Report: Independent grocers navigated inflationary pressures and rising costs in 2023

The NGA has released its “2024 Independent Grocers Financial Study,” a collaborative effort between the National Grocers Association and FMS Solutions, an accounting company. The report looks at the resilience of independent grocers during a turbulent fiscal year 2023. It also highlights grocers’ strategic responses to moderating inflation, shifting consumer behavior, and rising operational costs.

Despite inflation easing, independent grocers continued to face the cumulative effects of elevated prices, leading to more cautious spending from shoppers, the report found. A large majority of consumers, responding to price pressures, shopped across multiple stores and ultimately reduced their overall purchases.

These dynamics led to a slowdown in inventory turns, which dropped from 18.4 in 2022 to 17.2, and the industry-wide store shrinkage rate remained steady at 3.0%. While same-store sales edged up by 1.8%, this growth was largely driven by a 1.2% annual inflation rate rather than an increase in unit sales.

To remain competitive in that challenging environment, the report states that independent grocers continued to reinvest in their operations, allocating an average of 1.8% of sales to capital improvements. Investments focused primarily on store remodels rather than new store openings.

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With 70% of consumers comparing sales and promotions across stores and 86% checking in-store sales, independent grocers also invested in expanding loyalty programs and pivoting to digital marketing. But staffing challenges persisted, the report says, with associate turnover reaching 39.4%, pushing more than half (56%) of independent grocers to adopt self-checkout technology to enhance operational efficiency.

While transactions per store averaged 7,647 per week, spending per trip remained flat. Gross margins were compressed to 27.7%, as operational expenses, particularly labor and benefits, surged to 15.6% of sales—the highest on record. As a result, net profit dropped to 1.4%, a return to pre-pandemic levels, and EBITDA decreased to 2.77%.

The study drew on responses from 127 survey participants, representing 654 store locations, alongside financial benchmarks derived from FMS Solutions’ database of 434 independent grocers with 1,531 store locations.

NGA will present an in-depth analysis of the study findings during a session at its upcoming Executive Conference and Public Policy Summit, taking place Oct. 28-30 in Washington, D.C.