Explain the strategies that limited-assortment supermarkets (extreme-value food retailers) use in order to provide customers with high-quality merchandise at low prices to compete against other food retailing formats.
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Limited-assortment supermarkets only stock about 1,500 SKUs, but conventional supermarkets carry about 30,000 SKUs. Limited-assortment supermarkets offer one or two brands and sizes, one of which is a store brand. Stores are designed to maximize efficiency and reduce costs. For example, merchandise is shipped in cartons on crates that can serve as displays so that no unloading is needed. Some costly services that consumers take for granted, such as free bags and paying with credit cards, are not provided. Stores are typically located in second- or third-tier shopping centers with low rents. By trimming costs, limited-assortment supermarkets can offer merchandise at prices 40 percent lower than those at conventional supermarkets. These features have supported the substantial growth of such retailers, which appeal strongly to customers who are not loyal to national brands and more willing to try a store brand, especially if it means they pay lower prices.
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