COST PLUS

 Now that Save-A-Lot is gone I see that Super Valu is pushing the opening of their Shoppers Value “cost plus” format through their independent operators.    The usual scenario is to take a struggling independent conventional store and convert it to the cost plus format.  Sales will often double in high minority areas or increase about 35% in non-minority areas.  Keep in mind the low volume base that stores are converting from.  It is an interesting concept where 10% is added at the register.  The definition of “cost” can be complicated but it is actually very simple.  But I won’t get into that now.  At the same time, overhead goes down.

 Here is what I find very clever that Super Valu is doing.  They are opening these stores in some markets where there is a Save-A-Lot.  The handcuffs are off and Super Valu doesn’t have to worry about cannibalizing their stores.  The independently owned Shoppers Value retailer takes sales from mediocre conventional stores like Albertsons, Winn Dixie, weak independents, and big box stores if in a bad neighborhood.   Where sterile conventional stores have experienced failure and closed, Shopper Value sees opportunity. 

 So far Shoppers Value is staying under the radar.  They don’t get a lot of press when they open.  Other wholesalers and retailers are cashing in on this concept  and I’m hearing about a lot of success stories.

 I’ve seen these cost plus formats fail when attempted by other wholesalers and retailers, but the Shoppers Value format seems to be succeeding where others have failed.  In my opinion it is because they are doing a much better job of site selection, site acquisition, have better skilled independents, good signage, a strong meat program, and better control over labor.  These stores are not glamorous and they won’t be getting any “store of the month” awards in the media.

Nash  Finch tried this format with Avanza in Colorado and eventually settled legal issues.    It can be confusing to some customers.  Even me. So it is very important the customer understands they will have a 10% fee added.

http://www.startribune.com/avanza-marketing-strategy-backfires/35037759/

http://mypricelessfoods.com/faqs/

The above link Houchens does a good job explaining “cost” on their website.

A larger percentage of my projects are for cost plus formats.  We are all still going through a learning curve on how to project sales.  Trying to find the right mix of population density, mediocre competitors, income, ethnicity, and occupancy costs will result in improved analogs over time.  So far I have seen the more successful cost plus stores in the deep south and west Texas.  This concept has salvaged many locations that might otherwise go dark.