K.V. Mart Grows Low Price Niche

The formula for growth for K.V. Mart Co. usually has meant one retailer's loss and another one's gain. The company's newly opened store, Buy Low Market, a hybrid price-impact format, illustrates how the company has grown over the last 32 years. Take over an abandoned anchor store in a struggling retail complex situated in an economically poor neighborhood. Put in a format

CARSON, Calif. — The formula for growth for K.V. Mart Co., based here, usually has meant one retailer's loss and another one's gain.

The company's newly opened store, Buy Low Market, a hybrid price-impact format, illustrates how the company has grown over the last 32 years. Take over an abandoned anchor store in a struggling retail complex situated in an economically poor neighborhood. Put in a format that is better targeted to the local community. In this case, it was a 43,000-square-foot Von's, which had shuttered four years prior in the Edmond Town Center of West Las Vegas, where a concentration of African Americans and Mexicans reside.

The city of Las Vegas offered attractive financial incentives for K.V. Mart to move in, marking it the first time the retailer has ventured outside its home base of Los Angeles County. Incentives included $200,000 toward new equipment purchases and annual tenant improvement and remodeling rebates not to exceed $100,000 per year for seven years, to be used toward Las Vegas Redevelopment Agency-approved improvements. In addition, Buy Low Market will apply for up to $50,000 in grant funds through the RDA's Commercial Visual Improvement Program, according to a news release on the city's website.

Darioush Khaledi, K.V. Mart chairman and chief executive officer, and his brother-in-law partner, Paul Vazin, president, said the Buy Low opening in Las Vegas was the most successful in the company's history, and they even had to close the store doors due to heavy customer traffic.

The retailer also opened a new Valu Plus Warehouse store in a former Albertsons in Whittier, Calif., earlier this year.

The company, with revenues the Los Angeles Business Journal estimated at $232 million in 2006, is known for offering low prices and good values. The retailer operates two main formats — six Top Valu Markets, a traditional supermarket offering good values, and 11 Valu Plus Food Warehouses, a non-membership, bare-bones, deep-discount store. The retail price differentials between a Top Valu Market and a Valu Plus Warehouse store is between 4% and 5%, said Khaledi. The warehouse format is more cost-efficient to operate and generates higher sales volume, he noted.

Altogether, K.V. Mart operates 24 stores. Other banners are Buy Low Market, Price Rite, Valu Mart and Amar Ranch. Store sizes range from 15,000 to 75,000 square feet.

Khaledi, an Iranian-American who immigrated to the United States in the '70s, and Vazin opened their first store, a Top Valu Market in Torrance, Calif., in 1977. The biggest changes the partners have seen over the course of doing business is consolidation among the bigger chains and the growth of Hispanic and Asian populations.

K.V. Mart has successfully capitalized on both of these changes. Over 90% of the retailer's customers are of Hispanic origin. “We have realized the value of Hispanic shoppers. Most are preparing food at home and have families twice as large as American families,” noted Khaledi.

The company has concentrated on developing an assortment that caters to Latino shoppers.

Hispanics shopping K.V. Mart stores can find freshly made tortillas, a bounty of fresh produce and prepared foods, and a number of financial and bill-paying services. “People come to your stores and feel at home because we employee people that speak their language,” said Khaledi.

He gives credit to the company's main wholesaler, Unified Grocers, Los Angeles, in helping it cut the best deals to allow the retailer to offer low prices and good values.

K.V. Mart also has a 100,000-square-foot warehouse, so it can buy direct, giving the retailer a competitive advantage. Operating out of Southern California gives the retailer easy access to farm-fresh produce. About 40% of K.V. Mart's produce is shipped directly from the farm. Over 50% of the company's sales are in perishables.

K.V. Mart has taken an even more aggressive position on price this year. “We are sacrificing margins, but the results are phenomenal. Our same-store sales are double-digit growth store per store,” said Khaledi, who considers the margin sacrifice an investment he hopes to recoup within another six months.

Due to the high traffic and volume of its stores, K.V. Mart is dedicated to remodeling three to five stores per year. This year it invested $2 million in the remodel of a 75,000-square-foot store in Garden Grove. The result was a 90% lift in sales, according to Khaledi.