For independent grocers, it’s innovate or die

Peter Larkin, President & CEO, NGA - Photo: NGA
Feb 16, 2018
Ron Margulis

Your neighborhood grocery store is once again caught between a rock and a hard place. In this metaphor, the rock is ecommerce competition from Amazon and larger, more traditional retailers. The hard place is the spate of emboldened retail formats carving out a niche for themselves in the discount, fresh/organic and specialty ends of the industry, including the likes of Aldi, Sprouts and Wawa. All these challenges and more were discussed at the National Grocers Association’s Annual Conference this week in Las Vegas, where attendees heard a series of warnings and prospects for the next several years.

On the plus side, shoppers are very/extremely satisfied with their local supermarket, with more than 80 percent preferring their local store to an online alternative, according to a survey NGA released at the conference. Additionally, independent grocers are strongly associated with friendly employees, quality fresh foods and a convenient layout. Perhaps most heartening, more than two-thirds of food shoppers have no plans to switch from their independent store.

On the negative side, competitors in the physical and digital markets are devoting massive resources to meet the shopper’s every need, including integrating customer outreach for all channels and personalizing promotions. These companies are testing the limits of the data analytics they can conduct to optimize the offers made and the delivery systems deployed to fulfill them.

“There’s no doubt that the supermarket industry is rapidly changing, either because of the growth of e-commerce or the explosion of new formats, along with shifting consumer trends. However, independent grocers are nimble enough to quickly overcome obstacles and with strong ties to their communities, they know what consumers want and need,” Peter Larkin, president and CEO of NGA, reported at one of the keynotes.

Mr. Larkin and other speakers said a few of the key areas independents can at least partially “own” going forward are becoming primary sources for a healthier lifestyle, meal planning and local fresh foods. These retailers need to engage shoppers where they want to be engaged (increasingly, mobile) and how they want to be engaged (honest storytelling). Bottom line, any promotions or offers need to be customized so the shopper will trust the retailer.

  • National Grocers Association, Nielsen and The Harris Poll Release New Findings from the 2018 National Grocery Shoppers Survey – National Grocers Association

DISCUSSION QUESTIONS: Where are the biggest opportunities for independent supermarket operators to improve their business results? What good examples have you seen from independent grocers successfully countering competition from online and big chain competition?

Please practice The RetailWire Golden Rule when submitting your comments.
"I’d begin by zeroing in on who the shopper is, what it is they value and how to deliver a second-to-none experience in and out of the store!"
"This is David versus Goliath — small retailer versus big box store, on premise versus online, everyone versus Amazon."
"Don’t compete head-to-head with the national chains. If you keep on shouting “price” then you might win the battle but lose the war."

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21 Comments on "For independent grocers, it’s innovate or die"

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Ricardo Belmar

The best and most innovative path for grocers is to focus on assortment and convenience for the shopper. That may mean delivery services, but it’s not limited to that. Providing health and wellness related features and products in-store, freshly prepared foods that are unique and leverage higher-margin products and offering recipes and ready-to-go shopping lists to customers are just a few examples of what independent grocers could potentially provide better than national or regional chains. Independents typically know their customers better than anyone and that gives them the opportunity tailor both the experience and the merchandise to what their customers want. There is great potential to focus on value over pure price!

Al McClain

I’d suggest focusing on the perimeter and cutting WAY back on center store items, just having enough to satisfy shoppers needing a few fill in items. There is no way an independent supermarket can match the big boys on price or assortment on center store items, national brands, or commodities. Instead, focus on a large assortment of fresh produce, deli, seafood, and prepared foods. Independents can do a great job on prepared foods and there is also an opportunity to build a presence by carrying more local brands.

Max Goldberg

The biggest opportunity for independents is to create an experience that can’t be matched by the grocery chains or Amazon. Use employees to interact with consumers and provide better service. Offer better prepared foods and a wider variety. Provide personalized service. The opportunity to do these things has never been better.

Art Suriano

I recommend that independent grocers continue concentrating on their most significant advantages which are customer service and quality. Local grocers get to know their customers and have the best opportunity to “wow” them as they learn their needs. Technology for the independent grocer is useful, but it should only be something that adds convenience and does not replace a service. Concentrate on a specialty or specialties that please your customers and most importantly always try to do everything right. Plan small growth and keep your focus on the customers you have and make sure you keep them.

Phil Chang
Phil Chang
Retail Influencer, Speaker and Consultant
1 year 2 days ago

Indie retailers need to focus on curating products and creating a retail experience that makes the consumer trust them. As they see products pop up that fit their lifestyle and walk of life, that instills trust in the consumer that the indie retailer has their interests at heart. Trust becomes the currency for repeat purchases.

