ARLINGTON, Va. — The financial gap between the top tier of independent operators and those closer to the middle is widening, according to the 2011 Independent Grocers Financial Survey from the National Grocers Association here.
The study — conducted by FMS Solutions, Baltimore — indicated operating profits margins for the top 25% of independents was 4.07% this year, compared with the median level of 1.08%.
That compares with margins of 4.10% for the top operators last year, compared with a median of 1.68% — widening the gap by 57 basis points this year compared with a year ago.
The 2011 survey also showed overall gross margins declining 60 basis points to 25.68%, compared with 26.28% in the 2010 survey — a result of overall economic pressures, Robert Graybill, FMS president, pointed out.
Price pressures resulting from the weak economy, along with fierce competition, will continue to push margins down, he said.
“The marketplace is becoming for many a Darwinistic environment, [with] many operators either growing or disappearing,” Graybill said. “Consumers are forcing operators to function at peak efficiency so that pricing will remain reasonable in their eyes.
“A sloppy operator who relies on price to offset high shrink won't survive, nor will companies that are overloaded with administrative costs that don't contribute to serving the customer, as the customer can no longer afford to pay for those costs with higher prices,” Graybill said.
According to Peter Larkin, president and chief executive officer of NGA, independents who have a good understanding of the characteristics of best-in-class retailers and relevant industry benchmarks can compete more effectively.
“Our industry has managed to push through one of the worst economic downturns in recent history and will continue to do so,” he said.