By Jessica Dumont
If there is one thing that Kevin Davis has learned in his more than 20 years leading Bristol Farms, it’s that finding a niche has helped the independent grocery company out-execute major chains.
Davis, formerly President & CEO of Bristol Farms and now
“If you succeed in differentiating your store to your customers so that they understand why they’re shopping there, and they get a different quality or service – something that’s unique and different, you will be a survivor,” Davis says. “If you’re trying to beat the big guys at their game, you have a hard road. The more unique, different and special you are, the longer you can survive and the more you can do.”
With a product assortment that is local, fresh and specially curated, Bristol Farms stands out as one of the most popular stores in Southern California and one of the most successful independent grocers in the state. But even as it thrives, there are still a number of challenges in operating an independent grocery store in today’s evolving industry.
As most independent operators are all too aware, business has changed dramatically in recent years, especially with the rise of e-commerce and the continued growth of giants like Amazon and Walmart and newcomers like Aldi. This has, without question, caused new challenges and created more competition for independent grocers. But it has also created an opportunity for them to stand out and offer something that shoppers cannot get from retail behemoths or international grocery chains.
“This industry has always experienced a lot of change,” says retail food industry consultant Michael Sansolo.
“The competitive landscape keeps changing, and the consumers’ needs and wants keep changing. The difference today is the enormity of the change and the speed of the change.”
Fortunately, independent grocers have the flexibility to adapt well and respond quickly to change, according to Peter Larkin, president of the National Grocers Association (NGA), which represents more than 1,400 retail members and about 8,000 storefronts across the country.
“One word I would use to describe their advantage is speed. I like to say that the independent operators that I know and have worked with over the years can make decisions quickly and turn on a dime,” Larkin says.
Regardless of the change, independent grocery stores can make adjustments or sweeping overhauls without going through a bureaucracy, Larkin says, and this will help them get ahead of their competitors much faster.
Kevin Coupe, the “Content Guy” for MorningNewsBeat.com, agrees. He says there are some great independent retailers who are independent precisely because they know they need to be competitive, and yet they’ve decided they’re going to play their own game. “The worst thing you can do is play somebody else’s game and play by their rules,” Coupe says.
There are independent grocers that stand out to Coupe because they have a specific value proposition, such as Bristol Farms and Gelson’s Markets in Southern California, Mollie Stone’s Markets in the San Francisco Bay Area and New Seasons Market in the Pacific Northwest. But these retailers also understand that they may need to make changes from time to time to create something completely different.
Making E-Commerce Work
Perhaps the most triggering buzzword today when it comes to grocery is e-commerce. According to research from Nielsen and the Food Marketing Institute, 70 percent of consumers will be grocery shopping online within the next five to seven years.
“Our industry has always relied on technology to help us be more efficient and more cost-effective,” Larkin says. “Now we have technology that is also consumer-facing. Our members are looking at what direction they should take regarding e-commerce, as well as other technology that will help them be more efficient and effective in driving costs down.”
Larkin says a big part of the e-commerce challenge is the competing technologies that exist, which make it difficult for independent retailers to figure out which one they need and how much they should invest.
Coupe says independent grocers have to figure e-commerce out, but they also have to resist simply turning to a company like Instacart to fulfill their e-commerce needs.
“They get all your shopper data and they’ll compete with you,” Coupe says. Instead, he encourages companies to be diligent in finding a way to do e-commerce that works for them.
Harmons, a fourth-generation family-owned grocery business based in Salt Lake City, Utah, is one company that has figured out an e-commerce format that is tailored to its needs and customers. Harmons just marked one year of e-commerce offerings for several of its 19 stores.
“That was an interesting challenge for us because we grew up as a brick-and-mortar business,” says Lindee Nance, vice president of marketing for Harmons. “Because we’re family-owned and not as large as these other chains, it took us a while [to launch e-commerce].”
