Basics grocery chain joins warehouse wars

PSST! BARGAINS IN THE BACK

April 02, 1992|By Michael Dresser | Michael Dresser,Staff Writer

Aiming to keep its customers and their dollars away from its warehouse club competitors, the Basics grocery chain is taking the Employees Only sign off its back-room door and inviting customers into the former storage area to buy bulk goods at wholesale prices.

Many other grocery chains have started warehouse pricing programs, including "power alleys" such as the centeraisles at many Giant Food stores, but Basics is apparently the first sizable chain in the United States to use its back room for that purpose.

Last month, Basics converted three of its stores to open up the back rooms at the Southside Market in South Baltimore, in Mitchellville, near Bowie; and in Lorton, Va.

Basics President John Ryder said the test was so successful he plans to expand the concept within the next 90 days to five more stores -- on Wabash Avenue in Baltimore and in Eastpoint, Randallstown, Millersville and Waldorf.

"Where space is available, I'm going to do it," Mr. Ryder said.

At the new Basics store in Southside Market, customers are led into the back room by an emphatic array of bright red and yellow signs near the meat counter.

"What we're trying to do is shock them into coming into that area," Mr. Ryder said. "If I get them into the back room, it's a novelty. It's something to talk about."

Once in the back room, customers come upon a corridor lined with bulk-purchase, name-brand products at prices Basics claims are lower than those at competing discount warehouses.

As with other grocery stores' bulk-purchase programs, the selection varies from week to week depending on what is available from suppliers at low prices.

Basics' warehouse selling space takes up 4,500 square feet at each store, about one-third of the back-room area, Mr. Ryder said. By the time it is filled out, he said, it will occupy about 6,500 square feet, about half the back room.

During the test period, Basics has carried about 25 items in the back room, but the selection will grow to about 40 items as the program expands, said Ron Mowry, Basics' vice president of marketing.

Basics continues to sell another dozen large-format discount items in the grocery aisles under its Big Value private label, Mr. Mowry said, and is developing an additional two dozen private-label products.

By contrast, Giant carries an average of 300 items in its SuperDeals "power alleys," said Barry F. Scher, Giant's vice president of public affairs.

Basics' mix of products is also slightly different from that of Giant's SuperDeals aisle, with more of an emphasis on groceries than on health and beauty products. But the bare-concrete surroundings go a step farther in visually emphasizing bargain prices.

Giant's Mr. Scher said the region's dominant chain has no interest in using its back rooms in place of its SuperDeals aisles.

"We believe in presenting our SuperDeals program in a well-lit and well-merchandised setting within our stores," he said.

Douglas Tigert, who follows merchandising trends as a professor of retail marketing at Babson College in Massachusetts, said the 6,500 square feet Basics plans to devote to warehouse-type sales is "significantly more than a power alley."

Mr. Tigert said Basics' "fairly aggressive response to warehouse club penetration" is a high-risk strategy. Sales at warehouse prices cut into margins, and "you may not be able to lower your costs enough to be profitable," he said.

But Mr. Ryder remains confident that Basics' new idea is a winner. He said the sacrifice of back-room storage space has been made possible by improvements in inventory control and delivery systems that make it possible to punch in an order electronically in the morning and have it in the store that night.

Randallstown-based Basics is a division of Harrisburg-based Super Rite Foods Inc.

It operates 24 stores in the mid-Atlantic states, 70 percent of them in Maryland.

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