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How Contrarian Thinking Still Fuels Independent Growth

How Contrarian Thinking Still Fuels Independent Growth

By David Orgel

If the entire food industry finds consensus on a topic, you can be sure there’s an independent retailer out there who strongly disagrees, and probably has a good point.

Not all independents are contrarians. But because they own their own businesses or wear many hats, independents tend to exhibit healthy skepticism and challenge prevailing wisdom. That’s usually a positive for their companies and the industry.

This trend was again evident at the recent National Grocers Association Convention in Las Vegas. I heard speaker after speaker question industry practices and the advice of trading partners. Here are a few examples, some of which were reported in last week’s SN.

How many times have you heard that supermarkets are shrinking grocery aisles in favor of perishables expansion? More than you can count. Yet not all see perishables as supermarkets’ future. Dennis Lindsay, chief financial officer of Nugget Market, Woodland, Calif., said fresh foods may create an image and draw shoppers, but “grocery sales pay the rent.” His nine-store operation last year rose to the challenge of expanding grocery deals and promotions, including the use of end-aisle displays. The result was quite favorable: Grocery sales and margins each jumped 0.5%.

Most observers agree there are too many new product introductions, so surely independent retailers want the items edited by manufacturers and wholesalers in advance, correct? Well, it turns out that some retailers want to do the sifting themselves, even though suppliers and distributors prefer to do it for them. “If 1,000 new products come out this week, I want to look at them, because my competitors are looking at them,” said Ron Rehkopf, president and chief executive officer of Rehkopf Family Food Stores, Texarkana, Texas.

More than a few retailers have switched to selective everyday-low-price strategies to battle Wal-Mart Stores and other discounters. Typically these retailers call attention to the new item prices through signage. Not so independent retailer Doc’s Country Mart, Bixby, Okla. That retailer didn’t broadcast the 200 SKUs to shoppers with shelf signage and even bucked the advice of its own wholesaler to create special shelf tags. What was behind this stance? Jim Brown, company president and CEO, was worried that such a move would lead shoppers to hoard items and stock up — which goes against the point of everyday low pricing. Brown’s strategy worked and the result was “remarkable,” he said. Customers got the message quickly enough despite the lack of hoopla, leading to improvements in sales and gross profits.

Everyone knows that independents are willing to purchase subpar real estate because chains get the better offers. Right? Not so fast. Nugget’s Lindsay said he used to get calls from developers that went something like this: “We checked with Safeway, Raley’s and Albertsons, and they aren’t interested in this site, so we think it would be a great site for a Nugget’s.” Yet Lindsay is sticking to his guns about the need to obtain the best sites. “For us, it must be an ‘A’ site or we won’t move forward,” he said.