Harmons’ e-commerce service is called eShop, and it features about 33,000 items that customers can purchase online. Once a customer places an order, a personal shopper, employed by Harmons, will fulfill the order in store and communicate with customers by text as needed. Personal shoppers will use text and picture messages to ask the customer about replacements or substitutions for out-of-stock items as well as preferences – such as how ripe their bananas should be.
eShop orders can be picked up in store, and Nance says Harmons recently partnered with Shipt to begin offering last-mile delivery. Harmons has chosen not to hire Shipt for personal shopping and instead plans to keep that feature in-house.
“What makes our online service unique is the customer service aspect, and we want to maintain that, so we didn’t want to outsource personal shopping to Shipt,” Nance says.
Customers have responded very well to Harmons’ e-commerce offerings, and last year Harmons was able to achieve its goal of ending the year with 3 percent of eShop stores’ total sales coming from online orders. Customers who use the service still do about 60 percent of their shopping in-store, Nance says, but they use the online service for repeat purchases and “stock-up” shopping trips.
With the rise of e-commerce, the traditional strengths of retail are becoming less important, Sansolo says. “Things like location, which used to be so important, don’t matter as much. We can order anything from where we are. These traditional strengths of retail are challenging the industry to find new ways of appealing to especially younger consumers who can have things done for them.”
Standing Out from Competition
Another significant challenge for independent operators today is increased competition, which changes daily. Larkin says that is not just the number of competitors that independent grocers face, but the nature of the competition and how it has changed over the years.
“It used to be that supermarket operators would name another supermarket as their competition. Now, you have so many different places that are selling food and grocery items that it’s more difficult to pinpoint who your competitors are,” Larkin says. For example, big-box discounters like Walmart and Target are now in the grocery business, as well as dollar stores and convenience stores.
“There are more competitors, and independents have a hard time determining who their fiercest competitors are and how they need to change to keep their customers,” Larkin says.
For Harmons, which was founded as a fruit stand in 1932, competition drove the company to reinvent itself several years ago when Walmart came to Utah for the first time. In the early 2000s, this led the company to move from price competition to fresher food offerings, which were not widely available at other grocery chains.
“We started out as a price operator in Utah, but in order to stay in business we’ve had to shift our focus,” Nance says. “You have to decide who you’re going to be and stay true to it, and that’s really been an effective approach for us. It can be risky to move away from the price message, but if we’d tried to compete on that we’d have raced to the bottom.”
Since then, Harmons has stood out largely for its fresh food and local offerings – including artisan bread baked in stores and fresh meal solutions, as well as a lineup of products shoppers won’t find in other supermarkets nearby, such as Kroger or Whole Foods, which Nance says are Harmons’ closest competitors. Today, Harmons carries more than 2,300 local-to-Utah products.
Based in Los Angeles County, Bristol Farms has also pursued fresh foods and unique product offerings to stand out from larger grocery chains. Bristol Farms was founded by two partners in 1982 as a specialty butcher shop and grocery store. Today the company operates 26 stores under three banners including Bristol Farms, Lazy Acres Natural Food stores and the recently acquired Metropolitan Markets, which operates in Seattle, Washington. Until recently, the company was owned by a private equity firm, but due to an unsolicited offer from Korean retail conglomerate Shinsegae – which owns retail giant E-mart in South Korea – the company has changed hands and will now operate as a wholly owned subsidiary of E-mart.
Notwithstanding its success that attracted a massive international buyer, Bristol Farms is among the most popular and high-performing independent grocers in California.
The average Bristol Farms store is about 29,000 square feet, and while it offers mainstream brands and goods that shoppers recognize – such as French’s mustard and Bush’s baked beans – Davis says the stores’ unique specialty items are its focus. The banner also has a central kitchen where it makes more than 600 fresh items and ships them to stores.
“We’re not commodity-driven,” Davis says. “We’re specialty, unique, fresh, organic and natural-foods driven. Our foodservice department is bigger than our grocery department.”
Bristol Farms and Harmons both exemplify how independent operators can take advantage of their opportunities to stand out from larger grocery chains by offering something that others cannot do as easily, or as well.
“A lot of independents’ ability to focus on customer service, to know their customers, to curate local products in their store better than Amazon and Walmart can do, or even Kroger or Safeway or Albertsons – that’s where they have the advantage,” says Larkin. “It’s not keeping up with those companies. It’s understanding and responding to the needs of their own consumers.”
