Weather can greatly influence shopper behavior and that was the case in North Dakota this winter. The state, which is normally cold and snowy from November through March, has been exactly opposite of what its 780,000 residents typically experience.
John “Jiggs” Dyste, president of the North Dakota Grocers Association, pointed out that the change in weather has affected buying behavior. When blizzards are forecasted, customers stock up to stay home until the weather clears.
Severe winter weather, he added, is a plus for rural stores because customers are reluctant to travel to the larger regional shopping cities. Conversely, clear highways and warmer conditions benefit the large cities – as has been the case these past few months.
In addition to fluctuating weather patterns, Dyste said the retail landscape in the state has changed during the past year, with rural and urban independent retailers facing increased competition from low-priced formats.
“Rural North Dakota has seen large increases in the number of dollar stores opening. Additionally, Aldi is targeting our urban areas as well, as we’ve seen several locations open here,” Dyste said. “This, along with an increased presence of both Walmart and Target, has placed increased pressure on the bottom-line profits for independent grocers in our state.”
As is the case in other states, it has taken businesses and residents a while to recover from the effects COVID-19 had on their economies. As supply chain issues moderate, Dyste said retailers are finding workarounds to deal with any lingering supply chain issues.
“During the pandemic, our retailers needed to utilize more than one source of products, and many are continuing to turn to multiple wholesalers to fulfill their orders,” he said.
Population shift
In rural areas, the population mix has not changed much since the early years of statehood. However, in urban areas there is much more diversity than in the past. And more people are leaving rural areas in search of higher-paying jobs.
“North Dakota is still a very rural state. Our urban areas are small compared to many other states,” Dyste said. “Since the late ’90s, the economic advances that the state has achieved have significantly changed the demographics of the state.
“The rural areas outside of the ‘oil patch’ are still mostly homogenized and the urban areas, especially in the eastern portion, are much more diverse. In broad terms, rural grocers’ clientele tend to be the more traditional ‘meat and potatoes,’ whereas the larger independents tend to cater to a more varied customer mix.”
Labor challenges
North Dakota’s unemployment is hovering around 2 percent, which is pushing retailers to consider labor-saving processes. Stores are putting in electronic shelf labels and adding more self-checkout lanes, according to Dyste. Perishable managers are using pre-packaged and shelf-ready products.
“Larger independents are leaning on suppliers to help facilitate this,” he added.
To help alleviate the labor shortage, the state is investing money and resources to expand the labor pool.
The Department of Commerce has been tasked with developing and implementing a statewide strategy to support recruitment and retention of foreign labor, including immigrants already in the U.S. This group will be working with the ND Global Talent Taskforce to tap into employment talent in the state and beyond its borders.
The state has also created the ND Career Builders program, which provides matching funds to help businesses recruit and retain talent in high-need occupations in the state. The partnership provides $1 of state funds for each $1 of matching funds, up to a total of $17,000 per recipient.
Recipients can receive a scholarship while enrolled in college, or student loan repayment once they have finished their program of study and are seeking employment in an in-demand occupation in North Dakota.
Scarcity of grocers
The North Dakota Grocers Association has partnered with others in the state to address its food desert problem, one that Dyste called “a real issue for the state.”
In expanding on this, he said, “Many of our small towns have steadily been losing business that is needed to keep the community viable. It seems that when the grocery stores close it is not long before most other business fail as well.”
Dyste commended North Dakota’s politicians, who he said have designated several funds to address the needs of the state.
“In the last legislative session, we secured funding for regional buying co-ops patterned after the successful RAD C0-Op. These funds are part of a pilot program to see if other groups can replicate the success of RAD,” Dyste said.
The RAD program was started by the North Dakota Association of Rural Electric Cooperative, a trade association that oversees 16 distribution co-ops. The NDAREC takes three to five stores and brings them together to help negotiate better purchasing power, with a larger independent acting as a main hub store.
Another part of the program includes a system where customers in rural areas can have products sent to a locker for them to pick up. The locker has different sections that can accommodate dry, refrigerated and frozen groceries. It provides an option for customers while still using the co-op’s hub stores.
Returning to the funds, Dyste noted the Bank of North Dakota is the depository of these “buckets” and has millions of dollars available to promote business in rural and urban areas of the state.
“We recognize that food deserts cause food shortages and adverse economic costs. We also acknowledge that food deserts pose a health risk to the elderly and poor populations who live in these locations,” he said. “We are fully aware this issue will persist in rural areas and will take more than one creative initiative to help solve the problem.”
Looking ahead
Dyste predicted retail competition will become more intense as the large out-of-state companies keep expanding into North Dakota. He anticipates seeing more dollar-type stores, Aldis, Walmarts and nontraditional businesses selling groceries in months and years ahead.
“Rural areas will see some mergers, but I expect to see more closures, too,” Dyste said. “Independent grocers are very concerned about the increased costs of insurance, taxes and other inputs. They have a very limited ability to pass these expenses along in the form of increased prices because of consumer concerns over inflation.”
Read more market profiles from The Shelby Report.
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