This also takes you down a different path from big grocery. It won’t be a hard place because the indie retailer will wind up with products that big grocers won’t have. It’s a great way to give your customer what they need and stay away from the race to the bottom on price.

Lee Peterson

The biggest opportunity for any small retailer is taking advantage of how close they are to their customers. It starts with hiring and ends with carrying groceries out to the car or even to their home. No giant like Amazon or Walmart will ever know their customers like a smaller indie retailer can/should regardless of Alexa or any tech intrusion. Face-to-face with customers will always be any retailer’s biggest opportnity, but more so with smaller entities. Know your customers. Take care of them. Go out of your way for them. Love them. They’re the reason you’re in business (still). And if you think any of that is wrong or too “expensive,” you deserve to get steamrolled by corporate giants.

Lyle Bunn (Ph.D. Hon)

Grocers are not exploiting the opportunity to be the center of promoting a healthy community. When answering the question, “what does that grocer mean to me and my family?” the answer should go way beyond “source of food.”

Aligning with the goals of community organizations, teaching about nutrition, celebrating community successes, being a meeting place with the benefit of people also being able to pick up a few things and other points of context to patrons’ lives all make the grocer more relevant.

Bob Phibbs

Can we stop with the hyperbole “Or Die?” What if all the hyperbole about everyone never going to the store again because of Amazon or the convenience of Amazon were grounded in some type of reality? What if the number of people willing to tap and go remains at about 20 percent and certain retailers are able to own those shoppers but the bulk remain going to a physical store? Then how smart does upending everything to chase Amazon seem in hindsight? Look, the goal of any business is to be and remain profitable, that’s the first key. So-called “personalized offers” are little more than an algorithm putting in a form field — they’ve been able to do that for decades. Cutting-edge is being brilliant on the basics first; do that and the rest flows naturally. Believe the hype and you will cut the wrong things in hope of meeting what PR firms are telling us is the reality.

Dave Wendland

Begin by throwing out the traditional rule book. Continuing to trudge along with the “establishment” approaches will only distance an independent supermarket (or any brick-and-mortar retailer) further from its customer. I wrote a piece on innovation in the independent channel here.

I’d begin by zeroing in on who the shopper is, what it is they value and how an operation can deliver a second-to-none experience in and out of the store! Sometimes to get started a supermarket must be willing to have an objective third party come in and assess their operation with a fresh set of eyes. Choose a partner who understands an independent operation and is willing to bring new ideas and help with the transformation.

Although not a grocer, Ritzman Pharmacy has done an excellent job differentiating and reinventing their customer experience.

Ryan Mathews
I have long felt that independent grocers ought to be, if not the only game in their towns, at least the most prominent players. But year after year, decade after decade my uncharacteristically rosy outlook has been dashed by the fact that — while there are hundreds of examples of my being right — there are thousands of examples of independents defaulting to a victim role and attempting to use conventional wisdom to address the challenges and opportunities of a rapidly evolving market. As a lifelong fan of independents, I want to see us stop chanting the bromides and cliches which have dominated the conversation about, “the future of independents” since I first entered the industry. If you take any set of NGA speeches from the last 30 or 40 years or so and deconstruct them they all tend to read something like, “Independents are disadvantaged because of unfair competitive practices by [chain stores/manufacturers/Walmart/e-commerce players or a threat to be named next year]. However, we have these potential great qualities [being nimble, agile, community-based and… Read more »
Camille P. Schuster, PhD.

Independent retailers can understand their specific customers and provide an assortment that caters to those people without having the consumers sort through aisles and aisles or pages and pages of product to find what they want. Ther are some independent grocers in some Phoenix neighborhoods catering to Mexican, Middle Eastern or Indian products.

Mohamed Amer

Don’t compete head-to-head with the national chains. If you keep on shouting “price” then you might win the battle but lose the war. The immediate advantages that independent grocers have include their natural integration with the communities they serve and the ability to micro-localize their assortments and stores.

Operationally, they need to manage inventories even better than their national counterparts and diligently add technology to front-end and back-office processes so they enhance their relevance in the market. Managing labor content is challenging but cannot be done at the expense of customer service.

The best growth and margin opportunities are in the perimeter of the store. These departments also provide further differentiation and strong branding for the independent grocer.

