August, 2007

Fruits of Thought

The Power Of Independents

For independent retailing, it is the best of times and the worst of times. In a sense, following 15 years during which Wal-Mart rolled its supercenter concept across America, crushing independents everywhere it went, all the independents standing today in America can throw a party — they are the survivors. Through the blessings of geography or the skill of their executives, they are still here.

And after a long hiatus, we are starting to hear about many independents opening new stores and doing remodels.

At the same time, many independents are horribly backward. They can’t raise or won’t spend the money needed to update their stores. They are not organized with enough managerial depth to grow, and technologically they hesitate to entrust their own department managers with Internet access — thus relegating ordering to hours on the old-fashioned telephone.

Although the industry has a range of wholesalers ready, willing and able to supply them, many independents are unwilling to commit to their suppliers and, instead, drop their regular vendors in a New York minute to grab a cheaper bid. What these opportunistic customers don’t realize is that irregular and unpredictable orders add costs to the system, and seizing these “bargains” probably raises their costs all year long.

The broader produce industry needs to pay more attention to independents. The world of independent retailing is a complicated one, and its very complexity has caused grower-shippers to neglect it. How much easier for a commodity promotion group to walk into a big chain and propose a promotion than to reach out to a multitude of different format stores from a rural IGA to a dedicated produce shop in Manhattan, from ethnic markets to a high volume Shoprite in New Jersey.

And how important it is for the broader industry to reach out. With food safety everyone’s priority, it has to be recognized that when an independent chooses to buy “outside the system” of its normal wholesaling supply chain, it may be getting substantively different product. Product that has not been vetted in the same way for the attributes of food safety.

The whole industry needs to focus on this issue because this complicated distinction — of an independent, perhaps with a franchised or licensed brand, electing to go outside of the system and buying from a guy who shows up with a truck of produce from who knows where — is bound to be lost on consumers during the next food

safety outbreak.

On the whole, though, the prospects for independent retailing are bright because retailing as a whole is switching focus. The old category management methods were focused on product — how, by eliminating one variety and adding another, we could increase total sales and profits in each category.

Now, however, the focus is shifting to understanding not just what customers buy but why they buy what they do.

Much of this is data-driven — looking at the point-of-sale system and trying to see whether the consumer is just buying an apple or is the consumer buying an apple, butter, cinnamon and a baking tray to make baked apples?

What motivates the shoppers to walk in the door? Do they have a mission because they are having a “healthy snack attack”? Knowing these things affects assortment and merchandising and, properly understood, the strategic direction of the store.

Imagine a retailer who notes a sizeable business in people searching for items for their pets and sets out to delight them by creating the only place people on a pet-focused mission want to go. The retailer reaches out to every department. What does your produce department do to delight customers looking for veggies for pet rabbits?

Then, after the consumers are drawn in based on these specific shopping experiences, the key is to blow them away with over-the-top merchandising that isn’t just pretty but evokes a response on a key functional area valued by your consumers.

Maybe the display focuses on healthy or, perhaps, on family-friendly or self-indulgent. Whatever the specifics, the idea is simple. Offer a store that delights on a few key experiences, then use effective merchandising to entice the consumers into a world — and a set of purchases — they had not realized they wanted.

This new way of thinking about the consumers is what independents will need to fight off the challenge of Wal-Mart and now, Tesco, with its new operation in the U.S.

It is almost as if the Number One and the Number Three retailers in the world have inadvertently conspired to destroy the conventional supermarket.

After all, if Wal-Mart, perhaps along with warehouse clubs, is the place consumers will go twice a month to get their deeply discounted consumer packaged goods, and if Tesco’s Fresh & Easy Neighborhood Market is the place consumers will go two or three times a week for fresh foods, when, exactly, are consumers supposed to go to the supermarket?

The big chains realize the threat, and they will “data mine” to be on top of it. But the one area independent retailers are always best is in knowing their customers.

Tesco made a big show of sending executives from the U.K. to live with Americans, much as one would study a newly discovered aboriginal tribe. All this was to help them understand the customer.

They have the right idea, but independents get to skip the process; they live with their customers every day and, often, have for generations. This is a powerful weapon and bodes well for the future. The broader produce industry should try to harness its power to boost produce sales.  pb