Aiming High, and Low
Saturday, August 19, 2006
Food Lion has given up on one-stop shopping.
Instead, the Salisbury, N.C.-based grocery chain once known for low prices and old-fashioned service is staking its future on two store banners being rolled out in the Washington area.
The first is Bottom Dollar, which debuted early this summer in Fredericksburg in former Food Lion stores. Employees wear neon-colored shirts with kitschy slogans like "I'm a black belt in price chopping." Shelves are low for easier access and packed with bestsellers like strawberry Jell-O and 18-ounce peanut butter. Customers are expected to bag their own groceries.
Across the Potomac River in Maryland, Food Lion has unveiled another remodeled store under the name Bloom, with one just opened in Laurel. Shoppers there have handheld scanners to ring up their purchases. There are more than 50 types of cheese. Interactive kiosks help customers look up products and prices.
These are Food Lion's newest weapons in the long-running grocery store wars. Squeezed between the low prices of Wal-Mart Stores Inc. and the organic abundance of high-end retailers such as Whole Foods Market Inc., the company has decided to fight back on both fronts.
"We were stuck in the middle," said Michael J. Haaf, senior vice president of sales, marketing and business strategy for Food Lion. "We didn't really stand for anything, and that was a really untenable position."
Call it the Old Navy-Gap-Banana Republic model of food retailing. Food Lion is planning to remodel 40 stores in Fredericksburg, Manassas, Dale City, Herndon, Fairfax, Leesburg and Gaithersburg, among other areas, into Bloom. Fourteen stores will become Bottom Dollar -- including at least one within three miles of Bloom. The remaining Washington area stores will be remodeled but keep the Food Lion name, serving neighborhoods with lower average income than those served by the new stores.
The chain has 73 stores in the area, making it the third-largest grocer behind Giant Food and Safeway Inc. But according to data from trade publication Food World, Food Lion has the lowest per-store sales average of the top 10 chains in the region, with an average of $9.87 million per store, compared with Giant's average of $25.3 million over the past year. Total sales over the past 12 months were $721 million, compared with $3.3 billion at Giant.
"We had a cookie-cutter grocery store," Haaf said. Everything was "the same, the same, the same."
Food Lion isn't alone in scrambling to reinvent itself. Giant is remodeling its stores to focus on perishables and has installed Redbox DVD rental kiosks in some locations. Safeway's re-branding as a fashionable "lifestyle center" is also well underway, with more prepared and organic foods and general merchandise, such as cookbooks. Shoppers Food Warehouse Corp. last year opened a new ethnic food market, El Primero Mercado.
Food Lion spent three years studying its customers and created an internal research department to look at income levels and demographics, along with how customers shopped, what they bought and where they bought it. They conducted surveys, reviewed transaction histories and conducted focus group interviews.
Eight types of shoppers emerged, Haaf said, ranging from "wealthy elites" to those with "babies and bills." He declined to describe the other profiles, citing industry competition. But he said capturing each of those shoppers would be impossible with one store format.