As Grocery Outlet works to improve its business under new President and CEO Jason Potter, sprucing up the in-store experience — from store layout to value messaging — has become one of the discounter's key areas of focus.
Grocery Outlet plans to update most of its store fleet after seeing successful results with an initial group of pilot stores, company executives said during its third-quarter earnings call on Tuesday. The refresh includes a new store layout that moves produce toward the entrance and features a standardized core assortment.
The discounter is seeing “encouraging results” from the initial wave of stores that got a makeover in Q3, when the rollout began. It plans to ramp up its store refresh efforts in Q4, Potter said on the call.
“We believe that this initiative and the retail fundamentals it’s based on can be rolled out to the vast majority of our store base,” Potter told investors. Grocery Outlet had 563 stores across 16 states at the end of Q3.
After posting disappointing comps growth in Q3, the chain sees the store refresh initiative as key to boosting its financial performance.
“Delivering a stronger in-store experience has been our top priority, and the results of our store refresh give us confidence in our ability to meaningfully accelerate our comp growth going forward,” Potter said.
Retail 101
Feedback earlier this year from shoppers and independent operators “indicated that our customers felt a lack of consistency in their store visit experience,” Potter said.
“While customers appreciate the value we offer and enjoy the treasure hunt aspect of shopping in our stores, they indicated that the experience was challenging to shop and that a lack of consistent availability of various key items hurt their trust in us,” he noted.
Grocery Outlet focused its refresh efforts on three core areas: layout improvements, expanding and standardizing the core assortment, and boosting in-store messaging around value. At the two pilot stores that have introduced these updates, Grocery Outlet has seen a mid-single-digit comps lift, Potter said.
The new store layout creates “a more inviting and more intuitive shopping experience” with a clear sight line to help customers understand where everything is, Potter said. “We've removed the forced flow and have logically grouped categories throughout the store and ensured that the fresh departments are merchandised together,” he added.
The new design relocates the produce section to the front of the store, while meat and fish are located together. General merchandise and health and beauty sit near the back of the store.
Additionally, Grocery Outlet expanded its fruit and vegetable assortment. Potter said that relocating produce and offering more items in that department has fueled a double-digit comp lift in meat and produce in the test stores.
“Getting fresh right is a big part of helping us earn the opportunity to grow [the] basket with our customers,” Potter said.
Rethinking assortment and messaging
Grocery Outlet is also working to make sure that its stores provide basket-building items to encourage customers to do more of their grocery shopping at the discounter, Potter said.
The retailer identified 400 core items that all stores will carry going forward and focus on keeping in stock, he said. This core assortment will be a mix of name brands like Heinz, ketchup, Daisy sour cream and Eggo waffles as well as private label staples.
Potter said Grocery Outlet stores can stock these core items while still maintaining the "opportunistic buys and treasure hunt experience” the chain is known for.
“Improving the experience overall by being more consistent and easier to shop are key areas of friction that will support sustainable momentum in our comp sales,” Potter said, adding that the company is adding signage to help call out the changes to customers.
Localizing its store assortments is another priority for Grocery Outlet. In Southern California, the grocer has a store piloting “a more demographically relevant assortment” to cater to the large and growing Hispanic population in the region, Potter said.
“We're seeing encouraging results from this test, and we see an opportunity to deploy this widely through the region,” he noted.
Fresh foot forward
Going forward, new stores that the discounter opens will follow the refreshed format, Potter said, noting that one revamped location that opened in late Q3 is already showing “favorable results.”
Grocery Outlet plans to refresh approximately 20 stores by the end of the year, touch up at least another 150 stores by the end of 2026 and complete changes to “the balance of addressable stores” in 2027, Potter said.
The discounter will initially roll out the makeovers in core markets, Potter said. Each store update takes about five weeks to execute.
“Some of the things we’re doing here are really Retail 101,” Potter said. “We’re not necessarily cutting new ground here. We’re merchandising in logical ways. We’re organizing the store in ways that the customers can understand [and] support it with great signage.”