Richard J. George, Ph.D.
This article clearly captures the challenges to independent food retailers. On the one hand they need to figure out a profitable response to e-commerce. The Capex to do it themselves is prohibitive. Therefore, they need to forge partnerships with online service providers. On the other hand, they need to revisit and rethink their stores. No one should out-fresh, out-service or out-community the independents. These are the ante wagers to get into the game. Beyond that they need to stop putting their focus primarily on products on the shelves. Instead, they need to really understand the needs, wants, shopping patterns, etc. of their customers. I agree with Al McClain’s comments on the center of the store. As I have stated on previous posts, I envision a store with its current perimeter expanded and romanticized, similar to European street markets with stalls/displays of delicious fruits and vegetables; along with gourmet cheeses, artisan breads, fresh flowers, as well as today’s lunch or tonight’s dinner. Would this not represent a more enjoyable independent food retailer shopping visit than many… Read more »
Mel Kleiman

The way the independent can win is by providing a better customer experience. It is all about being truly faster, friendly and caring about the customer experience.

Sterling Hawkins

Great article and nice seeing you at the show, Ron! I’d add that most leading edge technology is available in the cloud today making it economically accessible for independents. Smaller operators can move faster and get feedback sooner given their typically closer relationships with customers. That’s a huge advantage in a world where the pace of innovation is moving quickly and accelerating. eCommerce, AI for pricing and personalization and customer analytics are a few areas where I’m seeing several independents really excelling today.

Ed Rosenbaum

I would enjoy hearing from Tony Orlando. Here is a man living and dying with this issue on a daily basis. He knows what is happening and what needs to be done to make his business grow successfully. He certainly knows more than I do. Hey Tony, jump in here and let us know what is happening from the battlefield.

Ralph Jacobson

The title of this article is a bit misleading. I believe ALL grocers need to innovate. Traditional format grocers haven’t changed, really, in a hundred years. Innovators have broken that mold, and many traditional grocers are suffering from flat or declining growth because of those companies, whether independent or chain operators.

Driving true loyalty, as opposed to just depending upon an existing frequent shopper program that every shopper uses to leverage mass, untargeted discounts, is a key opportunity for independents to grow the top line. Online targeting is the best way to look like a big grocer, while operating as a nimble indie.

Craig Sundstrom

The survey QODs made me wonder exactly what kind of “independent” we’re talking about. The local I patronize for deli and a few fresh items each weekend is +/- 4000 gsf with one location (or maybe a few more under different names that I’m not aware of). Online pricing and mobile apps? Please, I think that’s hardly something they could even fantasize about.

Tony O — the guy here who actually is an indie — has told us enough what seems to be working: enhanced specialty items and enough of a (not price ridiculous) center store to keep regulars from straying too much.

Shep Hyken

This is David versus Goliath — small retailer versus big box store, on premise versus online, everyone versus Amazon. (Had to put that last one in.) Here is where the smaller/independent supermarket can move the needle: The service and relationship. Just like the old TV show Cheers, people want to go to a place where everybody knows your name. Build a local relationship, focused on the community, churches, schools, local charities, etc. While not in the supermarket business, Ace Hardware is a role model for how this works.

William Hogben

Independent grocers need to focus on getting their technology updated. The danger from big players like Amazon and Walmart comes from their ability to improve the customer experience with technology — see Amazon Go and Walmart’s upcoming mobile self scan and checkout systems. The added convenience of line free shopping from the big players is enough to counter the independent grocer’s added personality and experiential benefits for busy shoppers, and if independents lose even a small number of their busiest shoppers to more convenient options, they will see significant losses.

Independent grocers who double-down on avoiding technology and customer service will find that, conversely, they are providing an inferior service to those who offer technology focussed on convenience. Just as Amazon’s 1 click checkout dominated eCommerce through convenience, letting customer checkout from their phones will dominate physical commerce through convenience. Independents who start now will enjoy the advantages of being seen as leaders and on top of technology, while those who start late will have already lost their busiest customers to competitors.

Joel Goldstein

As a company that exclusively caters to this market, I believe that the independent grocers will not only survive but thrive in the coming years. When people have free time on the weekend and after hours, they are going to be looking to try new things. One of those historically has been to cook, and cook with new interesting ingredients. Hispanic retail and niche grocers like butchers have been booming with the new foodie craze and it doesn’t look like it’s fading anytime soon. To stay ahead of the chains, they compete on selection and variety, not price.

"I’d begin by zeroing in on who the shopper is, what it is they value and how to deliver a second-to-none experience in and out of the store!"
"This is David versus Goliath — small retailer versus big box store, on premise versus online, everyone versus Amazon."
"Don’t compete head-to-head with the national chains. If you keep on shouting “price” then you might win the battle but lose the war."

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