Supermarkets: Too Much Diversity?
posted in Entrepreneurs |The big news in Sisters, the nearest town to the Antiplanner’s exurban home, is the grand opening of a new 43,500-square-foot Ray’s supermarket. The new store is more than 50 percent larger than the one it replaces and new features include a “wine cellar” with 2,200 different kinds of wine; an olive bar; and a bulk-food section with hundreds of different grains, flours, and spices.
These things may not seem impressive to people living in big cities, but Sisters’ population is only about 1,500 people. As one customer gushed, “you feel like you’re walking into a Safeway,” but then you remember, “This is Sisters.”
The new store probably carries at least 30,000 different products — known in the retail industry as stock-keeping units or SKUs. Yet this is only in the middle of the full range of food store offerings in this country.
Grocery store taxonomists say that at least nine different kinds of food stores range across the United States:
Convenience stores, with or without gas stations, tend to be small (average 2,500 square feet), with a limited selection (3,600 SKUs), and overpriced. Yet 24-hour convenience stores can often thrive across the street from 24-hour supermarket simply because people do not want to walk the long distances required to shop in many of today’s larger supermarkets. What is left of what used to be called the corner grocery store falls into this category.
Limited assortments typically offer only about 1,000 to 2,500 SKUs in less than 10,000 square feet of space, bucking the trend to larger and larger stores. Aldi, a German company with about 1,000 stores in 29 states, typically carries about 1,300 SKUs and attracts customers by discounting the products they buy most frequently. Trader Joe’s, which stocks about 2,500 SKUs, is a limited assortment version of Whole Foods.
Conventional supermarkets have a full range of fresh and packaged foods with some 12,000 to 20,000 SKUs in 25,000 to 40,000 square feet. Most Whole Foods stores fall into this category. Among other retailers, such as Ray’s in Sisters, these are fast being replaced by
Superstores that include delis, bakeries, and other attractions to the mix. Superstores often include several aisles of non-food items such as cleaning supplies, paper products, and kitchen utensils, pushing their total SKUs above 20,000 in around 40,000 to 50,000 square feet of space.
Food/drug combos are the next step, adding a complete drug section including a pharmacy. These typically carry at least 25,000 SKUs in 50,000 square feet of space.
Warehouse stores, sometimes called canned-goods stores and not to be confused with Costco-type stores, typically sell only packaged goods in a bare-bones, discount-type format. A typical canned goods store may have about 12,000 SKUs in 30,000 square feet of space.
Superwarehouse stores were invented by Cub Foods in the Twin Cities in 1977 and combine the bare-bones format of the canned goods stores with the product offerings of the superstores, including a huge selection of produce, bulk foods, and fresh meats and seafoods. The first Cub Foods stores typically had around 16,000 products in around 60,000 square feet of space, but Winco, Cub’s west coast successor, today stocks 35,000 or more SKUs in up to 90,000 square feet of space.
Supercenters combined groceries with non-grocery items including clothing, hardware, electronics, and other goods. While WalMart has made this category famous, it was actually originated by Portland grocer Fred Meyer, who called his stores “one-stop shopping centers,” in the 1950s. A typical supercenter has 150,000 to 200,000 square feet and anywhere from 140,000 to 225,000 SKUs.
Club warehouse stores have become the limited-selection versions of supercenters. Pioneered by Sol Price‘s Price Club, but now dominated by Costco, club warehouse stores may occupy 100,000 to 200,000 square feet but offer only about 5,000 SKUs.

The entrance to Jungle Jim’s.
Flickr photo by Cindy Funk.
Not every food store falls neatly into one of these categories. One that deserves a class all its own is Jungle Jim’s International Market in Fairfield, Ohio (a suburb of Cincinnati). Covering more than 250,000 square feet of space, it is larger than the largest WalMart supercenters, yet it is devoted almost exclusively to foods.

Hundreds of fiery hot sauces guarded by a fire engine.
Flickr photo by masamunecyrus.
Jim Bonaminio’s store carries more than 9,000 different wines, 800 different beers, 1,600 cheeses, and nearly 1,000 hot sauces. His olive bar has up to 50 different kinds of olives, his freshwater fish are harvested from his on-site fish ponds, and his produce store covers a full acre. His meat shoppe offers kangaroo, ostrich, and rattlesnake, his international department has more than 50,000 products imported from 75 countries, and his bakery makes more than 100 kinds of bread and pastries from scratch.

Jungle Jim’s monorail is complete now, but so far is only used for special events.
Flickr photo by CarrieLu.
To bring customers from the distant reaches of his parking lot to his event center, Bonaminio refurbished a monorail from a nearby amusement park (not surprisingly, installation cost more — $3.4 million — and took a lot longer than he expected). At the store entrance, customers are greeted by jungle waterfalls and audioanimatronic elephants, giraffes, and monkeys. Inside, they may be entertained by audioanimatronic bands and, on occasion, Jungle Jim himself playing the saxaphone.

Jungle Jim dedicates entire aisles to individual countries.
Flickr photo by masamunecyrus.
Bonaminio says that he doesn’t count SKUs, but his store must offer around 200,000 different products, and roughly 90 percent of them are edibles of one sort or another (about 6 percent of the store is devoted to a pharmacy and health and beauty products).
The average American household has around 600 different food products on its kitchen shelves at any given time. So why do we need stores that sell 30,000, much less 200,000, different foods? Why aren’t Aldi’s and Trader Joe’s enough? The first answer is that we don’t have the same 600 foods on our shelves all the time. More important, not everyone consumes the same 600 foods.
A newspaper reporter in Madison once explored two different outlets of the same chain supermarket. One was in the university district, the other in a minority district. Both had 30 different fresh fish in their seafood departments. But only three of those 30 were in both stores. The other 27 were tailored to the local neighborhood. But even neighborhoods are not uniform, so stores offer a wide range of products to serve everyone.
To one person, a 12-ounce can of Pepsi may not seem any different from a 12-ounce can of RC, much less a 12-ounce bottle of Pepsi. But that person may glory in finding 2,200 or 9,000 different kinds of wine, while someone else wants 100 kinds of chocolate or 50 kinds of olives. Superstores may sell 50 kinds of mustard, but the Mount Horeb Mustard Museum has collected nearly 5,000 different mustards (800 of which it offers for sale). Variety, as they say, is the spice of life — in this case, literally so.
In The Origin of Wealth, Eric Beinhocker estimates that Americans have a total of tens of billions of SKUs available to them (see p. 9). The most important difference between modern Americans and hunter-gatherer tribes, he says, is not that we earn 400 times as much income as they do but that we have at least a hundred million times more things that we can buy with that income.
Some people think this variety is a waste and that it has become overwhelming to consumers. But those who do feel overwhelmed can go to the limited assortment stores. Or, as Virginia Postrel comments, if people are overwhelmed that just creates opportunities for entrepreneurs to help them choose, as when Amazon suggests books to me, based on what I’ve purchased in the past, every time I visit their web site.
At one time, government planners thought that careful planning could eliminate the waste of too much variety — that everyone would be happy with one or two kinds of shoes, one or two kinds of coats, or whatever. Fortunately, we don’t live in such a place.
How did American food stores evolve into so many different types with so many different products? How does that evolution differ from what would happen in a planned economy? What other benefits do we get from that variety? The Antiplanner expects to address these questions in future posts.




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