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Independent grocers still challenged after recession

Personalized service, fresh and local food offer can help differentiate

Independent grocers are still feeling the effects of the recession, according to a report by the U.S. Economic Research Service (ERS), but they can still find opportunities to grow.  

Independent grocers, or those with four or fewer locations, accounted for 11% of all U.S. grocery sales in 2015. However, between 2005 and 2015, the share of independent stores declined in 41% of U.S. counties while the total number of grocery stores rose 7%.

“There has been and will likely continue to be disruption and consolidation in the marketplace,” said Greg Ferrara, senior vice president of government relations and public affairs for the National Grocers Association (NGA).

While some independent grocers may have closed or been acquired, those stores are often purchased by other independent grocers, according to Ferrara, who noted that the NGA’s definition of an independent grocer encompasses more businesses than the ERS report. NGA classifies independents based on ownership (being family-owned, privately held or employee-owned) and not by size.

Several factors have impacted the independent grocery market, including growth in dollar stores, convenience stores adding more food options and population movement out of rural areas, which independent grocers tend to service, and into suburbs and cities.

“That movement, that decrease in customers, certainly has an impact on the ability to sustain stores in those areas,” Ferrara said. “That’s something that’s very real.”

Independent grocers are important particularly in the rural and lower income areas where they tend to be clustered for a couple of reasons. These areas often have fewer amenities, so the presence of independent grocers is critical to food access. Additionally, these stores provide an economic benefit to the immediate area through the jobs they offer and tax revenue.

In 2015, independent grocers and their employees generated about $14 billion in state and local taxes, and $13 billion in federal taxes, according to the ERS report. Meanwhile, studies cited in the ERS report indicate that the introduction of large retail chains in some areas—Walmart, for instance—led to the closure of some smaller businesses and a reduction in job opportunities. However, other reports have found short-term growth in job opportunities in the same scenario.

Wherever the location or whatever the business is next door, independent grocers face stiff competition. But there are areas in which independent grocers excel, and where their competitors do not, Ferrara noted. That might mean a higher level of personalized service, offering specialty and local products, having an exceptional deli or even having a smokehouse onsite.

“It’s all about differentiation,” Ferrara said. “It’s all about giving customers reason to come in.”

There is also opportunity in catering to Hispanic consumers, who may be more inclined to shop at independent grocers. According to the ERS report, a greater black and Hispanic population in a county correlates to more independent stores.

Hispanic consumers spend more of their income on food versus other consumer groups, and they gravitate toward fresh, unprocessed foods, according to an NGA blog published in April. And in a study by NGA and Nielsen published in February, surveyed consumers said independent grocers were better at offering locally grown produce and other goods, high-quality fruits and vegetables and a good selection of ethnic foods than bigger national chains.

Going forward, Ferrara said more NGA members are getting into tech, especially e-commerce through click-and-collect or delivery. Independent grocers may also have an advantage there because consumers tend to want to know who is delivering their groceries, he said.

Engaging customers in the store is also becoming more important, and operators are doing that with in-store apps, beacons and personalized offers based on shopping habits.

“That’s really where the future is going,” Ferrara said.

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