BALTIMORE -- Speakers at Natural Products Expo East here had this wake-up call for small retailers: The industry is going mainstream, so it may be time to reinvent yourselves.
"When Wegmans [Food Markets] receives more letters and calls of complaint about being out of stock on tofu than on anything they've ever gotten calls about before, you know that times have changed," said Chris Kilham, a marketing consultant from Lincoln, Mass., who spoke at a seminar called "The Cowboy Report: How the New Health Megatrends are Changing the World."
Addressing an audience of mostly small, independent, natural-products store owners, Kilham said they are losing market share to bigger retailers, including supermarkets, and to the Internet.
There also has been "a spree of acquisitions" by the two dominant natural foods chains, Whole Foods Markets, Austin, Texas, and Wild Oats Community Markets, Boulder, Colo., which have enormous purchasing power, Kilham noted.
He advised retailers to "boutique" themselves as green stores -- places where customers can come for advice and personal service as well as for products aimed at wellness and prevention of disease.
In a seminar called "Running With the Big Dogs," consultant Jay Jacobowitz, president of Retail Insights, Brattleboro, Vt., showed his audience of 144 small retailers that when the "super-naturals" the "super-naturals" (natural foods supermarkets) enter the neighborhood, typically sales at the small retailer decline, initially 20% to 25% a week. But he also explained that the "big dogs" don't come to town to take market share away from the little guys, but from larger supermarkets in the area. Fresh Fields, the forebear of Whole Foods, created the first true threat to conventional supermarkets, Jacobowitz stated, and pulled away a significant segment of consumers.
"Crossover is going on," Jacobowitz said. "Supermarkets used to put in natural foods sets halfheartedly. And we had a niche. We didn't have to advertise. Supermarkets could not match our selection or our expertise. Fresh Fields [entering the marketplace in 1991] changed all that," he said.
His advice to small retailers was to make skillful use of the advantages that they do have. Packaged grocery categories, Jacobowitz suggested, may be one good place where a small store can differentiate itself.
SN spoke with Calvin Mayne, director of specialty foods merchandising for Dorothy Lane Market, just after a seminar on food trends, who said he is not afraid of the super-naturals. Dorothy Lane is a two-unit conventional independent in Dayton, Ohio.
"Even if they [natural foods supermarkets] weren't in Ohio, we'd still be here; we've been coming to this show for three years."
Mayne and three other executives from Dorothy Lane attend because there is so much demand for natural products.
"Natural foods is going to be the future mass market," predicted Martin Wharton, grocery manager for the new Princeton, N.J., location of Wild Oats.
SN spoke with Wharton on the show floor, where he confirmed what Jacobowitz had said in his seminar: Wild Oats prefers to open stores where there are at least 100,000 people living in a 3-mile radius. Nonetheless, the chain made an exception in Princeton because of the area's high education level and high income. Princeton has about 63,000 people in a 5-mile radius. Forty percent of the population have at least a four-year degree, Jacobowitz told the audience, adding that education is the No. 1 factor that super-naturals consider before opening a new unit.