Without a lot of fanfare, the limited-assortment store format is on the move.
From northeast Texas, where Supervalu is expanding the operations of the limited-assortment stores it acquired earlier this year, to eastern Pennsylvania, the market where Aldi is adding new units almost monthly, the diminutive stores are sprouting up with increasing frequency.
According to a Willard Bishop Consulting study of 14 grocery store formats, about 200 limited-assortment stores should be added in the United States between 1993 and 1998.
The Bishop group, based in Barrington, Ill., estimated the number of limited-assortment stores operating in 1993 at 730.
The number of companies either studying the format or tentatively rolling out limited-assortment stores also is on the rise. Most industry observers now consider the limited-assortment store a viable format -- albeit a small player in terms of market share -- in the grocery industry.
"I think it has a future," Don Marsh, chairman, president and chief executive officer of Marsh Supermarkets, Indianapolis, told SN in an interview. "It has its own demographic customer base that it appeals to."
Marsh, whose company has opened seven limited-assortment stores under the Lo-Bill banner and plans to add an unspecified number of additional units, said the limited-assortment format appeals to a price-sensitive customer who is willing to trade service, variety and other features for price.
"There has always been a segment of the population attracted to low prices, but it's a bigger segment of the population today," Marsh said. "I think limited-assortment is here to stay."
In addition to Marsh, a number of other supermarket companies are getting more involved in operating or supplying limited-assortment stores. Among those companies are:
Aldi, Batavia, Ill., the leader among limited-assortment store operators. Aldi continues to spread its limited-assortment magic across the United States and now operates an estimated 400-plus stores in 11 states. The German-owned company, which is averse to publicity, is expected to open about 40 new units a year over the next few years.
Supervalu, Minneapolis, which became a major limited-assortment store operator with its 1992 acquisition of Wetterau, Hazelwood, Mo. Supervalu expects to add 105 Save-A-Lot units (its limited-assortment store banner) in the fiscal year ending next February. About 20 of the 105 units will be corporate-owned stores and the balance will be licensed to independent operators.
Overwaitea, Vancouver, British Columbia. The Canadian company has rolled out a 25,000-square-foot, limited-assortment store that could be the "most technologically advanced food store in North America," according to a Bishop consulting group report. Operating under the banner Smart! Market, Overwaitea's store showcases a host of high-tech features in a limited-assortment setting.
Shurfine International, Northlake, Ill., which has developed a special brand, Shur Valu, for the cooperative's members to use in their limited-assortment stores. Shurfine members operated about 250 limited-assortment stores at the end of last year and the number was expected to grow to 500 by the middle of next year.
Certified Grocers of California, Los Angeles; Piggly Wiggly Corp., Memphis, Tenn.; Wetterau Associates, St. Louis, and A&P, Montvale, N.J., are all reported to be in various stages of planning a limited-assortment store program, either through supply or licensing deals or by owning and operating the stores.
Wetterau Associates is a new company founded by Wetterau family members.
A limited-assortment store, as the name implies, offers a smaller selection of grocery items than conventional supermarkets and, most often, in a bare-bones setting.
Typical limited-assortment stores stock only about 1,500 items, with very few perishables. As a result of low overhead and an emphasis on private label, the limited-assortment store can offer the lowest prices in the market. The stores average about 12,000 square feet.
Aldi, for example, offered prices about 24% below Sam's Club on a market basket of 301 comparable items sold at two stores in a Chicago suburb, according to a Bishop survey conducted earlier this year. (The prices compared were on a per-unit basis for similar-style items, since the two stores have such disparate product selections.)
Bill Bishop, principal of Willard Bishop Consulting, said he believes the limited-assortment store format "definitely is growing." The reason, he said, is that it has "an extraordinary price proposition. There isn't too much else [other than price] that recommends it."
Bishop said he expects the format to "tick right along" its growth curve.
"The supercenter is probably going to be more impactful just because of its absolute size, but I think there is going to be strong growth in the limited-assortment format, too," he said. "No one wants to overpay for groceries. And if the limited-assortment store offer is acceptable to you, then you're overpaying if you're going somewhere else."
According to the Bishop grocery-format study, limited-assortment stores' share of all-commodity volume is expected to remain stable at 0.6% over the 1993 to 1998 period. By comparison, the supercenter format is expected to expand from 250 stores to 1,020 and from a 1.5% market share to 7% over the same period, according to the study.
Much of the limited-assortment store growth is expected to come from Aldi. The retailer has annual sales of more than $2 billion in the United States and ranks among the 25 largest chains, according to industry estimates.
Aldi has opened perhaps as many as 100 new stores over the past two and a half years, according to trade estimates, and it has entered a host of new markets.
Aldi executives in the United States could not be reached for comment.
A typical Aldi store -- which primarily sells private-label grocery items -- averages at least $50,000 per week in sales, Bishop said. "I think $50,000 per week is a low number today," he said. Bishop estimated that Aldi operates as many as 450 stores and is opening new units at "the upper end" of the 25-to-40 range every year.
Perishables, including some refrigerated and frozen products, also are an important part of the product mix at Aldi, Bishop said. The stores carry a "very limited amount of produce," he added.
In eastern Pennsylvania, where Aldi is close to opening a new distribution center near Allentown, a number of new Aldi units have opened over the past few months. Aldi, according to local observers, has an employee surveying customers at the door of the new stores to determine from how far away they have come to shop at the store.
Bishop said Overwaitea's new Smart! Market is one of the "most interesting limited-assortment stores" he has seen. The store has an electronic security system, which is a good way to control shrink, and electronic shelf labels, Bishop said. The store also features a "cool-zone, walk-in shopping area for produce and dairy," and a self-service checkout that allows shoppers to pay at a station near the exit.
Supervalu also has become a key player in the limited-assortment area.
Michael Wright, chairman, president and chief executive officer of Supervalu, told shareholders at the annual meeting in June that the company expects to add 105 limited-assortment stores during the current fiscal year. This includes 85 units licensed to independent operators. In addition, Supervalu will rebanner the 30 Texas T stores it acquired in March as Save-A-Lot stores.
If all goes as planned, Supervalu will own 95 corporate Save-A-Lot stores and supply 420 licensed units by February 1995. (The banner was launched by Wetterau in 1977 with five stores.)
In terms of store units, Save-A-Lot ranks ahead of all other Supervalu corporate retail formats, including Cub Foods, Shop 'n Save, Laneco and Scott's.
Much of Supervalu's limited-assortment store expansion is targeted for the Southwest. The acquisition of Texas T's warehouses will bring the company "distribution capabilities in the largely untapped Texas market," Supervalu said in its annual report.
Marsh also expects to add to its LoBill banner, which was rolled out in 1991. The LoBill store, which is about twice as large as a traditional limited-assortment unit at 25,000 square feet, also features more of an upscale produce assortment.
The LoBill stores reported a same-store sales increase of 5.4%, better than the results of Marsh's conventional stores, in the year ended April 2. Two new LoBill stores were added during the year. Don Marsh said the company plans to open more LoBill stores this year, but he declined to specify a number.
Bishop said he believes the limited-assortment format can operate anywhere, but because it has only a "price proposition," competitors can do things to thwart its success.
"If somebody worked very hard at it, limited-assortment stores can be neutralized," he said. "Yes, they can go anywhere, but they are still vulnerable."
