Chain Reaction

[October 11th, 2006] A non-native species of grocery has sprung up in the Portland area.

Save-A-Lot, an "extreme value" grocer that began about 30 years ago in suburban St. Louis, is a fast-growing chain of small stores with an intentionally limited selection and no-frills house brands.

The company made its debut in these parts on Sept. 20 with two stores—one at 6828 SE Foster Road in Portland and one at 6100 SE King Road in Milwaukie. Save-A-Lot also has a North Portland distribution center as the hub of its local expansion in the year ahead.

And with the chain planning to open 25 to 30 more stores in Oregon and Washington in the next year, you too may soon have a Save-A-Lot near you. If and when that happens, here's what you should know:

History: Save-A-Lot started in 1977 with a single store, and has grown to a chain with more than 1,100 stores, mostly in the Midwest.

How it did it: So, how did Save-A-Lot survive and thrive in Wal-Mart's native habitat, competing for the same predominantly low-income customers? Simple: The companies have different evolutionary adaptations. Save-A-Lot is the feisty and smaller velociraptor to Wal-Mart's Tyrannosaurus rex.

Similarities with Wal-Mart: Everything about Save-A-Lot's business model keeps costs down, enabling it to undercut more traditional competitors such as Albertsons and Safeway. And it's also come in for criticism from unions for what they consider low wages that undercut groceries that are unionized.

Differences from Wal-Mart: Save-A-Lot stores average 15,000 square feet—one-third the size of a typical supermarket, and an order of magnitude below Wal-Mart's 100,000 to 150,000 square feet. Small stores mean Save-A-Lot can search out low-rent quarters in inner-city neighborhoods that are too cramped for Wal-Mart, snap up shuttered storefronts in suburban strip malls, or build at rural crossroads and shave 20 minutes off the drive to the nearest Sam's Club.

What it's like inside: Save-A-Lot stocks just 1,250 items—one-twentieth the number stocked by typical supermarkets. Its strategy is to sell just basics, in just one size. That concentrates its buying power, enabling it to "dictate" prices to suppliers. As with other discounters, products are displayed in their packing boxes, and customers bag their purchases.

The future: With the Census Bureau reporting in August that more than one in eight Americans—37 million people—get by on less than $10,000 per year per person, Save-A-Lot seems like it's onto something with offerings that include its Wylwood vegetables at 39 cents a can or Banquet Salisbury steaks at six for $1.59.