Last updated on February 17th, 2014 at 10:30 am
During the 2014 NGA Show in Las Vegas Feb. 9-12, National Grocers Association (NGA) President and CEO Peter Larkin asked the outgoing Chairman Joe Sheridan, president and COO of Wakefern Food Corp., and incoming Chairman Rich Neimann Jr., president and CEO of Niemann Foods, about what it takes to be a successful independent in today’s market—and what NGA does to help members navigate the marketplace.
“As NGA, we are a group of self-interested individuals that come together to share a common cause,” Sheridan said during the opening session on Feb. 9.
That common cause, Sheridan said, is individual family businesses.
Larkin underscored the importance of these individual, family-owned businesses in figures found in the Economic Impact study, which The Shelby Report helped sponsor. The study found that independent grocers, often thought of as small, mom-and-pop businesses, see more than $130 billion in sales across the U.S.
“You are a vital force in this industry; you should be very proud of it. Because your industry—our industry—is a vital force, we feel that NGA needs to be as well,” Larkin said.
According to Sheridan, simply participating in the NGA can open doors, since the organization—and the recent show—is host to not just grocers, but wholesalers and vendors as well. The NGA seeks to open channels of communication between links in the supply chain; while independents may not always get to speak with suppliers directly, the NGA Show puts them in the same room.
In addition to putting them in the same room, Larkin noted that NGA has a new program that hosts one-on-one meetings to connect retailers with wholesalers and suppliers. When it was launched in Chicago recently, the meetings sold out. NGA organized 230 individual meetings in a day and a half and plans to host the event again in October.
Larkin also described the measures NGA is taking to improve its services, including its new Member Value Proposition (MVP) program. The MVP program has identified eight initiatives that can build value and ROI. NGA is intent on being the “voice of the independent grocer” as well and has ramped up its efforts to make that voice heard in a government forum.
“We’ve added more staff, we’ve added more resources, but the most important thing we have done is gotten our members involved,” said Larkin, adding that last year NGA forwarded more than 2,000 member letters to Congress in relation to action alerts.
Though often independent retailers may seem like they’re behind the times, NGA is working to ensure they stay on top of technology, particularly e-commerce.
Niemann noted that Niemann Foods stores are piloting a program that can deliver specific deals to customers via mobile app.
“We have an app…(through which) we can connect to where our customers are in the stores—a location function with beacons in the store,” Niemann said. “We can deliver specific deals to specific customers, so it’s really exciting to see where this might go.”
Niemann added that NGA is working to make retailers able to locate customers in the store and send notifications based on their location inside the store, meaning a coupon for bread might become available as the customer looks at the selection of baked goods.
“A lot of it is in place now and working,” Niemann said.
As for the looming threat of e-commerce retailers, Sheridan said he isn’t worried.
“There’s a great scare going on that brick-and-mortar’s not going to be relevant in the future,” he said. “I think that’s a false premise, but I do think e-commerce is going to be a disruptor, and I think it’s going to change the way brick-and-mortar works.”
At Wakefern, Sheridan said the company measures both on-premise and e-commerce volume, and there has been a “migration of certain categories.” Although independents typically worry that they don’t have the breadth of resources and manpower some of the national chains boast, Sheridan said the size and adaptability of independents are important points to take advantage of in the shifting marketplace.
“I think those that are closest to the business, like independent retailers, who see those dynamics occur…can adapt and move a little bit faster,” said Sheridan, noting that, of the 50 families operating at Wakefern, “some families (react) quicker than others, but they all get the concept, and as they embrace it, they watch their communities react to it, they’ll move a little bit faster.”
Again, the NGA Show gave retailers a chance to compare their experiences with others and engage in a conversation about e-commerce, something Sheridan said they shouldn’t take lightly.
“I guarantee the chains are not having that dialogue,” he said.
Neither Niemann nor Sheridan sounded very concerned about competition, each noting that it’s always been there, and it will always be a factor, whether it’s in the form of e-commerce or dollar stores.
