Independent Grocers Look to Gain Ground
By Ron Margulis, Managing Director,
RAM Communications
The National Grocers Association held its annual convention
and trade show in Las Vegas last week and attracted 20 percent more attendees
than 2009. That in and of itself is an accomplishment in today’s trade show
environment, but it also provided insight into the current state of the independent
segment of the supermarket industry where operators are bringing a unique
value proposition to the market and winning the battle with some chain stores.
Speakers at the conference covered a myriad of issues
affecting community-based retailers and their wholesale suppliers, including
technology, health care costs, loss prevention technology, energy and more.
In addition, the 2010 National Grocers Association Consumer
Survey Report was released revealing several
challenges and opportunities for independents.
On the opportunities side, the survey suggests stores
continue to emphasize:
- Value and competitive prices
- Attention to food safety
- Healthful assortments
- Great fruits and vegetables
- Nutritional information
- Personal safety at the store
- A kindly approach to special requests
- Smart use of technologies to tailor frequent cardholder
promotions and speed checkouts - Support of local growers and other nearby food suppliers.
In terms of challenges, the report indicates there will
continue to be fierce competition from alternative retailers and other supermarkets,
continued economic malaise and the aging of the population as the first of
the Baby Boomers turn 65 this year.
When it comes to acting on these insights, "regional chains
and independent food store operators are nimbler than their larger competitors,
often homegrown local favorites and deeply rooted in the communities they
serve. Much of what local consumers prefer is already embedded in their minds,"
the report stated.
Discussion Question: What do independent
supermarket operators and their wholesale partners need from their trade
association?
I’m not seeing a lot of actual operations training and resources coming out of trade organizations. Independents need the most help in this area.
Also, how about a desk dedicated to helping retailers localize their business to better service their immediate selling area? Local store marketing is always a big challenge for independent retailers but it’s the one area where they can beat their big-box counterparts.
The real opportunity for smaller independent and regional chains is to stay focused on customer service, store experience, and employee retention/excellence. I read a great article in Inc magazine http://www.twoak.com/bdii about a small Pizza restaurant (Nick’s Pizza & Pub) that has only 20% turnover when the industry average is 200%. They also far exceed industry net operating profits. The industry average is 6.6% they are around 18%.
How?
1)Customer experience. They created promotions that made sense to consumers like price Pizza’s on Monday’s and price pizza delivery on Tuesday’s until the unemployment numbers in their town improve. By keeping the focus on the local economy patrons feel connected to the restaurant. By the way, Monday and Tuesday are the industries slowest nights. These are the two busiest for them.
2)They have a solid training program that allows their staff (most between 16-18 years old) to grow and see the rewards. Pay raises are based on how many areas in the restaurant you have performed at a certain measurable level.
Although this is a Pizza restaurant the similarities to independent and regional chains is clear. Like this restaurant, they have a stronger connection with their community and they can really focus on employees and building a team. Regionals compete with Walmart and National Grocery chains. This Pizza Restaurant competes with Dominoes and 75,000 other Pizza restaurants. If they can do it, so can smaller grocers.
Independent retailers and wholesalers have been my primary clients for several years. To me they are the best clients in the grocery business. So it’s important to me that they belong to a good trade association like NGA.
From what my clients tell me, estate taxes and unions are a threat to their livelihood compared to large chains. Putting the right people in political office that will advance our agenda of low taxes and a non union environment. It hurts me to hear a retailer tell me he has to turn down the opportunity to open a new store because a labor union will interfere with their business model.
Trade associations are good creators of conventions and hope. Sharing insights such as giving better service, buying local produce, and utilizing more technology are fine services but they aren’t totally effective against today’s competitors.
Ask this question: If trade associations didn’t exist today, what would be the greatest loss to independent operators? Whatever the answer to that question is, it could tell us a lot about what is needed today.
One of the long-term benefits of being an independent operator is building a surviving family asset. That seems in greater jeopardy today from possible government plans. So that has to be managed effectively.
Among other practical moves, the trade association might work with existing wholesalers to determine if it were to become the master wholesaler, would it be a contemporary paradigm? Existing wholesalers would become shareholders. Such an activity would undoubtedly create conflict with current wholesalers but perhaps that could be a new weapon today.
The landscape in American retail (including grocery) is changing vastly and will continue to do so over the next 10-20 years. America has never been so niche and sub-segmented. There is simply no longer such a thing as an “average American consumer.”
There are unprecedented demographic, social, environmental and technological changes taking place. Many of these changes actually represent enormous opportunity for the independent merchant but unfortunately they aren’t being brought to the fore. I personally talk to independents each week who are completely in the dark with respect to what’s happening and how it may affect their business.
I feel that trade associations and wholesalers in general need to focus less on operational minutia (the safe stuff) and more on the powerful forces driving change in the market (the scary stuff).
They need to first get their own heads around these important market phenomenon and then educate their members and customers, bringing them along into the future.
In my opinion, making sense of the future is ultimately the best value a trade group can bring their members.
I agree with all these comments. Customer Service, less government regulation and collaboration of ideas are all needed.
A good friend of mine owns two small retail stores. Their employees have been there for many years. Their customer base has dwindled because the office buildings nearby are now almost vacant. However, they are nimble and have been able to keep their business afloat by expanding their home delivery services and keeping prices and costs down. They have always had home delivery service for medicine, which has kept their aging customers loyal. They now also deliver other items and offer delivery to nearby nursing homes.
This economy and government regulation is hurting all businesses today. More than ever we need organizations like the “National Federation of Independent Business Owners” to pull together and make sure Washington hears what businesses need. It would also be nice if this administration learned that stimulus money might create a few short term “jobs,” but business owners create careers.
Independent grocers, like independent restaurateurs, are the greatest of entrepreneurs, and a true backbone of the U.S. economy, as they have the ability to touch consumers on a weekly basis. They are smart, instinctive, and great risk-takers.
They are also seeking information to help them sustain and grow their businesses, as it helps them when they go to lenders/banks, as well as do a better job of taking care of their customers. Ongoing education/information programs about the consumer are key items that their associations can and should provide to them.
The Consumer has made adjustments to their spend in the past 12 months–no surprise there, we know. Based on the monthly Consumer Intentions & Actions (CIA) Survey, that each month asks “Where do you shop for Groceries 1st” and “Where do you shop for Groceries 2nd”, offers some clues about subtle, but important changes:
Comparing how Consumers said they shopped in January, 2009 to January, 2010, the Independents are perhaps leveraging their “Convenience” advantage. Consumers said:
January, 2009: 21.9% shopped Discount, 59.3% shopped Grocer, 33% had No Preference / Other.
January, 2010: 22.4% shopped Discount, 55.4% shopped Grocer, 35% had No Preference / Other.
With those types of shifts, the independent, while not getting a complete basket, had to be seeing an increase in customer counts and trips. Another year like that, and the SHAWS of the world selling off stores in Connecticut, leads to opportunity for the risk-takers–Independent Grocers.
If the playing field were really level, then independents could run circles around the big boys. BUT…since we can not get any good deals on pop, chips, cookies, and other top selling items compared to the big boys, it puts us at a huge disadvantage.
I do know that the perimeter of our stores is where good profits can still be made, and still have great values.
Good luck to all my fellow independents.