The economic forecast continues to look bleak, but Bottom Dollar Food -- the two-and-a-half-year-old discount banner from Salisbury, N.C.-based Food Lion -- is looking like it just might be recession-proof. Still, there's more to this story than low prices. While the name Bottom Dollar can evoke images of the typical tiny, cluttered discount or limited-assortment store, this is no ordinary low-price format.

"When we launched Bottom Dollar, we loved seeing the surprise on people's faces," admits Paul Lacroix, v.p. of the banner. "They had heard it was a discount store, so they didn't expect to find fresh meat and produce. That's what I love about Bottom Dollar -- we get to redefine discount and exceed customers' expectations."

So far the format has hit pay dirt with both lower-income and higher-income shopper segments, he notes -- suggesting that an unusually wide range of demographic groups are receptive to its offerings.

Tom Anderson, a longtime Food Lion exec who's director of operations for Bottom Dollar, adds that the concept takes Food Lion's model of "owning low prices" and simplifies it, in terms of both size and selection.

Importantly, "We didn't see anything else like this out there in the industry," he adds. Compared with a typical discount grocer, Bottom Dollar claims to have six times more products on its shelves. More items are prepackaged than in a traditional supermarket. The stores also use more efficient alternative display and stocking techniques, such as cut cases on shelves, and pallet displays and dump bins, to cut costs.

Bottom Dollar also sports an interior decor that stands apart from the discount crowd: Bright orange and green dominate the color scheme, while whimsical signs boasting of low prices keep the shopping mood laid-back and fun. (See more details about the store's catchy slogans online.)

And you won't find any boxes cramming the aisles -- management insists on aiming for an easy, clutter-free shopping experience.

What's more, the Bottom Dollar team intends to make it a "full shop" experience. A few of the more typical supermarket departments are lacking in service seafood, fresh bakery, and deli, and like other discount formats, shoppers are asked to bag their own groceries. But the retailer has found that customers are willing to forgo some niceties when lower prices are the reward.

"In our industry, it's cool to say you're going to add this or that to your store," notes Lacroix. "But retailers usually aren't looking to take things away. We've taken some things away, because they don't fit in with the core of what Bottom Dollar is. We haven't heard any negative comments about it, though. It's about lowering our costs, so we can pass the savings on to our customers."

Local flavor

Another feature that distinguishes Bottom Dollar from other discounters is a layer of market segmentation: Each store is merchandised according to local community needs and wants. That creates both a challenge and an opportunity for the retailer, according to Lacroix. "Working on Bottom Dollar has been a learning process," he says. "We have a model, which accounts for about 85 percent of the store, but about 15 percent of each store ends up being tailored for the neighborhood. That's the hardest thing to do, but also the most rewarding."

For example, the Sterling, Va. unit, just outside of Washington, gives a slew of Hispanic products prominent placement. Several aisles in grocery feature Hispanic and Asian products, and pallet displays offer popular staples such as rice cookies and corn flour. Meanwhile a refrigerated case was recently added up front to highlight an impressive variety of ethnic juices, cheeses, and other dairy items.

In fact, the Sterling Bottom Dollar is the company's No. 1 seller of Hispanic foods, meaning that it outpaces all Food Lion stores as well, notes Lacroix.

Bottom Dollar's execs attribute their success at local merchandising to two factors: Food Lion's sophisticated customer segmentation tools, and empowered store management.

"We all talk about getting close to our customers," observes Lacroix. "Food Lion is getting close by using customer segmentation. We use internal data and then pull in demographic data. But then once you have all this information, it's how you execute. At Sterling our sales success is based not only on the segmentation technology, but also on how the data is brought to life by the people who work there."

The talented store manager at Sterling is Nadar Homos, a friendly, quick-witted, locally based grocer who's in tune with the needs of the multiethnic neighborhood, perhaps in part because he hails from a different part of the world himself: Palestine. Homos talked his superiors into putting the refrigerated case with ethnic products in a prominent section of the store. He also keeps upper management abreast of all special requests from the locals.

Working alongside Homos is a dedicated staff configured in a nontraditional structure. Instead of having the standard grocery and produce managers, for instance, there's "fresh manager" Leo Vasques, who oversees meat, produce, and deli. (Although Bottom Dollar doesn't have a conventional deli department, it sells deli-type items as defined under Food Lion's deli-buying structure.) A "dry manager," meanwhile, oversees grocery, dairy, and frozens.

