David Smith, president and CEO of Associated Wholesale Grocers, shared seven big opportunities he sees for independent grocery stores, at a recent lunch hosted by the Illinois Food Retailers Association and Grocery Merchandising Association.
Smith likened AWG to a three-legged stool – members, vendors and teammates – with each leg providing a key to the success of the operation. In order to find success in the future, all three parts of the business need to be aware of the seven opportunities he identifies:
1. Fresh or Fail
Fresh categories are on the rise while center store categories are declining. AWG has been surveying consumers for 25 years about what they look for in a primary grocery store and always ranking in first or second is high quality fruits and vegetables and high quality meats.
“It’s fresh that drives the business. It's fresh that drives selecting where they’re going shop. It’s fresh that makes a difference when picking the store,” Smith said.
2. Get Out of the Middle of the Road
Pick your direction - you need to decide if you’re going to be a discount format or you’re going to be a specialty store or an ethnic-oriented option.
“Quit trying to be all things to all people because consumers are shifting away from that middle of the road store. Become very, very selective, become more precise, and choose your spot,” Smith noted.
He suggested looking to the United Kingdom for guidance as the market there has already experienced what the United States is just beginning to see. Market share for conventional supermarkets is down across the board while convenience, high-end and hard-discount formats are seeing an uptick in market share.
3. Cut Operating Cost Components to Fund Strategic Investments
Independent grocers and manufacturers alike are going to have to change the way we do business and “it’s critically important as we go forward that we fund those changes that we make through cutting costs,” Smith said. The funds can’t be raised through price increases because that will drive sales down, so cost cutting is the only option. Focus on “found” money, he suggested, citing an example of audits on property taxes to help save money.
4. Build Partnerships for Sustainability
People don’t have to do business with you, almost everyone has options, so make sure your company is a good partner to help grow the entire industry.
“As a company, AWG, it is a goal of ours to make sure that we take friction out of our relationship with our vendors. We take friction out of relationship with our members. We can take friction out, it reduces costs, it gives them a reason to want to do business,” Smith said. “Let’s find a way where we can win together, and it’s so important. It's so valuable in the long run.”
5. OmniChannel Your Business
Your brand may the best one ever, but you have to give consumers options on how to shop your independent grocery stores.
“Find a way to provide omnichannel capabilities where customers can buy how they want to when they want to,” Smith noted. “Consumers are not begging for you to do it and to lose money and do something stupid. They want to continue to shop where they want to shop. They want to continue to have access to your brand, but they want to also be able to do what their lifestyle demands. They need those options, and technology is there. It's to make things easier and to help them.”
6. Attract and Retain Talent
With the current unemployment rates, it is difficult to find and keep talented employees in the store. “We have to be extremely creative. We have to have a different mindset,” Smith said.
“The notion that if this person doesn't make it, then we've got 10 more that would like to have the job, those days are over. We have to take the ones we have, and we have to continue to work with them, make them feel engaged in the business, feel appreciated, give them the tools and the skills and the training to be successful. We have to raise our game.”
7. Be Faster & Nimbler
Smith suggested that independent grocers think about their business as a foot race. The tactile elements of grocery shopping, like smelling or squeezing a peach, can’t be replicated with ecommerce, and consumers will probably experience problems with your delivery.
The race is between grocery and technology. Grocery has the leg up with food and food safety issues and technology is trying to learn the grocery business.
“We don't have to outrun the bear. We just have to outrun our buddy,” Smith noted. “I do believe in our grocers. I see how nimble they are. They can turn on a dime. Our independent members, they don't have to have a board meeting. They listen to what their customers say they want. They can change. I see it every day. I believe in them. I believe that they are the best that they can be, and I believe that they are going to be extremely successful.”