The Future Still Trying To Catch Save-A-Lot

Last Updated Sep 27, 2009 11:18 PM EDT

Save-A-Lot was a small-format food retailer long before compact store concepts became popular among major chains, but it has been shifting from its original focus on grocery products to feature perishables and develop into more of a full-line supermarket operator for frugal consumers.

And, in that way, it may be the supermarket of the future. In a certain manner, it came into being as the supermarket of the future. Launched by its former president Bill Moran in 1977 as an alternative format for customers of his food distribution operation who were being put out of business by rapidly expanding regional and national supermarket chains such as Kroger, the original model for Save-A-Lot was Aldi and the rational applied was that, if a small, limited-assortment purveyor of groceries and consumables could withstand the European onslaught of supermarkets and hypermarkets, then something like it ought to work here.

So, Moran developed Save-A-Lot, opened company-owned and licensed stores and, a couple of sales and acquisitions later, found himself in the Supervalu fold. He headed up Save-A-Lot operations until 2006 and retired shortly after that company acquired a big part of Albertsons and sought to reorganize its expanded supermarket portfolio.

Evidence for Save-A-Lot's success comes in the form of 1,200 supermarkets under the name operating in 39 of the United States. Now, the times seems to have caught up with Save-A-Lot a bit. It's private label-oriented assortment, once was regarded as quirky, has allowed it to effect efficiencies and is something that the rest of retailing is moving toward.

As an everyday low price â€" or EDLP -- operator, Save-A-Lot is in a position that other retailers also are approaching. They are getting away from high/low pricing, where a few deep discounts, often heavily advertised, draw consumers who pay higher prices on other items. As consumers have been offered more shopping choices, they have become increasingly savvy, limiting purchases to big bargains at the stores that feature them then picking up other shopping list requirements where they know their item cost is generally lower, whether at Save-A-Lot, Walmart, a warehouse club or a dollar store. In fact, recently appointed Supervalu CEO Craig Herkert is moving, although not completely, in the Save-A-Lot direction as he looks to convince consumers that the company's conventional supermarkets offer a better value proposition than previously. Of course, Save-A-Lot's value proposition is well established. In a July conference call, Herkert said:

I would not use the term EDLP when you refer to our traditional supermarket banners across the country. Save-A-Lot clearly is primarily an EDLP operator and a very successful EDLP operator, has been and will continue to be.
As noted, Save-A-Lot is a compact format, with stores averaging only about 15,000 square feet and so less expensive to build and operate than typical supermarkets, which are twice as big. In an extension of cost conservation, it also is a limited assortment retailer, carrying about 1,250 different items in its stores. Today, retailers in general are cutting back on the number of products they offer in a rationalization process that focuses on top selling items and segments. Save-A-Lot, by keeping the number of products it carries at predetermined levels for years, already has developed insights and disciplines that provide it the kind of cost advantages other retailers â€" including Walmart and Kroger â€" are looking for as they consolidate assortment. Save-A-Lot, by the way, doesn't necessarily love the description limited assortment as applied to its approach to product selection. It prefers edited assortment. So, as other food retailers test compact formats, add private labels, develop better everyday values and consolidate product selection to cut costs, Save-A-Lot is building on experience in those areas as it has enhanced perishables it has only offered for a decade or so, such as fresh meat. As its competitors try to arrive as a more productive store model, Save-A-Lot has been building out its business based on operational approach they're trying to reach.

"We say keep it simple, work on efficiencies and productivity," noted Mike Kemp, Save-A-Lot's vp of procurement, a position that includes responsibilities for perishables generally. As Save-A-Lot added more perishables, it first considered how it might be adding cost and determined to press for greater efficiencies on the grocery side to balance what it was assuming. And the chain continued seeking ways to keep perishables operations as close to the traditional efficiencies it maintained as possible. Kemp said:

When we've added fresh product like meat and produce to the structure, we can't really do that without adding inefficiencies and some complexities even though while we're there, we still keep it simple. We've carefully edited assortments. But our customer base is very focused on protein as the center of meal. Our customer is more of a cook at home, a more traditional meal consumer than eat out or heat and eat. Our customer prepares more food at home.
Which is what more consumers have been doing in the recession. So, today, Save-A-Lot has certain customer as well as operational advantages to pursue. But more on that in a post to follow.