When small is big

Sure, it keeps prices down by leveraging buying power, offering edited assortments, and controlling operating expenses. But at 12,000 to 15,000 square feet, the diminutive limited-assortment format appeals to the time-starved as well as the penny-pinched, according to store development expert Bruce Kamph, v.p. of North Canton, Ohio-based BridgePoint Solutions Group, a retail services company specializing in strategic planning, real estate, and technology for the supermarket industry.

"Consumers not only feel that they can get a good value at the limited-assortment store, but they also appreciate being able to get in and out quickly," says Kamph. "Conversely, supercenters continue to be viewed by consumers as a major time commitment."

Indeed, Kamph posits that it's no longer accurate to view limited-assortment stores as best suited to lower-income areas. "It's difficult to paint one picture of the limited-assortment customer," he says. "It is, of course, the young family with a limited income looking for values, but it's also the single-parent household, retired couples, and empty nesters. Mainstream demographics have accepted stores such as Save-A-Lot, Mor For Less, and Aldi because they do offer a real value proposition."

Value is inherent in the format's DNA. Kamph says the investment required for a limited-assortment store is about $650,000 to $750,000 for equipment, decor, and technology, plus inventory. Typically inventory costs are estimated at $12 to $14 per square foot.

Kamph clearly admires limited-assortment store operators for the niche they're carving for themselves. "Consumers increasingly have more choices for their shopping dollars—conventional supermarkets, supercenters, pet supply retailers, warehouse clubs, dollar stores, and, yes, limited-assortment stores—and they've become accustomed to shopping at multiple outlets to fill their needs," he says. "Save-A-Lot and Aldi have done a great job in getting consumers to recognize them as a valid option for their dollars. Aldi is doing more and more with nongrocery in their stores, and I view that as a way for them to increase traffic and overall gross margin.

"On the other hand, Save-A-Lot's new decor and store layout are very attractive, and I'm impressed with how they've stayed the course," notes Kamph. "They do things very well. Most limited-assortment stores pay between $3 and $4 per square foot in rent, as compared to conventional stores that pay double and sometimes triple those amounts."