PHILADELPHIA INQUIRER Enlarge
PHILADELPHIA — Vicenza Cerrato stood in the bread aisle of a Giant supermarket and squinted at a receipt itemizing the stash she had just bought down the street at Bottom Dollar Food, a low-frills grocer that opened a few months earlier.
The retired cardiology technician, 83, monitors what she spends on food, despite living with her husband in North Wales, a Philadelphia suburb where average household income is $107,000.
Because her daughter has been out of work for two years, whatever money Mrs. Cerrato can save on meat, bread, and produce goes to her.
“I haven’t gone to Giant since some of these stores opened,” she said, referring to its extreme-low-cost competitors in her area, which include a Costco and an Aldi.
Stagnant or falling incomes, combined with the availability of affordable commercial real estate, are enticing cut-rate grocers to expand even into middle-class communities where conventional supermarkets have reigned supreme.
Save-A-Lot, Aldi, and Bottom Dollar, known in the industry as extreme-discount grocers, sell cheaper goods than large-scale supermarkets by cutting back on overhead and name-brand products, opting for small stores, employing few clerks, and stocking less merchandise.
These types of stores, one industry analyst said, have been successful for years in lower-income neighborhoods such as urban “food deserts,” where they had little to no supermarket competition.
But the post-recession economy is making them more appealing to a broader base of consumers, said Jonathan Feeney, who follows Supervalu Inc., Save-A-Lot’s parent firm, and the industry for Janney Capital Markets.
Save-A-Lot has said it wants to open as many as 160 stores nationwide this year. Aldi wants to open 100 more stores in 2011, Tom Fangras, chief of regional operations for the privately held firm, said. Bottom Dollar has targeted the suburbs to lure the middle-income shoppers.
Rather than use the megastore approach and stock tens of thousands of items in stores 50,000 square feet or larger, these chains run in smaller buildings with fewer cashiers and a sizable assortments of store-brand merchandise.
“We have stores in all different areas,” Mr. Fangras said. “Anywhere from urban, suburban, and rural. And the exciting thing about our business is that we really do well in all of those areas.”