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Grocery Outlet stays on expansion track

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EMERYVILLE, Calif. — Grocery Outlet is bucking the trend in the Southern California market — while other retail grocers in the region are filing for bankruptcy, merging or otherwise slowing their pace of expansion, the nearly 70-year-old company continues to grow.

The retail grocer recently announced plans to open numerous stores in the greater Los Angeles area, a move that is expected to create hundreds of jobs. Store openings are projected to continue into this year. Grocery Outlet’s sales have been growing, up from just over $500 million in 2000 to more than $1.5 billion in 2014 and, according to vice president of marketing Melissa Porter, sales could easily double or triple in the next decade.

“Our plan is to open a substantial number of stores each year in Southern California over the next several years,” she said. “But so much will depend on real estate. Our first entry came about because a competitor gave up great locations as it looked to pull back from the market. We’re very opportunistic; we like to take advantage of great deals.”

Founded in 1946, Grocery Outlet is the one of the nation’s largest extreme-value grocery retailers. With more than $1.5 billion in annual sales, Grocery Outlet stores offer brand name groceries at up to 60% off conventional grocery store retail prices. Grocery Outlet offers a unique business opportunity for aspiring entrepreneurs: The California company builds stores and stocks the inventory on consignment and then recruits an independent business to operate a Grocery Outlet Bargain Market independently under a license from Grocery Outlet.
The company explains that this opportunity affords the independent operator the ability to experience uncapped earning potential while avoiding the multimillion-dollar cost of building out a location and purchasing inventory. Independent operators are able to control their own earning destiny by growing their stores and controlling costs.

In addition, Grocery Outlet is growing in markets that competitors have avoided. Its entry into Southern California comes on the heels of retail grocer Haggen’s failed expansion. In mid-August, Haggen announced it would be closing 27 stores, and recently it filed for Chapter 11 bankruptcy. Haggen had entered Southern California’s competitive market earlier this year when it acquired 146 supermarkets — including 83 California locations — that formerly operated as Vons or Albertsons. Soon after the stores were open, Haggen began cutting employee hours and implementing layoffs.

“With 10 million-plus residents in Los Angeles County and 18 million in the greater Los Angeles area, this is a seemingly ideal place for retail to come in, set up and try to do business,” said Robert Kleinhenz, chief economist for the Los Angeles County Economic Development Corp. “But it’s a very competitive marketplace. We have a handful of grocery chains that have been in business for a long time and have lots of loyal customers.”

But Grocery Outlet is pushing forward in the Southern California market because of what it sees as untapped potential.


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