Good Time for Suppliers to Target Independent Retailers

It seems that no matter how many years go by, independent retailers still get second-class treatment from many in this industry.

This isn’t about to change any time soon, based on some of our latest news reporting. A recent webinar presented by the Food Institute included a prediction that smaller retailers will continue to see declining attention from suppliers. “If you are not in the top tier, it is likely you will see decreased supplier investment not only in the form of promotional support, but also in other softer kinds of investment, like personnel and intellectual property,” said Jim Hertel, managing partner at consulting firm Willard Bishop, who spoke during the webinar.

This forecast coincides with recent reports that smaller wholesalers servicing independents are getting less attention from suppliers, who are cutting back to slash costs.

None of this is surprising, because all kinds of companies are reducing expenses and independents have long felt the brunt of these kinds of pullbacks. Small retailers, you may recall, were considered a dying breed not long ago, only to reemerge and reclaim relevance. This time around there are important reasons to believe suppliers might want to give independent operators a second look. Here are some of these factors:

• Suppliers of brands are under pressure as major chains chart unprecedented growth plans for private label. In contrast, independents haven’t been as active or enthusiastic about growing store labels, and have been more loyal to brands.

• Some big retailers are proactively pursuing SKU reductions that are cutting out certain brands. Ahold has noticeably gone in this direction, and Wal-Mart appears to be heading down this path. In fact, according to a recent SN report, Wal-Mart will increasingly be reducing categories and seeking more marketing dollars from brands that it partners with. All the more reason for suppliers to look further afield to independents to help bolster their position.

• The best independents are still very close to their customers and are leaders in local marketing, despite all the efforts by major chains to make progress in this regard.

• Independents are on surprisingly solid footing. Last year their store margins, same-store sales and average inventory levels all rose, according to the 2009 Independent Grocers Survey from the National Grocers Association and FMS Solutions.

“It might be time for CPGs to finally make the investment that independents have hoped for,” said Frank DiPasquale, executive vice president, NGA, who cited chain retailer private-label growth and SKU reductions among the reasons.

My point is not that suppliers should abandon chains and redirect all efforts to independents. That would be foolish. However, they should review their retail customer accounts and consider whether independents deserve more weight. Their goal should not be to boost independents, but rather to ensure their own businesses have adequately diverse customer bases.