Deep discount garners interest outside of dollar store realm

DSN Retailing Today, Sept 23, 2002 by Mike Duff

Jonathan Ziegler, a Deutsche Bank Securities analyst, is among those high on the Yes!Less format, asserting that it provides an opportunity to enhance Fleming's standing with customers. Fleming not only accumulates goodwill by franchising the format, but it also gains an additional channel for product and sales. "I've been in the stores and they look attractive," Ziegler said. "As for growth as Neal said, it can be accomplished with little capital, and Yes!Less enhances Fleming's relationship with independent grocers."

Deal$ Deal

While Fleming developed its Yes!Less concept, Supervalu's Save-A-Lot division purchased Deal$, a convenience store chain that is also headquartered in the St. Louis area. Save-A-Lot also is a franchise-driven retailer, and its expansion into dollar store merchandise will involve its full range of stores, franchised and company-owned.

The company is currently experimenting with combination operations primarily in company-owned units, introducing general merchandise into Save-A-Lots and food into Deal$. The company is conducting its tests in St. Louis-area stores. Although the project is in its preliminary stages, said Dan Kimack, a Save-A-Lot spokesman, the outlook is good. "In looking at the performance of general merchandise in a handful of Save-A-Lot stores in the St. Louis metropolitan area, we are more than pleased," he said. "The sales results are double what was forecast."

For reasons of sheer scope, the effort to introduce general merchandise into Save-A-Lot, with more than 1,000 units, is a bigger deal than that of introducing food into Deal$, with about 50 units. The introduction of general merchandise into Save-A-Lot will come in three forms. Existing units, which are generally between 12,000 square feet and 14,000 square feet, will be retrofitted with an aisle or, in the case of larger stores, a somewhat larger section of dollar items. New stores in the 12,000-square-foot to 14,000-square-foot range will debut with dollar sections as a dedicated element of the floor plan. Also, a larger class of new stores, at about 20,000 square feet, will begin appearing and will include general merchandise operations expanded significantly in comparison to standard-size Save-A-Lots.

When the Deal$ acquisition was announced, Save-A-Lot also stated it was increasing the pace of its expansion program from 100 stores in fiscal 2002 to 150 in fiscal 2003. By the end of fiscal 2002, the company plans to have two 20,000-square-foot Save-A-Lots with a full complement of general merchandise in operation. It also will have refitted about 20 existing Save-A-Lot units. On the Deal$ side, plans call for about four stores to be retrofitted, with an extended assortment of food by fiscal year's end. What that will consist of isn't certain at this point, though grocery items will be included. The potential for adding refrigerated cases for categories, such as dairy or freezers, also is being considered, though nothing has been decided yet.

Save-A-Lot and Deal$ are a natural fit because both emphasize what Kimack described as "shocking values" in their buying and merchandising. However, taking the time to test and refine operations is critical to maximizing the potential that each company brings into the merger.