ALBUQUERQUE, N.M. -- Forty-eight cans of tomato soup. Ten thousand tubes of Preparation H. Many convenience store retailers can share tales of dollar-store programs past and conjure up similar examples of why those efforts failed: To get a discounted price on products, they had to buy them in massive quantities--which did not turn over.
Alon Brands is one of these dollar-concept veterans. In 2006, it created a short-lived value grocery section. While the value for customers was there--product was priced competitively to dollar stores--it was only because Alon had purchased the items in bulk to earn and pass along a lower price. However, there was just too much product to sell.
"We had 48 cans of tomato soup sitting on the shelf," John West, vice president of retail marketing with Alon Brands dba 7-Eleven, Odessa, Texas, told CSP Daily News. "We did get a price break and were able to pass along the savings, but the cost of goods and the cash flow were not where it should be. That wasn't what our customers were actually going to the dollar stores for."
With its latest effort at a value offer, Alon Brands plans to hit the turnover target. This summer, it signed on with a value-item program offered by its distributor, Core-Mark International, which features more than 60 non-edible grocery and HBC SKUs. The program, currently available in the Albuquerque, N.M., area, had already been in operation at another New Mexico retailer for a few years before Alon signed on.
"Dollar stores are popping up everywhere," said West, who noted that Alon's El Paso and Albuquerque markets include more than 130 dollar stores. "A good portion of their line … is candy, canned goods, things like that--they're a competitor.
"They're definitely trying to set themselves up as somewhat of a convenience store," he continued. "We need to make sure we keep as much of the business as we can, so why shouldn't we sell some of these value items that dollar stores sell?"
(For more on the dollar-store competitive threat, see the October issue of CSP Magazine or the “Related Content” box below.)
Alon's set includes 20 feet of paper, soap and health and beauty aids at value prices--for example, a 54-ounce bottle of name-brand detergent at two for $4. After a two-to-three-week test in El Paso, the store sold through its entire stock without advertising or signage highlighting the offer. Alon has since added ceiling and shelf signage to highlight the center, and began promoting it.
"Alon gets the fact that they need to build some awareness around it," said Orlando Dominguez, chain account manager/new business development for Core-Mark's Albuquerque division. "That's very critical to communicate to the consumer that they have something different in the store."
Key to making the program worth the investment is Alon's ability to buy the product in lower quantities from Core-Mark but still get a low price; to provide this, the distributor's import buyer has sourced vendors with low minimums.
"They're also being more flexible in pack size; where maybe something normally comes in a 24- or 48-count, the vendors working with us say we can get in a six-count," said Dominguez. "Core-Mark has made the program more enticing for retailers with many of the value-line items sold to retail as a single-sell rather than a full case.
"That's something Core-Mark strives in doing, meeting the retailer at where they need to be. We understand turns are very important in the business on their end, and we want to be flexible in this nature."
The retailer plans to roll the program out to 100 sites in El Paso and Albuquerque, ranging from 8 to 20 feet, depending on the size of the store. It will track scan data and adjust the assortment on a per-store basis.