Even before all of the Bottom Dollar stores closed for good Monday, the independent grocers who own Shop ’n Save stores in the Pittsburgh region were thinking about how to respond to this rare moment when a competitor exits stage left.
They used their weekly advertising flier. “To all Bottom Dollar shoppers, try us for top dollar savings,” read the ad sent last week to neighborhoods that were served by both grocers.
In the competitive grocery business, no one can afford to miss an opportunity.
While Aldi plans to buy the real estate assets of the 66-store Bottom Dollar chain owned by Belgium-based Delhaize Group, the deal hasn’t closed yet. Batavia, Ill.-based Aldi likely has analyzed the sites and determined which ones would support one of its stores, but it has not shared that information with politicians and community groups hopeful that they’ll still have a grocery store where Bottom Dollar used to be.
Aldi, which has more than 1,300 stores in the U.S., knows what it needs to make its limited-assortment, extreme value model work, said Jim Hertel, managing partner at consulting firm Willard Bishop in Barrington, Ill.
Some other operators, especially traditional supermarket operators, have not been as successful in executing the concept of small stores that carry far less merchandise and that cut costs with techniques such as using pallets instead of shelves and having customers bag their own purchases, he said.
One of Aldi’s biggest rivals — the Save-A-Lot chain that is part of Minnesota grocery distributor Supervalu’s portfolio — was slowed in recent years by restructuring issues at the parent company that meant it missed some of the opportunity opened up by the nation’s financial downturn, Mr. Hertel said.
But Supervalu CEO Sam K. Duncan, who said last week Save-A-Lot competes very well against Aldi, told analysts on the company’s third-quarter earnings conference call that the Bottom Dollar venture might have made some of its own missteps.
“Those Bottom Dollar stores, a lot of those were very high rent,” Mr. Duncan said, in response to a question from an analyst. “We were looking at some of those locations before Bottom Dollar and we established our rate that we would pay. And then, they came in above us and paid some very high prices.”
If real estate costs are high, it can be a hard issue to address, said Mr. Hertel, because leases tend to extend for a decade or more.
When Bottom Dollar announced the closings in November, it employed about 600 employees at the 20 stores in Western Pennsylvania and Ohio that it considers part of its Pittsburgh group. The operation overall had 2,200 employees with the rest of the stores in the Philadelphia area.
Although the official closing date for the stores was expected to be Thursday, a company spokeswoman said Tuesday that all locations were closed by 2 p.m. Monday “as a result of the merchandise available for sale in the stores.”
Around a dozen Shop ’n Save stores in the region competed directly against Bottom Dollar stores. O’Hara-based Giant Eagle had one of its Good Cents Grocery + More stores right next to the Bottom Dollar store on McKnight Road in Ross, illustrating the competitive nature of the Pittsburgh grocery market.
“We really believe we deliver a lot of value,” said Don Fabian, senior merchandiser for the Shop ’n Save group of stores supplied by Supervalu, noting that extends beyond competitive prices to things like a selection of produce, deli services, double coupons and even fuel discounts.
“We think we can deliver the value and maybe a little more than you were used to at Bottom Dollar,” he added.
Fans of Bottom Dollar did embrace some of the twists on the format that the company made, such as carrying some brand-name goods and accepting credit cards.
While Aldi traditionally wouldn’t take checks or credit cards because of the handling costs, company spokesperson Julie Ketay confirmed that a credit card usage program is being tested in stores in Minnesota and New York.
“Should the pilot program prove successful,” she said in an email, “we will consider rolling the program out nationally to all Aldi stores.”
First Published: January 13, 2015, 12:32 p.m.
Updated: January 14, 2015, 3:37 a.m.
