Large-Format Retailers

Discount prices on general merchandise and low-cost groceries are sustaining large-format value retailers. Supercenters were the only retail channel to post overall unit sales growth in 2008, and though warehouse clubs’ sales drooped early this year, Costco says supermarket merchandise — food and H&BC — were its strongest performers, and BJ’s Wholesale Club reported an 11 percent increase in food sales.

Target is bulking up food offerings both in its traditional discount stores and its SuperTarget supercenter format. In 2008, food and H&BC accounted for 37 percent of Target’s sales volume, compared with 59 percent at Wal-Mart. Gregg Steinhafel, who added chairman’s responsibilities earlier this year, is overseeing a vast expansion of groceries in Target stores — to about 90 percent of the SKUs found in a traditional supermarket.

David Livingston, a supermarket industry consultant in Waukesha, Wis., says Target is making a valiant effort to compete on food. “When looking at sales store by store in grocery operations, we’ve seen some big increases over the past five to seven years,” he says.