Most independent retailers expressed high hopes for their business despite having to negotiate a rough-and-tumble competitive playing field, according to a survey of National Grocers Association members.
In assessing the mood of the independent sector, the NGA in conjunction with Supermarket News recently conducted an informal survey and asked its membership to respond to four questions regarding their ability to grow their business in the future, and their mood going forward. Thirty-six companies — both single-store and multiple-store operators — responded.
Nearly two-thirds said they are able to grow sales and make a profit each year, and most, 92%, said they are optimistic going into 2007.
Over a quarter, 28%, said their business remains static, with little growth, and 11% said they are just surviving. No retailers said they were suffering sales losses or were planning to go out of business. Just 8% expressed pessimism about their business.
Among factors contributing to high expectations are opportunities to grow store bases through real estate opportunities or new formats. “National chains are now feeling the impact of mass marketers and thereby providing growth opportunities for independents,” said an NGA respondent from Homeland Stores, Oklahoma City.
Chris Thorvig, owner of Chris' Food Center, Sandstone, Minn., said he was building a new and larger store for growth.
Michael Bourgoine, president and chief executive officer, Associated Grocers of New England, Pembroke, N.H., said his company has had success in remodeling stores into upscale formats.
No Frills Supermarkets, Omaha, Neb., expanded from 10 to 15 stores several years ago. With the expansion, the retailer brought in new management, which “raised our goals and our performance,” said Richard Juro, president and CEO.
Joe Koppeis, owner of Columbia Center Marketplace, Columbia, Ill., said, “We continuously update and upgrade our store. We will keep providing a clean store with good quality, variety and service while remaining competitive with the market.”
John Morgan, CEO, Piggly Wiggly, Kingston, N.C., said he invested over $500,000 last year in upgrading and remodeling stores, in new back-door and front-end technology and in promoting the store name.
Some retailers indicated they now perceived Wal-Mart Stores and its pricing strategies with less trepidation than in the past. “We have turned the corner now that the market has become saturated with Wal-Marts. We have learned that there is life after Wal-Mart. We will remain focused on what made us great. We are independents, and can serve our communities better than chains,” said a respondent from Associated Food Stores, Salt Lake City.
Jerry Mountin, owner of Mountin's Piggly Wiggly, Mayville, Wis., said he remains somewhat optimistic despite Wal-Mart planning to build another supercenter near his stores. He estimated Wal-Mart could take 10% to 20% of his business. But the retailer said he added 16,000 square feet of retail space and put in extra services, such as a bank, a liquor store and U.S. Cellular.
One respondent simply said price is not everything. “It needs to be adjusted to provide profitability for the retailer while giving the consumer good value. Eliminate all promotions that are done because ‘we have done it that way forever and can't change.’ You can change without losing sales,” he said.
“The strategy of low price is now off the table as our primary go-to-market strategy,” added the respondent from Associated Food Stores. “We must become community-oriented businesses with the reputation for high-quality perishables, world-class service and fair pricing.”
A renewed focus and understanding of their business provided survey respondents with momentum heading into the new year. New York cooperative Olean Wholesale Grocery said it has made great strides using “event” planning by tying into deli-bakery extravaganzas, big-pack meat sales, tent sales and midnight madness.
“I am very upbeat about 2007,” said Richard King, vice president of Associated Food Stores. “We are seeing execution of programming improving, and a sincere desire by our own membership to serve their customers.”
“A red-hot perimeter with decent grosses and a strong catering-deli business will help us out,” said Tony Orlando, owner-manager of Tony's Supermarket and Catering, North Kingsville, Ohio. He said a new direction for its advertising will be introduced this year.
Bourgoine said the cooperative believes it is critical to establish a strong perishables and service brand. “We have found a growing customer base that wants more than price.”
Michael Floersch, president of Floersch IGA, Clay Center, Kan., said Floersch is “focusing on customer service with training and educating employees.”
When considering their biggest business challenges ahead, over a third of respondents, 36% each, were split between competition from Wal-Mart and other nontraditional food retailers and maintaining a level playing field. A smaller 14% of NGA members said they considered competition from large supermarket chains or other independents as their biggest challenge. Just 11% pointed to poor supplier relationships as an obstacle.
For half of those surveyed, the most important strategy they have pursued to combat the competition is establishing a niche or format that stands out from others. “In our market you can't survive without differentiation,” said Dave O'Neil, president of O'Neils Markets, St. Louis.
Nicholas D'Agostino III, president and chief operating officer, D'Agostino Supermarkets, Larchmont, N.Y., said, “Differentiating us from the competition and giving a clearer message to the customer” would help them overcome competition.
Over a third, 36%, of NGA members said a strong brand identity and community relations were important to compete, and 19% said they were building, remodeling or relocating stores to compete and grow their business.
Many of the respondents cited rising costs in health, taxes, and labor and government regulations in limiting their ability to stay strong and compete.
Jerome Pawlak, president of Save-A-Lot, Albion, N.Y., said he remains optimistic as long as “government gives me a fair chance to stay competitive by lowering taxes and less regulations.”
In a survey by the National Grocers Association, many independents voiced an upbeat assessment of their food retailing business, which most expect will continue to grow
|Competition from Wal-Mart and other nontraditional food retailers||36%|
|A level playing field||36%|
|Competition from large supermarket chains or independents||14%|
|Disinterested and poor supplier/vendor relationships||11%|
|Sufficient finances to add stores or technology||8%|
|Too many local/state and federal regulations that restrict growth||5.5%|
|Other (Multiple responses)||5.5%|
|Find a specific niche or format that distinguishes you in the marketplace||50%|
|Establish a recognizable name/brand and strong community relations||36%|
|Build, remodel or relocate stores||19%|
|Invest in technology to lower costs||8.3%|
|Change pricing/promotional structure||8.3%|
|Establish strong supplier relationship (Multiple responses)||0%|
|Able to grow sales each year and make a profit||61%|
|Business remains fairly static, with little growth||28%|
|Business is suffering sales losses and faces financial problems||0%|
|Getting out of the business||0%|