Limited-assortment banners offer retailers a potentially tidy arrangement: They attract customers with a low-price structure that cuts across all demographics, while providing the operators with a cost-effective way of moving their highest-volume Center Store items.There's more. Retailers looking to maintain real-estate holdings unable to support a successful full-service unit are opening these downsized,

Limited-assortment banners offer retailers a potentially tidy arrangement: They attract customers with a low-price structure that cuts across all demographics, while providing the operators with a cost-effective way of moving their highest-volume Center Store items.

There's more. Retailers looking to maintain real-estate holdings unable to support a successful full-service unit are opening these downsized, minimally staffed stores, selling not only the most basic of products, but often, only one size and one brand within each category -- which is often a private label.

As a result, retailers from A&P to H.E. Butt Grocery Co., with their Food Basics and H-E-B Pantry units, respectively, are able to offer Center Store products to every consumer imaginable. Also, as long as shoppers remain willing to divide their shopping experience between these low-priced formats and their traditional counterparts, supermarket deviations will continue to draw mixed crowds well into the future, sources told SN. "Consumers at any income level like to save money. They may have vastly different levels of discretionary income, but if they see a value, they want to be able to enjoy it," said Chuck Cerankosky, an analyst at equity research firm McDonald Investments, Cleveland. "[Limited-assortment stores] are designed to be the first stop for many consumers who can get the bulk of their purchases there."

According to a Competitive Edge study conducted by Willard Bishop Consulting, Barrington, Ill., entitled "Limited-Assortment Grocery Store Format: The Second Time Around," there are currently about 2,000 limited-assortment outlets peppered across the United States. The two retailers commanding the greatest domestic presence are Aldi, with headquarters in Germany, and Save-a-Lot, which was launched in 1978 and acquired in 1992 by Supervalu, Minneapolis.

There are more than 1,000 Save-a-Lot units in 37 states, each averaging approximately 15,000 square feet. Aldi, by comparison, operates about 700 stores in 26 states mostly from Kansas to the East Coast, according to the retailer's Web site. Its selling space rivals that found in the Save-a-Lot stores.

Between 80% and 90% of the products offered at these stores are private brands with exceptionally low prices. Perishables like bananas, cheese, milk and certain meats are part of the mix, though not a cornerstone of the merchandising platform.

Indeed, many of the shoppers that SN spotted during a recent visit to an Aldi unit in Newburgh, N.Y., were loading their carts with Center Store goods. It was easy to see why, as the store's layout led consumers through a maze of dry groceries. With no real shelving units, most of the products were stacked in their original shipping cartons, only about five feet high, allowing a full view of the entire store from any location.

Upon entering, SN encountered a hallway-style aisle, with salty snacks stocked up on the right and chocolate in bags and bars on the left. The remainder of that aisle contained items like cereal and salad dressings, and led the way to the back of the store where the meat/dairy cases were located.

The center aisles contained mostly dry grocery items, and a small section of frozen food doors lined the area leading to the checkouts.

During this visit, made early last month, SN saw private-label items like Casa Mamita tortilla chips in a 15-ounce bag for 99 cents; Clarissa tissues, 175-count for 79 cents; Mixade spiced cider, 10 envelopes for $1.29; Toasty Puffs miniature marshmallows, a 10.5-ounce bag for 59 cents; and Happy Farms sharp cheddar cheese, an 8-ounce block for $1.39.

According to the Willard Bishop study, the format offers a price advantage of approximately 30% over traditional, full-service supermarkets. In fact, a total market-basket comparison of 69 similar items really drives home what savings can be found, with Save-a-Lot ringing in at $61.08 and Aldi at $63.39 -- compared to a full-service supermarket at $90.28 (see chart).

"The key thing about these is that they are very, very cheap from a consumer point of view in the center of the store," said Bill Bishop, president of Willard Bishop Consulting. "In many respects, the limited assortment is the one type of retailer that can be successful being closely located to a Wal-Mart supercenter because they are so cheap."

The price advantage of both Aldi and Save-a-Lot is also apparent when breaking down Center Store items by category.

For example, bottled water purchased at Aldi was 55% cheaper than at the traditional supermarket and 46% cheaper at Save-a-Lot when the study was conducted last summer in the Chicago market. The largest price differentials were in the bread category, where Aldi's offerings were 68% cheaper and Save-a-Lot's were 51% cheaper; and the baking flour category, where shoppers saved 58% more in Aldi and 50% in Save-a-Lot (see chart).

However, the format does have limitations. The restricted offerings mean they currently can't fulfill the "one-stop-shopping" maxim touted by full-service banners. Store placement is also critical since the emphasis on price at limited-assortment banners can influence sales activity in nearby venues.

"This is a very important competitor to Center Store, and what [full-service] retailers need to do is to have some price-point product available [there] to keep people from leaving their stores and going to the limited assortments," Bishop added.

Also, while the majority of their inventory consists of dry grocery, to say that limited-assortment stores exist solely to help support the Center Store category would be untrue. Competitive corporate strategy also plays a role.

"What they are clearly saying with those stores is, 'We've got a location. It's probably not an 'A' location anymore, but maybe it's a low 'B' or a high 'C,' and we can make use of the site if we serve a demographic that is more price-sensitive," Cerankosky told SN.

That's what happened last month with Farmer Jack, an operating unit of A&P, Montvale, N.J., when the company announced plans to convert 10 poorly performing Farmer Jack Food Markets slated for closing into the company's Food Basics limited-assortment banner by April.

"I am excited to bring Food Basics to the Detroit-area marketplace, affording customers a choice in grocery shopping. The Food Basics stores provide our Detroit-area customers with a new, no-frills option," said Mike Carter, president of Farmer Jack, in a prepared statement.

As is the case with most limited-assortment stores, Farmer Jack's entirely self-service format calls for customers to bag their own groceries with bags they either bring in or purchase at the store. There are about 20,000 products for sale as opposed to the 45,000 that can typically be found at the average supermarket.

Because these types of stores require a very small workforce, they are almost always non-union. However, A&P receives a certain number of exemptions from the standard union contract, and the conversion of the Farmer Jack stores required a new agreement with the United Food and Commercial Workers, Local 876.

"A recurring theme in food marketing these days is that if you have a price message in your format, you're almost always non-union," said Cerankosky. "The ability to be 'extreme value' requires a very flexible labor force, and that's the key. It's not forcing people to work below minimum wage. It's that you have a base-level staffing for the store, and everybody in the store can do everything."

Yet, consumers that seek out limited-assortment stores don't expect a lot of bells and whistles. They are there strictly for the deals, a proposition that won't get old anytime soon, observers said.

"Over time, [limited-assortment stores] are going to progressively be a place that consumers feel they have to stop if price is real important and quality is real important -- and brand is not," Bishop said. "They have held certain prices on certain items for years; they hold prices relentlessly. They are kind of like one of the best-kept secrets around."