, a Kroger affiliate doubles down with cafes

BUCKEYE, Ariz. -- Recent additions by Dollar General and a division of the Kroger Co. illustrate two ways channel blurring is bringing new options to consumersand forcing retailers to stay on their toes.

Discount retailer Dollar General will enter Central Florida's competitive grocery trade next month with the introduction of Dollar General Market, a store that adds fresh produce, milk and deli meats to the chain's standard assortment of low-priced general merchandise, according to the Orlando Sentinel. Meanwhile, two Fry's Grocery Store in Arizona have [image-nocss] added coffee kiosks in their stores during the past three months.

The 500-square-foot living-room style coffee kiosks were installed by Seattle-based Tully's Coffee Corp. The kiosksnow open in Fry's stores in Buckeye and Surprise, Ariz.feature Tully's full line of espresso, drip and blended drinks, gourmet softened ice cream, as well as sandwiches, salads, juice and cookies.Customers can take a break from shopping in the kiosks' leather couches and chairs, big-screen televisions, bars and tables.

Our first kiosk was an enormous success, and we believe the Buckeye location will be equally popular, said John Dresel, Tully's president and COO.Our specialty division has done a great job launching this new initiative, and we look forward to opening multiple Tully's kiosk locations in the future. Fry's is a division of Cincinnati-based Kroger Co.

Meanwhile, the Dollar General Market scheduled to open in Orlando July 2 is the first of its kind in Florida, according to the Sentinel report. The company has opened a small number of Dollar General Market stores in an effort to lure customers away from conventional grocers.

"The idea is one-stop shopping," spokeswoman Tawn Earnest said. "It appeals to the same shopper who is already attracted to Dollar General, but extends what that shopper can buy."

The Orlando site is about twice the size of a conventional Dollar General, which typically occupies 7,000 to 9,500 square feet. The chain has moved tentatively into the grocery business. At the end of 2004, just 15 of its 7,300 locations were market stores. The new Orlando store is one of 30 opening this year.

Earnest said market stores appeal to price-conscious customers who want to avoid the ordeal of shopping in big discount stores. "We seek out underserved communities," Earnest said. "We have designed a small store on purpose, so you can get in and out more quickly than you would elsewhere."

Todd Hultquist, spokesman for the Food Marketing Institute in Washington, D.C., said Dollar General's move into the grocery trade is part of a larger trend in retailing. "The lines in food retailing have been blurring for some time," Hultquist said, adding that retailers like Dollar General, which offer a limited assortment of merchandise, aim at filling basic needs.

As pharmacies add grocery departments and supermarkets open gas stations, the traditional merchandise categories that defined retailers are disappearing, the report said.