Fruits of Thought
The Independent Opportunity
There was a time, not too long ago, when America had no national supermarket chains. Wal-Mart’s rollout across America changed that. Beyond Wal-Mart, though, the fragmentation of retailing into specialized types clearly opened the door for national chains of all types — Costco as a national warehouse club chain; Whole Foods as a national health retailer; Trader Joe’s as a national epicurean play; Aldi as a national discounter.
In some cases, these stores don’t have the footprint that a true national classification would require, but it seems to be the way the market is going.
These chains have lots of advantages in expertise, capital, procurement, etc., but for every action there is a reaction, and the homogenization of national chains will create an umbrella in which local retailing can thrive. This can be a farmers market, a CSA, an independent supermarket chain, a single-unit operator and a panoply of ethnic specialists.
Indeed this issue’s cover story, which deals with the renaissance of independents, profiles this trend. But we would actually go a step further. Most of the experts quoted in the article urge independents to avoid trying to price against the big chains, pointing out that these giants can buy in bulk, and it will be difficult for independents to beat the chains at this game. That is probably sound advice for groceries, but it is not true at all in fresh produce.
You can’t say that Wal-Mart, Costco, Kroger, Safeway/
Albertson’s/Publix, etc., are all buying below the market — they are the market.
Some independent retailers will become part of a co-op, such as Wakefern, or they will team up with large wholesalers, such as Supervalu or C&S, and they can buy as cheaply as big retailers. Lots of ethnic retailers buy off local terminal markets, and by being flexible, they can often buy under the FOB plus freight.
These ethnic independents are especially dangerous to competitors in fresh produce. They often have a sharp focus on one ethnicity as a clientele, so the groceries are often brands that wouldn’t appeal to a typical shopper, but the produce can appeal to anyone.
Independents of all sorts can be quicker to change procurement strategies, flexible when integrating rapidly changing procurement strategies with merchandising and marketing, and better at acquiring that “local” halo than national chains. Yet while the future of independent retailing is bright, the produce industry is doing a rather poor job of supporting this customer segment — which is another way of saying the produce industry is not taking advantage of the independent opportunity.
On the first week in December, many in the industry gather in Manhattan for The New York Produce Show and Conference. One of the shocking things that happens there is that shippers talk to retailers; the shipper finds out that the retailer has been selling their produce for years, and the shipper never knew it!
The shippers couldn’t service these accounts directly, and the retailers have good reasons for buying from service wholesalers or terminal markets, but these independents could benefit from promotional support. Indeed, these players will actually use the Point-of-Purchase material that most chains simply throw away.
Yet the same producers and associations that offer large chains substantial promotional assistance just ignore the independent sector. The reasons are clear:
These things are all true, but they don’t change the fact that there is an enormous opportunity, and the very difficulty of reaching out to independents creates a larger prize for those who dare to make a difference in this field.
How to coordinate with wholesalers and distributors; how to reach out to retailers with diverse store sizes and customer types . . . none of this will be easy. But as independents grow, and as shippers find their options with national retail chains are more limited, there will be a natural meeting of the minds.
The retailers want to sell more produce, the wholesalers and distributors want to sell more produce, and the grower/shippers want to sell more produce. The opportunities to creatively do new things are constrained at giant national retailers, so those grower/shippers looking for opportunity will gravitate to the independent sector.
It is very hard for a big chain to compete with a great independent, so it is in the interest of the produce trade to keep a diverse customer base by helping independents grow. pb