Are independent grocery stores a dead man walking? Are they no longer relevant? After all, Walmart and Amazon are gobbling up greater grocery sales, while Albertson’s and Kroger’s continue marching towards monolithic status.
The recent consolidation in the supermarket industry coupled with the intention of Walmart and Amazon to dominate grocery is a Catch-22 for consumers. On one hand, consolidation has led to lower prices for consumers. The downside to the consolidation and Walmart/Amazon shopping experience is, well, it’s not really much of a shopping experience.
For this reason, reports of independent grocery stores dying a slow, torturous death may be grossly exaggerated.
But before debunking the assertion that independent markets are no longer relevant, let’s first address some stereotypes about neighborhood markets.
- They are overpriced
- Slow to adapt to new technologies
- Don’t invest in their stores
Let’s picture a stereotypical image of an independent grocery store like this….
The store has no scanner or state of the art point of sale system. There’s not a SKU in sight. Instead, there’s price stickers on each item. A single avocado costs at least a dollar more than at Walmart. Specialty items and supplements also cost significantly more in comparison to ecommerce options and large supermarkets. Options are limited and the layout feels claustrophobic.
However, Mell argues the opposite is true. He believes most independents run highly-functioning stores that have adapted to modern times. “These operators have evolved, successfully and defensibly differentiating themselves by focusing on superior service, local knowledge and tailored offerings, often as the ethnic, produce or perimeter specialist in a market,” Mell told ProgressiveGrocer.
Our blog post, “How Supermarkets Can Compete With Amazon and Walmart” focuses on the concept of differentiation Mell alludes to, featuring Trader Joe’s as a highly-successful model.
But Trader Joe’s operates over 475 stores in the U.S. That’s approximately two-and two-thirds times more than the total number (177) of independent grocery stores in the U.S., according to Statista, for the years 2013 through 2017. Another report by Statista reveals there were over 38,000 supermarkets through 2017. If Statista’s statistics are correct that means that independent grocery stores account for five one-thousandth of one percent of the total grocery stores in the U.S. (0.005%).
What then can independent grocers do to thrive? John Derderian, president and CEO of Allegiance Retail Services/Foodtown, an advocacy group for independent grocery stores, told ProgressiveGrocer, large retailers by and large are unable to offer that strong neighborhood and community feel that independents do.
Independents, Derderian explained, are better able to institute community programs as well as “provide superior service and quality to what most of the major chains could do.”
That being said, though, independent grocers must be able to adapt to the consumers’ ever-growing need for convenience. This means that independents may also have to offer online ordering capability.
Derderian predicts online grocery ordering will grow but will reach a static number at some point. Consequently, independent grocery operators may want to save at least some center store space due to the fact that a certain percentage of top-selling items will be ordered online.
Instead, perhaps it’s best to focus on specialty items that can’t be found at your average Walmart. And keep focusing on that exemplary customer service….