The Resource Challenge
For most independent grocery businesses, resources – both human and financial – are ever-present challenges, and making money and resources work takes constant inventive thinking.
“It’s really hard to compete today in this environment when Amazon has never-ending supply of money,” Coupe says. “Margins are tight, and people are getting squeezed from the bottom and the top. It’s very difficult to find the resources to compete.” He suggests that independent grocers keep their prices sharp and do what they have to make their stores compelling, relevant and resonant to their shoppers.
Nance with Harmons says the bottom line is always a challenge, especially as the cost of goods continues to go up. At Harmons, that means the team has to be creative to make sure the margins are right and to keep business running smoothly – but also to stay true to the company’s core values.
“As costs increase, we want to be competitive in the market with our prices – but we also want to offer competitive compensation and care for our associates. It’s one of our main values,” Nance says.
Davis notes that Bristol Farms’ major challenge is finding and retaining employees. California’s minimum wage laws have created a labor market where employees have a shorter term view of their employment, rather than entering the grocery business with a career orientation.
“You have to look long term at who you’re hiring and you have to train and develop them so that they can see their path to success, so that they can see their growth beyond their starting job,” Davis says. To help with this, Bristol Farms will pay half of an employee’s tuition at a community college for any employee who wants to complete the Western Association of Food Chains’ retail management certificate program, an accredited eight-course program available at many California community colleges.
As for e-commerce, Davis doesn’t view it as much of an issue. “We offer home delivery and we always have,” Davis says. “It is growing and the competition, like anything else, is growing with Amazon and Whole Foods and everyone focusing more on it. But it’s a subset of our business. It’s not the majority of our business, and it never will be.”
How to Win as an Independent Grocer
Despite the ups and downs that many independent grocery companies face, there is plenty of room for independents to operate alongside major supermarket chains. But independents may have to work a little harder and invest a little smarter to stand out.
There is a fear in the industry that the traditional grocer is becoming irrelevant to the shopper and the future, Sansolo says. To remain relevant today, retailers can no longer rest on their old strengths. Rather, they need to focus on delivering an experience for shoppers, being resourceful and activating allies.
“How do you build a shopping experience that convinces people to get up, stop using Alexa or Siri, and come to the store? Independent operators are going to need to become much more creative, more flexible,” Sansolo says. That includes having a good supply chain, good products and well-trained people, but more than that, retailers need to create excitement and they need to create an experience, he says.
One way Harmons draws people into stores is through its cooking schools, where customers can sign up for a cooking class focused on a special cuisine.
“These are fully-loaded culinary programs that we have staffed with full-time chefs and sous chefs, and our customers love it,” Nance says. “They love to come in and learn how to cook something they wouldn’t normally try.”
Larkin says he is “bullish” on the future of independents, especially companies in California like Cardiff Seaside Market, Mollie Stone’s, Bristol Farms and Draeger’s Market who really understand what their customers want. That doesn’t diminish the fact that there is tough competition, and some will go out of business, but Larkin says many independents have invested and are very successful. And the demise of some small grocery stores may benefit stronger competitors.
“There are many independents buying other independents. They are growing because some of their colleagues are getting out,” Larkin says.
Another winning strategy, according to Coupe, is for grocers to offer click-and-collect as part of their e-commerce capabilities. “I would always encourage small retailers to do click-and-collect before they do delivery – customers want it more,” Coupe says.
This may be a daunting era to operate a grocery business, no matter what size or ownership structure a company has, but the future is bright for independent operators. Harmons, for example, is planning to open its 20th location in 2020, and is always scouting for more locations due to customer demand.
“With every store we build, we try to get just a little bit better. Our team is constantly look at processes – we always say we’re the best at getting better. We don’t want to say we’re the best and rest on our laurels,” Nance says.
For those who are committed to their success and their customers, there are plenty of ways to stand out and to attract shoppers who want something different, memorable and local. It will take hard work and innovation, but as most independent operators know, that’s just par for the course.
This in-depth report originally appeared in the 2019, Issue 1 of California Grocer magazine. Read more from this issue.