The COVID-19 pandemic has been one of the most challenging business environments that independent community grocers have had to face – and it’s not over yet.
The sudden shift in retail spending behavior during the second quarter of 2020 drove record supermarket sales. Grocers moved mountains to keep shelves stocked while contending with operational challenges, from supply chain to sanitation.
But staying sanitary is a relatively simple task compared to the supply chain rollercoaster that retailers have been forced to ride. That issue has been joined by a labor shortage and runaway inflation to deliver a triple threat to doing business.
Still, independent grocers have demonstrated once again that they have what it takes to weather the storm and deliver for their communities, according to the 2022 edition of the Independent Grocers Financial Survey, a joint study between the National Grocers Association and FMS Solutions.
The survey documents a complex marketplace in which the only constant was change. Amid supply chain and labor challenges, independents carefully managed inventory while compressing margins in key departments to drive sales during fiscal year 2021.
Navigating these volatile times is a tremendous accomplishment that will help independents through tough marketplace conditions that are lingering throughout 2022. Even the usual pundits find themselves increasingly hard-pressed to speculate on the end game amid a perfect storm of factors that are pressuring retailers and consumers alike.
As detailed in the NGA/FMS survey, grocery retailing remained in flux on both the supply and demand sides during FY 2021. Consumer spending and trips shifted between online and in-person as COVID-19 cases ebbed and flowed.
Inflation and out-of-stocks prompted shoppers to trade down within categories, seek alternative products and pack sizes, and even look to other retailers.
“Supply chain challenges kept independent retailers on their toes with historically low order fill rates averaging 74.6 percent,” said Robert Graybill, FMS president and CEO.
Even as inflation drove product prices higher, nearly 60 percent of independent grocers responding to the survey said they were unable to match their 2020 sales records; dollar sales did outpace pre-pandemic levels though same-store sales dipped nearly 2 percent.
While focusing on inventory management, independent grocers helped consumers find value for their stretched grocery dollars.
Much as they were resourceful in securing scarce high-demand goods during the darkest days of the pandemic, independent grocers continue to scour the marketplace to procure products that give shoppers the most bang for their buck.
Leveraging social media has helped grocers stay engaged with their communities to alert consumers about the latest deals.
Lower sales and compressed margins, combined with expenses driven higher by inflation, delivered a decrease in net profit compared to the prior year. Of course, this was to be expected after profits that rose five-fold due to 2020’s surge in grocery sales.
As Graybill noted, “At 3.62 percent, the net profit before taxes for independent operators in 2021 was the second-best result on record.”
Those retailers leading the pack on profits were largely those that focused on fresh, particularly produce and deli, with higher margins, above-average transactions and bigger baskets.
While 2022 is unlikely to bring the same results as the past two years, independent community grocers – resilient, creative and nimble – are prepared for the challenge.