These managers are responsible for ordering and scheduling, but they also have their hands in the merchandising side of the business. Other associates do most of the stocking, allowing the managers to concentrate on meeting customers' needs, notes Lacroix.

The scaled-down structure works well in a store like Bottom Dollar, since it's much smaller than the average supermarket. In fact, at just 32,000 square feet, the Sterling unit is one of the larger locations in the portfolio (the average square footage of the stores ranges from 25,000 to 30,000). The unit was formerly a Food Lion, which explains the slightly larger footprint.

Reworking a Food Lion into a Bottom Dollar created some challenges for the team. For starters, the front end had to be redesigned to accommodate Bottom Dollar's self-service features. The checkouts were restructured so that customers can pull up their carts at the base of the lane to load their own groceries. In addition, a bagging station was built so customers can take their purchased items and bag them in a separate area.

To facilitate self-service bagging, Bottom Dollar offers customers free cardboard boxes to carry their purchases in, or they can purchase a plastic bag for a nickel or a reusable bag for $1. Of course, they also have the option of bringing their own bags or boxes.

The remodel called for slight changes in produce, as execs honed the selection to about 170 items, notes Lacroix. Thus, customers won't find every variety of apple, but they'll still find a nice representation of fresh product overall, he says.

While the breadth of variety was trimmed compared with a Food Lion, the quality of product wasn't sacrificed to cut prices, he contends. "We're not selling second-tier produce here. We have Food Lion as our buying base, and one of the company's key commitments is to have the freshest produce and meat available."

In addition, the selection is edited carefully and presented just as thoughtfully. In addition to the produce department staples, Hispanic items such as green plantains, dried black beans, cactus leaves, and yucca root are merchandised together on a table, while a section with curved shelving features bagged salads and fresh-cut fruit.

Bottom Dollar's meat selection, meanwhile, includes more "value packs" than a typical supermarket, but there are also smaller-sized packages of fresh beef and poultry. Customers who feel like splurging -- just a little -- can purchase a New York strip steak for $8.49 a pound, or a ribeye steak for $7.49 a pound. Meat cutters are present in every store, too, so shoppers can make special requests.

In the absence of full-fledged fresh bakery and deli departments, Bottom Dollar has display tables set up in several areas of the store with fresh packaged products including doughnuts, bagels, cookies, and bread.

There's even a small selection of wine, although you won't find top-of-the-line vintages.

One increasingly common product segment that's not as readily available at Bottom Dollar is natural/organic. "We're limited in what we can carry, so we wanted to cover the basics," explains Lacroix. "Plus organics and natural products tend to be more expensive."

But what you will find is a special section in the center of the store called "Bottom Bargains." Here, customers can find hot deals on market overruns, seasonal items, or special offerings on a "while supplies last" basis. Typical finds there include kitchen gadgets, toys, hardware, candy, school supplies, pet toys, and hair care supplies -- all for $1 each. Greeting cards are two for $1.

The special deals are always changing, notes Lacroix. Examples of these rock-bottom prices include an iPod dock for $39.99 and a 44-piece kitchen set for $9.99.

Bottom Bargains has been so popular that Food Lion and sister chain Harvey's, in the Southeast, are looking at adding these sets to their stores as well, according to Lacroix.

Prices are right

Of course, deals are to be found throughout the store, as Bottom Dollar prides itself on offering the lowest prices around on groceries. (Executives won't comment on whether they're beating Wal-Mart's prices, but they stress that their goal is to be the lowest.)

The retailer's pricing structure includes "Everyday Buys," which are consistent low prices identified by orange signage; "Special Buys," based on deals from manufacturers and identified by red signage; and "Best Value" private label items, identified by green signs.

A few of the amazing Everyday Buys include Jiffy Corn Muffin Mix for 31 cents, Kraft Grated Parmesan Cheese at two for $5, and bagels at four for $5. Some of the Special Buys touted in a recent sales flier include D'Anjou pears for 79 cents a pound, a one-pound tub of strawberries for $1.47, and Smithfield assorted pork chops for $1.77 a pound.

