A New Retail Opportunity

Hard-discount format provides a different opportunity for c-store entrepreneurs

Magdy Taha

Brought to you by Save-A-Lot.

The hard-discount, limited-assortment grocery format has been expanding rapidly for several years in the United States, and it’s making gains in capturing market share with rock-bottom prices and convenient shopping experience. Save-A-Lot is one of the largest hard-discount retailers in the United States and offers a unique business model for independent retailers.

As Mike Stout, director, license business development at Save-A-Lot explained, the hard-discount format relies on efficiencies in logistics and operations to generate margins off of a smaller sales base than traditional supermarkets.

“Stores measure between 12,000 and 18,000 square feet, offering up to about 3,000 SKUs,” Stout said. “Prices are typically 20% to 40% lower on comparable items than traditional supermarkets, and lower even than dollar stores and discount supercenters.”

Using the hard-discount strategy, Save-A-Lot customers enjoy saving up to 40% compared to traditional grocery stores on high-quality, exclusive brands and can find national brand products, as well as USDA-inspected beef, pork and poultry, farm-fresh fruits and vegetables, and non-food items. In addition, Save-A-Lot’s smaller stores are clean, bright and make the customers’ shopping experience quicker and easier.

“Save-A-Lot is perfect for the [post-recession] economic situation we have. It is perfect for our clientele,” says Magdy Taha, a computer engineer turned commercial property developer who added a Save-A-Lot store to his shopping center in Greenville, N.C., in 2015.

“People are much more careful with their money now. They have to be very wise about what they buy.”

The store is already drawing traffic that will attract other businesses to the development--which is good news for Taha, who wants to add a fast-food restaurant and urgent care facility to his line-up. Because he’s new to the grocery industry, Taha was grateful for Save-A-

Lot’s training program. It began with classes and mentoring experiences in stores and continued with help ordering, marketing, advertising and doing inventory.

“The first week, Save-A-Lot’s district manager stays in your town until the grand opening, and then comes back to check on you,” he says. “They hold your hand. In my book, it’s the perfect package.”

The simplicity of the hard-discount, limited-assortment business model itself also made for an easy entry into a new industry. “You basically have a one-stop-shop warehouse without the expense of having to buy from multiple vendors,” Taha says.

Unlike Taha, Brothers Tom, Tim and Paul Freeman have a lifetime of grocery experience between them, but for them Save-A-Lot was also the right choice. As they’ve steadily expanded to 24 Save-A-Lot stores throughout Michigan, the Freeman brothers have carefully targeted areas they believe discount grocers would flourish, but other considerations also draw in customers. “We have a very good meat image,” says Paul Freeman. “We take pride in that.” Their in-house butchers do custom cuts.

The Freemans have a lot of experience to rely on, but they still sing the praises of the support services Save-A-Lot offers. “After the store is opened, Save-A-Lot will continue to assist us in advertising, competitive price checks, and updated plan-o-grams for every department, along with merchandising recommendations each month,” says Tom Freeman. “This allows us to spend more time managing our business and taking care of our customers.” They believe Save-A-Lot’s efficiencies are what allow them to be competitive.

Save-A-Lot’s extensive support resources are coupled with its Licensed Store Incentive Program, which gives at least $200,000 to all new and converted licensed stores. These are some of the reasons more convenience store operators are considering diversifying their business, delving into the rewarding space of hard-discount grocery.