by Alissa Marchat/staff writer
The grocery industry is a tough one to succeed in, particularly when your store is located thousands of miles away from your wholesaler. That’s the challenge faced by those retailers in Alaska and Guam, which are served by Unified Grocers out of Seattle and California.
Grocers and consumers alike face their own sets of challenges in each of these regions, but Unified, which has been serving retailers in those areas for years, has adapted to the challenge, helping its customers plan ahead and stay stocked up on items that, in some cases, shoppers can’t get anywhere else. Mike Koens, executive director of sales-Seattle, and Larry Barton, account executive, recently spoke with The Shelby Report to share some of their insights about what it takes for retailers operating stores in remote areas to be successful.
Community types vary dramatically
Guam, a U.S. island territory in the Western Pacific—about 5,600 miles from Seattle—is only about 30 miles long and four to 12 miles wide, with a population of about 162,000. The island’s dominant supermarket chain, Pay-Less Supermarkets, has eight full-size, conventional grocery stores, six gas stations and a distribution center.
Community and store size in Alaska are more varied. Unified serves stores from 60,000 s.f. all the way down to small local markets. The larger stores are found in more developed areas, such as Anchorage. In more remote areas, such as those along the Bering Sea, stores can be as small as 5,000 s.f., and they may be the only shopping destination for residents.
Logistics, logistics, logistics
Shipping products to far-off locations comes with a unique set of challenges that retailers in the lower 48 don’t have to face. Some of the biggest hurdles to supplying retailers in places like Alaska and Guam are the shipping times, cost and weather.
From the time retailers in Guam order product to the time it arrives on the island is two weeks, said Koens. Most products are shipped on a barge, although highly perishable goods, like yogurt, are sent via plane.
“They get one load a week,” he said. “When one order is being written, another is on the water, and a third is being fulfilled and shipped. The retailers do a great job of managing their business and making sure their stores are in stock despite the fact that they have very long lead times. Unified’s Interactive Ordering System allows everyone to see order status—what’s being picked and what’s on its way.”
Alaskan retailers, who receive their goods through third-party carriers, also deal with long lead times and a variety of shipping methods. Products going out to more remote parts of the state, referred to as the bush, can change hands several times before reaching their destination.
“The logistics involved with getting product out to the bush are some of the most complicated and interesting I’ve experienced in my 30 years in the industry,” Barton said. “Product is typically shipped on a barge out of Seattle to Anchorage and brought to the Anchorage postal service, where it is staged for later shipment. The postal service then sets up appointments for delivery via plane to the outlying areas. This is called bypass mail. Large orders of a couple thousand cases may be transported all at once, or product may be sent from the postal service in smaller quantities, depending on demand. From the time it leaves Seattle to the time it arrives at the store could be up to two weeks.”
Weather also a factor
The rivers in Alaska also are a cost-effective means of transporting product, but timing is critical. In April the ice begins to melt, and retailers take advantage of the mild weather conditions to ship large quantities of product and extensive tonnage via “summer barges.”
Pulled by tugboats, the summer barges depart from Tacoma and Seattle ports to visit locations up and down the west coast of Alaska.
“Costs are significantly reduced by this shipping method to approximately 25 to 35 cents per pound,” Barton said. “The barges reach their destinations in about four to five weeks. The retailers then store the product in warehouses. The cost savings resulting from this seasonal shipping opportunity more than makes up for storing the inventory. In more accessible Alaska areas, typical shipments can range between 12 to 50 cents per pound, but in remote areas, those costs can reach as high as a $1 to $1.25 per pound.”
Price fluctuations make budgeting a challenge
Because shipping costs to remote areas of Alaska are very high and can fluctuate so dramatically, some of the retail prices consumers see at the store can be pretty astounding. Some examples of expensive items Barton has seen during his years serving Alaska include a 24-pack of bottled water that retailed for $19.99; bananas as costly as $4 per pound; and a gallon of milk marked at more than $10.
“Because the cost of the freight can be so high, those costs are often reflected in prices at the checkstand,” he said.
Timing can be tricky
Due to long shipping times, especially to the remote parts of Alaska, retailers in some cases need to plan their purchases months in advance of shipping those products.
“Sometimes we’re buying Christmas as early as August, so holiday products can be sent up on the summer barges,” said Barton. Barton works closely with Unified’s procurement team to get promotional pricing on Thanksgiving and Christmas items that ship to Alaska in August.
Another unique factor about working with Alaskan retailers is planning for the dollars that every Alaskan resident (children and adults) receives each October from the state as a result of the “Alaska Permanent Fund.” The Permanent Fund was established to set aside a certain share of oil revenues from the Trans-Alaska Pipeline System to benefit current and future generations of Alaskans.