While Bottom Dollar sells mostly national brands, its private label of choice is the Food Lion brand. "It was a cost decision to not create a Bottom Dollar private label," notes Lacroix. "Besides, we're not hiding the fact that we're part of Food Lion."

In fact, the discount buzz at Bottom Dollar is catching on with shoppers who are used to frequenting Food Lion. In many cases, consumers who were initially hesitant to shop at a discount store have quickly become hooked once they experience Bottom Dollar's values.

Notes Anderson: "Customers get it when they see Food Lion brand apple juice cheaper in Bottom Dollar than in Food Lion."

But wouldn't that be a source of trepidation for parent company The Delhaize Group?

"We're not concerned about cannibalizing sales," explains Anderson. "The banners complement each other very well. A lot of our customers shop at multiple places, and that doesn't bother us. They come here to meet their basic needs." In the Norfolk, Va. market, for example, Food Lion, Bottom Dollar, and Bloom, the retailer's convenience-centric concept, co-exist successfully.

As if Bottom Dollar's daily specials aren't special enough, customers can also purchase membership cards (the lifetime fee is only $5) to enjoy the benefits of continuity programs. Initiatives that have been recently offered include those geared toward pet products and baby products, and a special where customers buy six gallons of milk and get the seventh gallon free.

Gaining ground

As for the future of Bottom Dollar, Lacroix, Anderson, and other members of the team are optimistic about growth potential. In the past few years, they've experienced a real growth spurt: The concept went from three test stores, to 27 stores in multiple markets.

For now, they're concentrating on constantly tweaking the selection in each store so that they have the right variety, and enough products to limit out-of-stocks and keep shoppers satisfied. Indeed, the stores are constantly battling out-of-stock issues, since the low prices blow products out of the doors rather quickly, says Lacroix. "We're using science to try and be bulletproof. We have technology that tracks sales at the item level, and we also reply on category management tools."

Taking advantage of Food Lion's infrastructure has undoubtedly helped the format get off on the right foot and stay there, when it comes to operational issues such as out-of-stocks, notes Anderson.

Yet in the end, the success of Bottom Dollar will rely on execution on a store-by-store basis, the execs maintain. And the key to that is good, proactive management in the field. "The real challenge as we go forward is to try and get talent for every store," admits Lacroix.


Signs, signs, everywhere signs

Wordsmiths, and those who generally enjoy a good pun, can find plenty of entertainment at Bottom Dollar. The store is full of signs employing witticisms about food and prices.

Some of the catchier turns of phrase include:

--"More lettuce for less cabbage."

--"Our produce is extra fresh. Only the prices have wilted."

--"More meat for the moo-lah."

--"This is worth getting a second cart."

--"Prices may not vary."

"You’ll see the same ridiculously low prices next week."

Even associates' uniforms display whimsical sayings such as "Black belt in price chopping."

However, behind those light-hearted messages, Bottom Dollar is all business, says Paul Lacroix, v.p. of Bottom Dollar. "The slogans are fun, but the savings are serious."

Origins of the format

Salisbury, N.C.-based Food Lion LLC launched Bottom Dollar Food as a test in September 2005. The first store opened in High Point, N.C., and two more pilots opened soon after, in Mt. Airy and Asheboro, N.C.

Food Lion based the concept on a simple strategy of streamlining services and procedures, and then passing the savings on to the customers, says Bottom Dollar's director of operations, Tom Anderson.

"We did a great deal of research into what consumers wanted, and found shoppers are very savvy [and] interested in getting the most for their money through a price, quality, and selection equation," explains Anderson. "Bottom Dollar hits all of those marks by providing customers with a 'full shop' grocery experience that offers a wide variety of brand-name products at discount prices in an environment that’s bright, cheerful, and inviting."

Today Bottom Dollar operates 27 stores in North Carolina, Virginia, and Maryland.

Since they started, the Bottom Dollar team has come to learn that the low-price format works not just in low-income areas, but also middle-income and even upper-income markets. Bottom Dollar has also shown that it's a suitable format for ethnically diverse neighborhoods, and both inner-city and rural locations.

Paul Lacroix, v.p. for Bottom Dollar, attributes the banner's success to a universal appreciation of good value: "Across demographics, people love to save money."
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