3 Keys to Local and Regional Grocers’ Survival
Editor’s note: This article is the second in a series. Read Part 1.
For local and regional supermarket operators, achieving success requires striking the right balance between the demands of a rapidly evolving consumer base and financial necessity in a competitive environment full of ongoing threats from national chains, specialty stores, hard discounters and ecommerce retailers. In the best of times, this is a daunting task and — especially for some local independents and regional supermarket chains — these aren’t the best of times.
Localization, or the precise tailoring of assortment by store, or by cluster, based on customer demand, is an essential first step toward differentiating your stores, attracting and retaining shoppers, and meeting demanding margin goals, and it trades on your deep understanding of the community that you serve.
Localization requires two modern management tools to be effective, however: 1) analytics that provide input into market conditions, consumer behavior and store performance, and 2) the ability of the organization to execute in an agile manner. Local and regional operations that can respond to market conditions with agility don’t need to seek approval from multiple layers of management, giving them an inherent edge over national-chain competitors.
But without good customer and performance analytics, it’s all but impossible to get your assortment mix right. Building robust analytical decision models — either with partners or on your own — to discover that mix before your competition does, and execute against it in-store, is a crucial differentiator. While local and regional grocers are ostensibly more nimble and know the communities in which they operate better than national players, this conceptual advantage didn’t translate into success when up against consolidating national grocers 40 years ago, nor did it stop the rapid growth of Walmart 20 years ago.
The difference now is that, with so many partners and vendors offering affordable analytics tools and services, regional operators and even independents with several stores can access the data and information they need to generate the insights necessary to make great assortment choices. That said, analytics alone aren’t enough to guarantee success.
Retailers have to use those analytical outputs to create operating models that allow them to become more nimble, to target consumer segments more successfully (and even segments within those segments), and to identify and mount effective competitive responses to real-time changes in their local or regional market.
In today’s hypercompetitive market, local and regional grocers’ organizational operating model and merchandising strategies must align on finding the right mix of established national and local or regional brands, emerging brands, and own brands, especially in the fresh categories — produce, deli, bakery, foodservice, meal kits, and so on — that best satisfy local shoppers on a variety of levels. Even tried-and-true brands can appear to be new to your customers, particularly if these brands have had limited distribution earlier in their life cycles.
Balancing incumbent and challenger brands — national and local, own-label or another label — to achieve ideal composite margin yield, attract a loyal and sustainable shopper base, and give you price flexibility is simply good business.
But balanced assortment is the cornerstone of a larger, total store-brand differentiation strategy that creates a clear identity for your store or stores in the communities in which they operate. It also lets customers know who you are, and that you know who they are and what they want. Tailoring product mix to local markets also gives you the ability to tell — and illustrate — your company’s unique story, allowing consumers to identify and relate to your stores in emotional, not just transactional, ways.
What other approaches enable local and regional grocers to compete? Two additional strategies will help. The first is an absolute and unrelenting commitment to offering top-quality products and establishing store-level metrics and operational policies that make sure that everything the customer sees, smells and/or tastes is as fresh and high-quality as it can be, particularly if it has your store’s name attached to it. This has been the cornerstone of successful regional operations as diverse as H-E-B, Wegmans and Meijer.
The second approach involves optimizing your presentation, merchandising and storytelling — illustrating and reinforcing the unique role your stores play in the communities that they serve. For example, if you operate in a region that boasts a lot of local farmers — perhaps even urban farmers — you can showcase locally sourced products and local producers by stocking their items and displaying them alongside other perishables in a way that creates a “farmers’ market” feel.
Localization is also critical when it comes to differentiating through fresh and foodservice offerings that meet the unique needs and tastes of your local community. Given the scale of their operations, by successfully leveraging analytics, regional grocers are also in the best position to authentically offer favorite local and regional prepared foods.
If the history of supermarketing teaches us anything, it’s that local and regional grocers are capable of successfully addressing any competitive challenge, provided that they focus on their assets — like their intimate knowledge of, and connections to, the communities they serve — while embracing and integrating the latest that technology has to offer.