Inside Grocery Outlet: The 'Treasure Hunt' Supermarket Model

Grocery Outlet is a supermarket chain based in California that is currently expanding into the Eastern United States. The retailer distinguishes itself through a business model that sits somewhere between Aldi and T.J. Maxx. Like Aldi, the stores are smaller than traditional supermarkets and emphasize low prices. However, similar to T.J. Maxx, the inventory often consists of products that other retailers or manufacturers cannot move, such as overruns or packaging changes.

This opportunistic buying strategy allows the company to offer prices that are 40% to 70% lower than comparable items at traditional retailers. The chain emphasizes a 'treasure hunt shopping experience,' encouraging customers to visit frequently to discover new and unique products. With 563 stores as of the third quarter and plans for continued growth, Grocery Outlet is positioning itself as a major player for budget-conscious shoppers.

The core of Grocery Outlet's strategy is its method of sourcing inventory. Rather than relying solely on traditional supply chains, the company's buyers specialize in purchasing surplus stock. This includes items resulting from packaging changes, product overruns, and other varied inventory circumstances.

During the height of the pandemic in 2020, the chain purchased 30,000 cases of 1-gallon salsa containers originally intended for restaurants. This specific type of purchasing allows the company to pass significant savings to customers.

Layla Kasha, the Chief Marketing Officer, explained the process: "Our suppliers offer us great prices on that surplus inventory, and we pass those savings along to our customers." This approach enables the retailer to maintain a constantly changing stock of goods.

Grocery Outlet stores generally occupy between 15,000 and 20,000 square feet. This makes them slightly smaller than Aldi locations (approximately 22,000 square feet) and significantly smaller than traditional supermarkets, which often span 40,000 square feet.

A visit to a store in Beltsville, Maryland, which opened in July 2024, highlighted the chain's layout. The store features:

• Fresh produce and meat sections
• Gardening tools and non-food items
• A 'last chance' clearance shelf
• Standard checkout areas

Despite the opportunistic buying, the stores stock many standard grocery items. The company balances store-branded goods, such as the SimplyGo line, with name-brand products to ensure shoppers can find everyday basics like butter and eggs.

The retailer actively cultivates a treasure hunt shopping experience. While everyday basics are stocked consistently, the name-brand goods are intended to create excitement and discovery. Shoppers might find holiday-themed cereals, unique soda flavors, or niche products like dairy-based sports drinks.

Inventory varies significantly by location and timing. A shopper might encounter:

• Hooters-branded crab cakes in the freezer aisle
• DiGiorno breakfast croissants
• Noni juice sourced from Southeast Asia
• Old Bay flavored sausages

This eclectic mix means that while the store is reliable for staples, the specific branded items available change frequently. The strategy relies on customers returning regularly to see what new deals or unusual items have arrived.

As of its third quarter ending September 27, Grocery Outlet reported having 563 stores. The company is actively expanding, with plans to open 37 new stores by the end of 2025. While the chain has a significant presence in the Western US, recent growth has focused on Eastern states including Delaware, Maryland, and Pennsylvania.

The company's financial performance reflects the current economic climate. In the third quarter, comparable sales grew by just over 1%. The CEO, Jason Potter, expressed dissatisfaction with this result but indicated optimism for 2026.

Grocery Outlet's model appeals to shoppers seeking value amidst inflation. By offering brand-name goods at deep discounts, the chain competes with traditional grocers and discounters like Aldi, capitalizing on a shift where brand recognition is becoming less critical than price for many consumers.