Fewer Choices, More Savings: The New Way to Buy Groceries

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The average American supermarket now measures over 46,000 square feet—up from an average of around 35,000 square feet in the mid-90s. While most grocery store operations continue to focus on the super-mega-ginormous category, two value-focused chains—Aldi and Save-A-Lot—are going the opposite way, with stores typically under 20,000 square feet. Shoppers have fewer items to pick from in the aisles, with the tradeoff being significant savings compared to traditional supermarkets. And because Aldi and Save-A-Lot are both expanding in a big way, chances are these stores are coming to a shopping center near you, if they’re not there already.

While Aldi has 1,135 stores in the U.S., and plans on adding about 100 more this year, Save-A-Lot says it’ll double its number of stores over the next five years, which would bring it to a total of 2,400.

A USA Today story on the discount grocer trend describes how Aldi and Save-A-Lot operate, and how they save shoppers money:

They stock mostly private-label packaged foods, with a sprinkling of national brands thrown in when the price is right. Meat and produce sections are smaller than supermarkets’, but sufficient for many shoppers. Stores of 20,000 feet or less and a bag-it-yourself policy help trim overhead.

A previous post on these discount supermarkets cited some additional details, courtesy of a WSJ story:

A typical Save-A-Lot stocks just 1,800 items, 5% of a supermarket’s total. Roughly 80% are private-label products, and they are displayed on shelves in the cardboard boxes they arrived in to save labor costs.

“A typical grocer carries 100 types of mustard,” said Save-A-Lot President Bill Shaner. “We have just brown and yellow.”

Aldi stores carry 1,400 items, 95% of them private label.

Which brings up another grocer trend: Since the onset of the recession, shoppers have often given up their attachment to major national brands and are more likely to buy generic store-brand products. The USA Today story states:

In an August 2010 survey, 54% of responding consumers said they were buying more store brands. That’s up from 46% in July 2009, according to SymphonyIRI, a Chicago-based market-research firm.

The old grocery-shopping standards—heading to the big supermarket in your neighborhood and thoughtlessly snatching up the brands you recognize—may be changing. Over the past few years, shoppers have been more willing to test out ways to trim their food bills, including not only generic products and discount supermarkets, but also dollar stores and warehouse stores. And now that consumers have done some taste tests of food coming from somewhere other than a national brand, and other than their neighborhood humongo grocery chain, they’ve often realized something: This stuff isn’t so bad. A Consumer Reports poll revealed that most consumers noted no significant difference in quality between generic and national brand foods. And the generic stuff costs 30% or 50% less than what the typical consumer had been committed to buying for years prior to the recession.

But don’t consumers love options? Won’t they miss out on their favorite brands? Perhaps a bit. In many ways, however, consumers are sick of having to pick from hundreds of shampoos, for example. Studies have shown that more options often leads to less satisfaction with your decisions—because you’re always wondering if you made the right one. (See the link to “25 good things that can be bad for you” via the link above.) And to some extent, consumers appreciate a simplification of the grocery shopping experience via fewer options. If this simplification saves them money, all the better.

Interesting side note: The fewer-but-better choices model has for years been a staple of the highly successful upscale Trader Joe’s grocery chain—which is owned by the same company that owns Aldi.