Insights for independents at DCI Business Summit
How are independent grocers faring in this country? That was one of the questions explored at DCI’s Business Summit 2019, held last week in Toronto.
Stan McClintock, vice-president of sales at FMS, a grocery retail consulting firm that publishes annual independent grocer financial surveys in both the U.S. and Canada, spoke of the “ever-changing” competitive threats facing independent grocers. Players such as Walmart and Amazon are becoming a bigger and bigger part of the equation as their grocery sales grow; convenience stores are selling “more and more of the same products we’re selling,” he said, as operators in this channel seek to appeal to convenience-focused shoppers and grab more grocery dollars.
And the fast-growing discount channel continues to be a “big deal,” added McClintock, who asked summit attendees if they thought European deep discounters Aldi and Lidl—both of which have been aggressively expanding in the U.S.—would enter Canada? “If they don’t come this way, I would be surprised,” he said, “particularly Lidl, which is the one with really deep pockets.”
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Amid all this competition it is the retailers stuck in the middle that are really getting squeezed, said McClintock. “What I always ask retailers around the country is what would cause a customer to drive by your competitor's store to get to your store? If you can’t answer that, I would say your days are numbered.”
While e-commerce continues to grow, McClintock, citing figures from the 2018 Independent Grocers Financial Survey, said 70% of Canadian indie grocers did not have an online ordering offer (the figure was similar among U.S. independents surveyed). “If you’re doing nothing in that area at least you need to be talking about what you need to be doing going forward because it is going to be a bigger and bigger chunk of your business going forward.”
Other points McClintock said independent retailers should consider:
Reinvest — What are the most profitable retailers doing that the least profitable aren’t? They’re reinvesting in their stores. Don’t let your stores get so tired and outdated that people don’t want to shop at them. “It leaves you wide open for competition to come in.”
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Do you have a loyalty program? Retailers with loyalty programs report a higher number of transactions and a higher transaction size. Loyalty programs work!
Get a handle on shrink — Stores that have a shrink program put between 1.1% and 1.3% more on their bottom line than stores that do not have one. At a time when it’s hard to make profits in this industry, 1.1 % to 1.3% is “huge,” said McClintock, who also stressed that retailers should know what their shrink level is and hold their people accountable for the shrink happening at the store.