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    INDEPENDENTS REPORT: Working within limits

    They may be more challenging to run in certain respects, but extreme-value stores can really pay off for certain small operators.

    Feisty independents across the country will continue to invest time and money in a format thought by many to be the most insulated from big-box competition -- the limited-assortment store. But, according to some with a track record in the format, the limited-assortment game demands a unique approach that its simple structure belies.

    Limited-assortment stores are forecast to generate over $18 billion in annual sales by 2009, according to Barrington, Ill.-based Willard Bishop Consulting. Leading chains such as Supervalu's Save-A-Lot and German-owned ALDI will no doubt contrive to meet the needs of value-conscious consumers -- but they won't be alone.

    There's also ALPS, the Always Low Price Store. Offered exclusively in the Springfield, Mo. division of Kansas City, Kan.-based Associated Wholesale Grocers (AWG), the ALPS banner now graces 23 units. Three of them are operated by B&R Stores of Lincoln, Neb., an independent operation that also has 17 conventional stores.

    "Like any aggressive independent, we're constantly searching for growth opportunities for our company and our people," says B&R president Pat Raybould. "We viewed limited-assortment stores as an opportunity to efficiently expand and diversify our conventional operation."

    Raybould says that the ALPS concept is geared toward high sales and low operating costs, especially labor expense. He budgets just over $300,000 for inventory and equipment, most of which is refurbished, and another $200,000 for startup costs.

    There's more to the enterprise than that, however. "While the stores are seemingly simpler to manage, they can present numerous challenges," he cautions. "We've had to deal with a few gross profit issues because we became overly aggressive, with the opening of new Wal-Marts in our market."

    In an effort to maximize nonfood sales for its ALPS retailers, AWG recently introduced a department called Dollar Junction, which Raybould says is producing positive results. "We installed the department in our Council Bluffs store, and our sales distribution has more than doubled. The key is to keep the merchandise fresh and lively so it doesn't get stale."

    Furthermore, Raybould stresses the importance of managing the limited-assortment store's price image. "While it's tempting to stock some items in ALPS that are big sellers and produce good average rings in our conventional stores, it's not always a good idea. The higher rings can make customers feel like they spent more than they intended."

    In essence, you have to continually treat limited-assortment retailing as a different animal, with its own complexities. "The stores are smaller and they employ fewer people, but the work is more physically demanding," he explains. "Everybody stocks shelves at some point during the work day. Plus loss prevention appears to be a bigger issue."

    Raybould's advice to fellow independents considering the format? "Focus on getting into place the right people, especially the store director, and the right products."

    He adds: "Merchandising is one of the most important functions in the limited-assortment store. You can't expect customers to want to fill their carts with a bunch of junk and walk out of the store happy."

    Independent Retailing Editor Jane Olszeski Tortola can be reached at [email protected].

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