What good is a bargain grocery store if there are few bargains there anymore?
After months of weak sales and customer complaints, the new boss of the Grocery Outlet discount chain is offering a mea culpa. “We missed the mark on value,” CEO Eric Lindberg admitted to investors last week. “And we’re paying the price of that right now.”
Lindberg, the retailer’s former longtime CEO, is back in the saddle after his successor was shown the door last month. And he’s not mincing words about what went wrong while he was away. Competitors “were taking prices down, we took prices up,” he said. “We did this to ourselves. I’m going to take ownership for that… We did not price for value consistently.”
So the transition at the top, he said, “is about refocusing on strong execution and doubling down on that differentiated value proposition.” The goal going forward is to keep prices in check and “create an exciting treasure hunt shop every time the customer steps foot in one of our stores.”
Grocery Outlet, Lindberg explained, aims to offer a typical basket of groceries priced at about 20% less than discounters and 40% less than conventional grocery stores. And the “WOW deals” that put the “outlet” in Grocery Outlet’s name – the bargains, the closeouts, the items unwanted by conventional grocers, the close-to-expiring products that need to go fast – offer at least 60% savings. “We still have some work to do on delivering the extreme 60% value items on a consistent basis to our customers,” Lindberg said. These “represent the deals that our customers tell their friends and family members about.”
Many of those customers have been grumbling to friends and family, and to each other, about Grocery Outlet’s regular prices creeping upward and the lack of deep discounts in recent months. “I might get a deal here and there but on the whole it’s the same or more expensive. Sales prices at the grocery store are cheaper every time,” one customer wrote recently in a Reddit forum. “Used to really enjoy going to the store, now it’s just another high price grocery store,” another wrote. “The whole purpose of having a store like that is to able to save and get more bang for your buck.” While some tried to defend the retailer, saying inflation affected it just like everyone else, one commenter believed that Grocery Outlet “took advantage of the fact that prices went up everywhere. They increased theirs by a much larger percentage, hoping people would just assume that other stores must be priced even higher.”
And some price hikes have been hard not to notice, some shoppers said. “I’ve seen prices go up 50% over a week,” one customer wrote. “Things that were 99¢ are now $1.49 so, still seems ‘affordable’ but that’s a hefty jump.”
Grocery Outlet began life nearly eight decades ago as an outlet store selling government surplus food products. As it expanded into a chain of more than 500 stores in 16 states, it began supplementing its ever-changing assortment of closeouts with everyday grocery items like milk, bread and eggs, so Grocery Outlet could serve as more of a one-stop shopping grocery destination. But those convenience items aren’t necessarily bargain-priced. So you may go to Grocery Outlet expecting rock-bottom prices across the board, and come away with sticker shock at some of the store’s prices as compared to its competitors.
Others may not mind, or even notice, that not everything is a great deal. And that’s where some Grocery Outlet loyalists say the retailer had lost its way. “I think what happened is that a lot of people who don’t know their prices, or don’t know how to shop frugally, started shopping here because of inflation and the rough economy,” one customer speculated. “If you’ve got people like that buying everything up because it’s ‘supposedly’ a bargain, then (Grocery Outlet) is gonna charge whatever people are willing to pay.”
Lindberg says the retailer is committed to its legacy of offering bargain-priced closeouts, and a good value on everything else. “The closeout buying environment remains very healthy,” he reassured investors. “Deal flow is very strong.” So expect a steady flow of WOW deals ahead, he said, and give them time to recalibrate their other prices so shoppers aren’t saying “wow” in a bad way going forward. “We need some time to get back to the basics,” Lindberg said. “When the customer needs us most, we need to be there for them. We’ve made a ton of progress, but we’re not quite done.”
True bargain hunters know that no one store will have the best prices on everything. One store may have the best everyday prices, another may have the lowest weekly sale prices, and still another might have the steepest discounts on certain items, if you don’t mind buying products that have been discontinued or are about to expire. That’s what Grocery Outlet fans have long loved about the store. Now Grocery Outlet has some work ahead of it, to try to win them back.
Image source: Grocery Outlet