“There’s always been a threat,” Sheridan said. “We’re a ‘burning bridge’ type of world in retail. Everyone in this room has survived Walmart; Walmart was going to knock us all out, but we cracked that code. I think what we continue to do is adapt and transform and crack the code.
“The one thing that (those in) this room will have to do is adapt and move faster. When Walmart was the big deal or any other brick-and-mortar was the big deal, they had to build a store. There was a year or two to get ready for each competitive threat. In the digital world, the threat comes and it’s immediate, and you might not even see it.”
Niemann agreed, saying, “In our industry, there’s always—we’ll call it the boogyman out there—it was Walmart before, and it was restaurants for a while and dollar stores now and e-commerce. The thing about it is…it’s about two kinds of strategic things.”
According to Niemann, those two things are branding and having a working sales organization. For most independents, branding isn’t the issue; they typically understand what their brand means and can offer consumers.
“The key about the brand is you’ve really got to make sure your brand evolves,” he said, noting that relevance is key.
Unlike in decades past, Niemann said, a supermarket has to do more than have a great location with great products and fully stocked shelves. It has to be a functioning sales organization.
“You’ve got to build a sales organization from the beginning to the end, and they have to understand what the idea is and what you’re trying to accomplish,” Niemann said, adding that if a company gets to that point, the branding becomes even clearer and simpler to evolve and stay relevant.
As far as competition goes, Sheridan summed it up: “There’s going to be pain for everyone, and it’s going to be fatal for a few. So we’re going to survive, but not everyone is.”
Independents more cautious when it comes to the economy
While Niemann and Sheridan were full of hope and conviction when discussing the state of the independent grocer, technology, maneuverability and competition, both said the economy is still a worrisome specter in the industry.
Niemann noted that while the Midwest’s unemployment dipped down to 6.6 percent, that number is misleading, since workplace engagement is lower—which means unemployment really is more than 11 percent.
“When you combine (the Affordable Care Act’s impact) with the tax increase after the first of the year with the employment tax, I think people are still struggling,” he said. “We still feel like it’s a value-driven customer base mostly.”
While the economy impacts the business, Niemann spoke most about how it affects Niemann Foods customers, adding that customers are “buying what they need, not what they want, which changes our mix.”
Unfortunately, Niemann doesn’t see that changing too quickly for his company. While he acknowledged that some facets of the customer base have recovered, “overall, we still think it’s going to be that way for a while longer.”
Sheridan shared the sentiments, particularly when accounting for recent cuts to the Supplemental Nutrition Assistance Program (SNAP, formerly food stamps). He described 2014 as a “grinding year” in which Wakefern will again be walking the line between offering value—which consumers need—and maintaining profitability.
“This is a very real environment for consumers,” Sheridan said. For Wakefern, that means “you have to look at your top line. You’ve got to look at your bottom line, and you have to be very precise in what consumers want and what they need…On top of that, I think we have to understand their issues.”
But again, Sheridan stressed that even though consumer budgets are tight, independents can offer something that big chains often fall short on: great service.
“I think the retail experience is a big driver,” he said. “I think customers need to feel a little TLC right now.”
That customer base, too, is changing as Baby Boomers age and consumers grow more and more ethnically diverse. Sheridan stressed the importance of being bilingual—and that doesn’t necessarily mean Spanish.
“I would say once you get past price and variety, the language issue has to be solved,” he said. “If you have bilingual capability in your stores, depending on the community you’re in—in New Jersey, you could have 20 different ethnicities, and a town could be dominated by one ethnicity. So your pharmacist, your produce manager, your meat manager has to be bilingual in the culture (dominating the community).”
He added that one way to tell how the community is changing is through store-level employees, who often reflect the community better than any market study could—and often they’re already bilingual.
As far as the aging population, Niemann said retailers need to be aware of the convenience factor that many Baby Boomers want—ranging from product mix to package size.
In the feature photo at top are Joe Sheridan, Rich Neimann Jr. and Peter Larkin.
