‘I Can’t Stand Competition’: Inside Grocery Outlet’s Growth Trajectory
In discount grocer Grocery Outlet’s quest to hit 1,100 stores, two factors loom large: population and competition.
LOS ANGELES–“I want to go where the people are,” Pat Barber, VP of Real Estate at Grocery Outlet, told attendees at this week’s GlobeSt. Net Lease 2023 Fall conference in Los Angeles. “Everyone buys food; we want to be centrally located. And equally important is the level of competition – my favorite sites are the ones that don’t have any. I can’t stand competition.”
The balance between those factors, Barber said, “is the single-best way” to measure what a site’s price per square foot will be. He says Grocery Outlet uses an outside vendor to case stores, a practice he says is “the only reliable way to know what the stores are actually doing.”
“In Apple Valley (north of Victorville, Calif.), there are three competitors in the entire market,” he said. “And in Pacific Beach, in the San Diego area, the average sales per square foot is $25 per square foot per week. That’s $1,000 a foot. In supermarkets that’s unheard of. In my career, $18 per square foot is the highest I’ve seen.”
Barber says he also relies heavily on brokers to be his eyes and ears in markets where Grocery Outlet seeks to expand, calling them his “bread and butter.”
“I always go to brokers and ask, what do you think? What information do you have? That’s key in the process,” Barber said.
Grocery Outlet is not a large traditional grocer, utilizing instead a box that’s 16,000 square feet on average. Many of its stores are ground-up, Barber said, while 60-75% of new stores are in existing retail spaces.
“There’s obviously a lot less construction going on,” Barber said. “In the markets we are looking in, existing space is at a premium; rents are higher, and that means more pressure on those of us who are growing.”
When asked about the company’s expansion plans, Barber was direct and to the point. “I’m looking everywhere I don’t have a store two miles away,” he said, adding that Southern California is a big area of focus.
“We really just started growing a lot here in the mid-2010s,” he said. “We have 100 stores now in Southern California and room for another 100. And nationally, our goal is to get to 1,100 stores – but I think we have potential for 5,000, to be honest.”
Check back with GlobeSt.com for more coverage from the GlobeSt. Net Lease Fall conference.