Salvage Grocery Store Interview

The following interview took place back in July of 2008 where I sat down with a guy who operates a very successful salvage grocery store about forty minutes from my own home town here in Northern California. He wished to remain anonymous for fear of receiving too many requests for additional information.

How did you get started selling salvage groceries?

About 4 years ago my wife and I went to a large flea market on a Saturday afternoon and while walking though I noticed one vendor who was attracting a lot of attention. He was selling name brand beauty products (Shampoos, Soaps etc) from large watermelon boxes. We spent some time talking to him and he was willing to share his experience buying what he called banana boxes of scratch n’ dent grocery products. While we were talking with him there were continuous sales being completed at his booth. He had what appeared to be his wife and teenager taking money from booth customers.

On our way home from the flea market, my wife and I got really excited about what we thought could be a great opportunity. We talked about opening a small salvage grocery store in our hometown. The rest is history!

From that day at the Flea Market how long was it before you opened your store?

Roughly two and half months later we were open for business. Looking back now I wished we would have went a little slower as I think our excitement caused us to overlook our inexperience in retailing. We just wanted to open and make a ton of money!

Wow! That is quick, it sounds as though you made some mistakes…can you elaborate?

We had a very good grasp on retailing on-line, as my wife and I ran a successful Ebay business. Due to our cash flow from online sales and our desire to be self employed we jumped right into this idea that we could become successful without the need to plan. I think our dream of owning our own store caused us to overlook a very important fact: we had no experience in the grocery or salvage industry. I did work as a bagger when I was eighteen at a local grocery store, but that was the closest experience I had.

We immediately looked for a store front as well as salvage food supplier. I was able to go back to the guy at the flea market and convince him to reveal his source as we lived 70 miles from his flea market booth and I assured him we would in no way take away any of his customers. Reluctantly, he gave me the name and phone number of a broker he used to get his merchandise from. Without checking any references or investigating this contact I called the following Monday and introduced myself and asked for load pricing. We were not ready to buy at that point, but within a couple of weeks we had a location and were ready to order.

Our first load consisted of sixteen pallets and we paid $16 per box for what we thought was a mixed load of Groceries, HBA’s and Paper Products. When the truck arrived we unloaded our pallets onto the ground and realized that we were shorted 2 pallets and the load consisted mainly of food

– No soaps, paper or shampoo. No big deal I thought, I would call the broker who we purchased from and get the discrepancy settled. Wrong. This guy would not answer his phone or return our calls! In fact, to this day we have yet to ever talk with him again.

We opened our doors to the public with that first load and learned a valuable lesson….having multiple, trustworthy suppliers would make or break our business.

How were you able to find more suppliers?

Well, this will sound crazy, but I drove to the “Ship from” address on our first loads’ bill of lading and found the source that broker (we bought from) was using to fulfill his order. As it turned out we were able to start buying loads much cheaper and the service was much better

Tell us what happened on the first day you opened your Salvage Store?

We had what they call a “Soft Opening” with no advertising. We relied upon two large banners we placed outside of our store proclaiming “Groceries 50% or Less below Retail!”. As I recall we had over 120 shoppers through the store on that first day. Register receipts for the first 12 hours totaled about $2400.00. We were pleased with the days take, but everything that could have gone go wrong…did.

We did not have enough help, it was just me and my wife. People were asking questions left and right about the condition of the food and its shelf life. We had two people try to walk out of the store without paying and 3/4′s of the way through the day shoppers got really tired of waiting in long lines to check out. We had major issues with our newly purchased cash register.

When that day was over we looked at each other and said the same thing, “What have we gotten ourselves into!”.We laugh about it now, but honestly we could have saved a lot of heartache and money if we had just slowed down the process of getting our store open.

Have you since created a full business plan and if so, how has it helped?

Yes, we have a written plan in place which focuses on our goals and direction. We now have a clear picture of our strategy for our success and we do not vary from our direction. Because we track our sales and progress we can at any one time see if a particular area of our business needs help.

Fast-forward to today, what is the hardest part of your salvage grocery business?

Getting products/loads ongoing. Salvage food is like a commodity, one day there are several loads available and if you wait to long to order they may not be available. Loads are always on a first come, first serve basis. I know that truckloads are usually sold well in advance and those that have the money to buy ongoing typically get the freshest loads.

We have been fortunate in that our cash flow allows us to buy a truckload weekly, but there have been times when inventory will slow due to availability. If a good deal comes along sometimes we have bought more than we can warehouse just to take advantage of supply and demand. After 4 years of experience we have 4 salvage suppliers that we buy from on a regular basis.

What percentage of waste do you experience when buying salvage food for resell, in other words do you receive items that are unsellable?

Some loads are really good while others may contain more damage. I think the biggest factor with unsellable food is due to what I will and will not accept as marketable. Let me explain: two weeks ago we received a shipment that had one pallet which had a really good assortment of higher dollar grocery items, BUT…one of the banana boxes at the very top of the pallet had a few Ocean Spray cranberries juices bottles that were leaking. They were almost empty in fact! They leaked throughout the next two boxes below. It was a very sticky mess. We cleaned up the items below as much as we could, but rather than place the damage on our shelves we elected to toss about one and a half boxes of merchandise. Stuff like this happens as this is the nature of the biz-

What percentage of your client base would you call repeat buyers?

Ah, this is the great part of any business…making friends. We have our regulars who shop religiously, some like clockwork, on a particular day of the week. I would have to say that at least 25-30% of our daily traffic is from repeat business.

On the flip side, salvage grocery shopping is not for everyone. As much as we try to convince people that the food is safe and tastes just as good as their local big box…they shy away. We make sure that when we advertise we always try to educate the public about what we sell and address all safety concerns.

Do you sell anything other than salvage groceries?

I would say our store is approximately 70% salvage food/grocery products. The other 30% consists of general merchandise (closeouts) and first quality staple items including fresh milk, butter and misc dairy items. We also maintain 4 refrigerated cases for sodas and other drinks. In addition we have contracts with a few local vendors who supply our store with rotating stock including sunglasses, hats and toys. We have found several vendors who will provide merchandise on consignment. This is great for us as we only purchase what sells!

If you were to give one piece of advice to someone who was opening their own salvage store what wold it be?

Don’t do it in my neighborhood! Ah, just kidding! Hey, to anyone thinking of this business go for it! We have done really well and call me crazy, but we enjoy the salvage aspect of it. Not knowing exactly what you are getting on each shipment is kinda fun.

Back to your question: I would have to say the single most important lesson my wife and I have learned is simply, “Do not think you can handle all of the work”. We have learned that we cannot be business owners, checkout clerks, accountants, and entrepreneurs all by ourself. In the beginning we did everything and it grew old fast. Long, late nights caught up with us quickly and we had to hire outside help. We started with one part-timer and now we have two three full time employees and a part time/temp to help out.

Thank you for sharing this information with us….It sounds as though most of your experience came from the “School of Hard Knocks”. We wish you continued success and please let us know if you open another location!

UPDATE: Check out the new 130+ page guide on How To Open A Salvage Food Store!