Fleming Companies was the largest wholesaler of food in the United States in the 1980s and 1990s, when consolidation was taking place downstream in the retail grocery industry. To improve profitability in the low-margin, high volume retail business, some retail chains, such as Wal-Mart, developed their own wholesale distribution facilities, thereby making wholesalers such as Fleming redundant. As a reaction to its changing environment, Fleming decided to vertically integrate downstream by a series of acquisitions; that is, to get into the business of retail grocery stores. Management saw retail stores as attractive as a separate business and appealing as a captive market for Fleming's wholesale business.
The strategy did not work well, and sales per store declined. Thus, Fleming maintained its interest in retailing but decided to focus i efforts on developing Price Impact supermarkets. These supermarkets targeted highly price sensitive consumers, offering large discounts and everyday low prices in a warehouse-style format. Fleming believed it could use its unique position of being a wholesaler as well as a retailer to make money with this low-price formula. Fleming also believed it would be able to keep prices low compared to other stores thanks to the low-cost features of the new format, such as a narrow range of products, and its focus on popular brands. Other initiatives included low product storage and handling expenses by the implementation of flow-through distribution. The stores would have basic physical features such as cement floors, cinder block walls, and exposed ceilings to keep the costs low and would also have walk-in freezers, thereby combining the storage and display area. Fleming management believed the success of Price Impact stores would be based on an underserved trade area and would not require a significant market share. Thus advertising and marketing expenditures lower than the grocery norm would suffice.