Grocery Outlet wants to be the “TJ Maxx of grocery stores.”

The Los Angeles-based regional chain has 251 locations and plans to expand to 376 by 2020, according to a recent profile inFrozen & Refrigerated Buyer magazine that was cited byRetailWire. It is on track to gross $2 billion in sales this year.

TJ Maxx offers lower prices than department stores by paring down the shopping experience and passing savings on to consumers. The apparel store has been blamed for the downfall of brands like Nordstrom and Macy’s.

Grocery Outlet says that it sells items at a 40% to 70% discount off regular stores’ prices by offering surplus items, seasonal closeouts, and discontinued items. While some of its goods aren’t up to manufacturer standards, none of what it sells is past the sell-by date.

Here’s why Grocery Outlet is becoming a viable threat to industry giants like Walmart, Kroger, and Whole Foods:

  • Like TJ Maxx, Grocery Outlet says that it relies on a “treasure hunt” experience to hook consumers.
  • Because customers don’t know exactly what products they will find at Grocery Outlet, they keep coming back for the thrill.
  • Still, Grocery Outlet executives tell Frozen & Refrigerated Buyer that it strives to make stores a place where people can do most, if not all, of their food shopping.
  • Grocery Outlet says that it cuts costs by offering “opportunistic” products that wouldn’t be sold in regular stores, such as surpluses or seasonal products.
  • It also cuts costs by not offering traditional services like a deli, bakery, or butcher.
    Because Grocery Outlet can’t always count on getting discounted products, it orders some staples like frozen pizza, butter, and ice cream and sells them for prices comparable to Walmart’s.
  • While Grocery Outlet doesn’t offer amenities like a deli, it tries to excel in customer service. It also sells wine.
  • At Grocery Outlet, workers will carry your bags to your car for you.
  • While discounters like Whole Foods and Trader Joe’s sell private-label products, Grocery Outlet sells brand names at a discount.
  • Grocery Outlet is also making a big push into organic, healthy, and specialty food.
  • It plans to open an additional 125 stores in the California and mid-Atlantic regions by 2020.
  • The chain does not offer coupons or promotions.
  • Instead, it lets customers know about exciting deals in a daily email.
  • The discounting model has proved to be a disruptive one in department stores, with TJ Maxx and Ross Stores challenging longtime giants, including Macy’s.

If traditional stores like Kroger and Whole Foods want to compete, then they will have to focus more on discounts.

Source: Business Insider