BUTLER, Pa. — Independent operators must be able to compete on a level playing field with the industry's largest players to keep diversity alive in the marketplace, said Carole Bitter, chairwoman of Harold Friedman Inc., a seven-store independent based here, and of the National Grocers Association, Arlington, Va.
“Independent operators have a wonderful opportunity to grow — as long as the playing field is level,” she said. “The vast majority of companies in our industry are independent, privately owned businesses, [and] they do a great job of providing diversity and variety to the consumer and are a source of significant job and economic growth.”
Suppliers are beginning to recognize the independent sector can be a valuable business ally, Bitter added. “[They're] rediscovering that to invest too much business in just a few accounts is a risky, shortsighted business strategy.”
As for legislative issues impacting independents, obtaining permanent repeal of the estate tax continues to be an insurmountable hurdle now with a Democrat-controlled Congress.
Bitter doesn't expect the new Congress to vote in favor of repealing the estate tax — what NGA members refer to as the “death tax” — “[because] repeal didn't happen in a Republican Congress, and it's unlikely to occur under the new Congress.”
She said she expects the new Congress to boost minimum wages, “which will create some food inflation, as every job ranking will get an appropriate boost in wage rates.”
According to Bitter, the biggest benefit of NGA membership to her company over the last few years has been attendance at supercenter share group meetings, which she said have probably “done more to help independents survive than most other recent NGA offerings.”
At all levels of the industry, Bitter added, supercenters have “changed our world.”
To combat their effectiveness, Bitter suggested independents make their stores more “shopper-friendly” by offering meat cut to order, a broad assortment of quality produce, personalized deli and bakery departments, strong community orientations “and stores that are easier to navigate from parking lot through checkout.”
The text of the interview:
SN: How has NGA been effective over the last 25 years in helping independent retailers grow and prosper?
BITTER: NGA continues to be the exclusive advocate for the independent operator, which includes being a proponent for a level playing field and for a diversified marketplace that provides customers with variety in terms of products, services, quality and value.
NGA has helped the industry grow and prosper by helping us compete against supercenters and other power buyers; by attempting to repeal the estate tax; by creating a level playing field; by reinventing the supermarket as a lifestyle destination center; by helping us win back Center Store sales; by recruiting and retaining the next generation of quality managers and entrepreneurs; by helping us see that retailers and wholesalers must operate more as a virtual chain in collaboration with their trading partners; by allowing us to take full advantage of all available technology; by creating new synergies that achieve more competitive economies of scale; and by introducing us to ways to access competitive growth capital.
SN: How has the association enabled independents to survive in general and, more specifically, in competition with Wal-Mart?
BITTER: Every independent operator is different, and each is successful in his own unique way. Therefore, each company takes different tools from NGA and uses information and ideas from workshops, research, conferences, share groups and mailings in its own ways.
What our company has gotten from NGA has varied over the past 25 years as the competitive and regulatory climate has changed. In the last couple of years, for example, we have gotten tremendous help from supercenter share group meetings. I suspect these meetings have done more to help independents survive than most other recent NGA offerings. They are popular, helpful and very well attended.
SN: What industry trends have impacted independents the most over the last 25 years, and what trends do you see coming?
BITTER: The industry trend that has impacted independents most is the same one that has impacted larger conventional supermarket companies most — the growth of the supercenter. It has changed our world.
The concept has been difficult for all traditional grocers to compete against because our “legacy” costs create higher costs of doing business. That translates into higher costs for labor and higher costs for benefits while our food-to-nonfood ratio generates lower gross margins. Price is an enormous sales driver, and we don't have extensive nonfoods to subsidize food the way Wal-Mart does.
That said, we need to work with what we have and turn our advantages into reasons why our customers would want to shop us as an alternative — meat cut to order by real in-store butchers, produce variety and quality, unique personalized deli and bakery departments, catering, gift baskets, a strong community orientation and stores that are easier to navigate from parking lot through checkout. We refer to our stores as “shopper-friendly” in size.
A major trend I foresee that will impact independents and chain stores in the immediate future will be the consolidation of various dollar store companies. There's simply too much retail square footage represented by this type of store. The surviving companies could get stronger as consolidation occurs, but as smaller dollar stores in rural and semi-rural communities close or consolidate, the opportunities for independent operators in those communities grow. Most wholesalers and several individual companies now offer a full range of dollar store merchandise, and most independents take advantage of those offerings and merchandise them within their stores.
SN: As NGA chairwoman, what are your goals?
BITTER: My most important goals are to implement NGA's new strategic plan; to grow membership among all independent community-focused retailers, especially regional and private or family-owned companies; and, in view of the new political climate, to gain strong bipartisan support for private and family-owned businesses.
It is only when an independent grocer becomes a member of NGA and realizes the wide variety of help NGA offers — in terms of merchandising, advertising, research, tax and regulatory assistance, plus conferences, workshops and seminars — that a new member wonders why he or she didn't join years earlier.
We'll be celebrating NGA's 25th anniversary Jan. 26 through Feb. 1 at the 2007 NGA Annual Convention and Supermarket Synergy Showcase at Caesar's Palace in Las Vegas, and the value members will receive is absolutely amazing — real take-home value.
During my first six months as NGA chairwoman, some of the issues I've been personally following have involved the work the Merchants Payment Coalition has done on debit and credit card fees and the efforts of Congress on death tax reform and repeal.
As for NGA's legislative agenda, the change in power in the House and Senate will affect that agenda. Most independent operators are family-owned businesses, and death tax reform and repeal is much more critical to them than for a publicly listed company. Death taxes could literally force an independently owned company to liquidate to pay “death” taxes. But death tax repeal didn't happen in a Republican Congress, and it's unlikely to occur under the new Congress.
In a Congress controlled by Democrats, it will probably be more difficult for Wal-Mart and other companies to enter banking through ILC's [industrial loan companies]. In addition, we will most likely see increases in the minimum wage law — a competitive neutral — but that will create some food inflation, as every job ranking will get an appropriate boost or step-up in wage rates.
SN: Independents have been written off many times in the past. What do you see as the long-term prospects for independent operators?
BITTER: Independent operators have a wonderful opportunity to grow as long as the playing field is level. Remember, the vast majority of companies in our industry are independent, privately owned businesses. They do a great job of providing diversity and variety to the consumer and are a source of significant job and economic growth.
