Independent Grocers Struggle
Independent grocers optimistic despite slow growth for 2017
- The National Grocers Association and FMS Solutions released their annual “Independent Grocers Financial Survey,” which found independent grocers saw sales decrease 0.6% in 2017 compared to the year before. Despite the decline, the numbers are an improvement over last year’s results, which showed a 1.62% decrease in same-store sales, according to the Shelby Report.
- The study indicated that dollar sales declines, combined with flat margins and higher expenses, led to a decrease in net profits to 0.09% in fiscal 2017 compared with 0.98% in 2016. Nonetheless, independent grocers’ margins were slightly ahead of where they were a year ago. More than 70% of the 139 U.S. and Canadian companies surveyed said they are optimistic about their future.
- “There’s no doubt that the supermarket industry is changing at a rapid pace. However, independent grocers have faced industry shifts and challenges in the past and have proven resilient. They are the entrepreneurs of the industry and have the ability to experiment and adjust as needed to meet their shoppers’ needs,” Peter Larkin, president and CEO of NGA, told the Shelby Report. “This study offers good insight on where the profit leaders are excelling and areas of needed improvement by independents.”
Independents continue to struggle as competition gets more intense from all corners, from the low prices and growing e-commerce options that giants like Walmart and Kroger can afford to offer to growing popularity of discounters such as Aldi. And of course, there’s always always Amazon, which currently accounts for 18% of online grocer sales and threatens to expand its reach through its site and its acquisition of Whole Foods stores.
These challenges may have led to several bankruptcy announcements in recent months. Southeastern Grocers said it entered a restructuring agreement earlier this year with a group of creditors holding 80% of the company’s debt, and will file for a pre-packaged reorganization plan under Chapter 11, according to a news release. The company said it would close 94 stores across its Winn-Dixie, Bi-Lo, Harvey’s Supermarket and Fresco Y Mas banners, and keep another 582 operating. Likewise, Tops Markets LLC this year announced its filing for Chapter 11 bankruptcy. The chain competes with Wegmans and Walmart in many markets.
The majority of independent grocers surveyed, however, said they aren’t ready to throw in the towel. The NGA report highlighted business practices that helped them stay afloat in a tough year, including carefully managing inventory, product assortment and margins, as well as focusing on the fundamentals of keeping inventory turnover high and keeping a close eye perishable and theft-related shrink. Many also kept capital spending and store development in check to meet budgetary constraints.
Maintaining those practices, while offering things larger stores can’t could be a key strategy for independent grocers. For one, today’s shoppers want a personalized experience and tend to make several smaller grocery runs a week rather than fewer bulk purchases. Smaller grocers can capitalize on these preferences by highlighting the effortlessness of shopping at a smaller store, and by offering more regional foods or recipe demonstrations that national stores can’t provide.
As consumers gravitate to meal kits, independents can move away from the rotisserie chickens or prepared mashed potatoes and salads to increased variety or regional favorites.
They also can strive to stand out as eat-in destinations. In Chicago, for example, five-store grocer Sunset Foods offers “chef prepared” dinners that include a fresh protein and two sides. In neighboring Michigan, Busch’s, a 17-store retailer, has sushi and sandwich bars, and recently opened a barbecue restaurant inside its store located in the town of Canton. In Guilford, Connecticut, The Marketplace at Guilford Food Center has firmly established itself as a meal destination, where owners remodeled to replace some grocery aisles with tables and chairs, and built culinary stations around the perimeter, including a made-to-order burger station, salad bar and meat counter.
Customer care is likely the best way independents can compete with big chains and e-stores. Trend studies show millennial shoppers want to feel special, and a store that provides customized service, friendly workers and a food experience they appreciate could be more important than price for some consumers.