“Every person receives a check, ranging from $500 to $2,200,” Barton said. “This money provides a significant boost to the Alaska economy each year. Many people use the money to buy electronics, cars and stock up their food supplies.”
Knowing your shoppers
Every retailer and supplier knows how important it is to understand the consumers purchasing their goods, but it’s especially important when product orders have to be so carefully planned, like in Alaska and Guam—and consumers in those regions have their own unique shopping habits.
One thing shoppers in both areas have in common is their tendency to prepare a lot of meals at home, which is, of course, a plus for grocers.
“…The stores in those areas generally have higher sales per transaction size and larger basket sizes,” Koens said.
But that doesn’t mean consumers never eat out. Parts of Alaska, like Anchorage, boast plenty of restaurants. And as a tourist destination for Australia, Russia, Japan, China and the Philippines, Guam has no shortage of food sources, from fast food restaurants to convenience stores.
Koens noted that retailers in Guam also must stock a variety of unique items—those that appeal to the locals as well as some familiar foods for travelers, including a variety of Japanese, Chinese and Filipino foods, especially produce, seafood and center store items.
“There’s a lot of unique itemization in the center store that caters to tourists and shoppers of various ethnicities,” said Koens.
Alaskan shoppers have their own unique habits as well. In addition to doing a lot of at-home cooking, they are fiercely loyal to the products and brands they know and love.
“For example, 48 oz. Hills Bros. coffee is very popular and it can be difficult to get shoppers to try other brands,” Barton said. “They’re very loyal to certain products and tend to buy larger sizes.”
Unique challenges don’t end with shipping
In Alaska, it’s not just the retailers and suppliers that have to deal with tricky logistics. For consumers, just a trip to the grocery store requires careful planning and unique modes of transportation. In the remote areas it’s not unusual to see the locals driving snowmobiles in the winter and boats in the summer to do their shopping.
“In the warmer months, when the rivers are not frozen, consumers living in villages along rivers travel to the store via boat—often with one boat to transport themselves and another tied behind to transport their groceries,” said Barton. “Along the Kuskokwim River near Bethel, Alaska, there is a store that serves about 50 villages. During the summer months it’s not unusual to see 30 to 40 small boats parked nearby. Behind each boat is another boat for hauling groceries and supplies. Entire families will be in the first boat—parents, babies, strollers, everything—and then the second boat will be used to transport a two- to four-week supply of groceries. ”
Barton added, “Large families and the infrequency of shopping trips means that bulk items are a big deal in Alaska. A lot of stores up there buy large containers of product and buy in bulk.”
Travel in Alaska can be challenging
More troubling than the need to plan out a month’s worth of groceries at a time are the treacherous travel conditions Alaskans face when traveling to and from the stores. Snowmobile travel on frozen rivers can be dangerous.
“Every year there are reports of snowmobiles falling through the ice,” said Barton.
Another, more common, concern when traveling on the remote roads and highways are accidents caused by wildlife.
“There are stores located on the eastern side of Alaska close to the Canadian border, that when you’re traveling to them you’ll see signs on the roadsides noting the number of accidents and fatalities caused by moose. It’s not unusual to see moose, deer and bear. When you’re driving they’ll suddenly appear out of nowhere. You always have to be on the lookout for them. Avoiding accidents due to wildlife on the roads is taken very seriously in Alaska.”
Despite these challenges and the distance from Unified’s warehouses to Alaska and Guam, the company stands out as the wholesaler of choice, even if it might not be the closest wholesaler, because of its assortment and hands-on approach, explained Koens.
“It’s our wide assortment of product and the people we have working with our retailers that set us apart,” he said of Unified’s success serving retailers in Alaska and Guam. “We have a number of specialists working with them at different department levels. Our procurement teams and category managers are very engaged with their buyers. And it’s a winning combination for both sides.”
Highlights of the job
“Working with the retailers to overcome their unique challenges so they can be successful is very fulfilling,” said Koens. “It is a great opportunity to engage at every level of management, working with all the people from senior management to the buyers to the department heads and store managers—that’s my favorite part of the job.”
For Barton, the best aspects of his job are similar.
“You get to work with some very unique retail situations in some of the most beautiful places on earth. I’ve seen a lot of beautiful landscapes, and the retailers treat you as one their own—they’re very friendly and appreciative. Alaskans are truly a unique and talented group of retailers.”
*Editor’s note: Find many more photos in the March 2017 print edition of The Shelby Report of the West, where this regional feature originally appeared.