Being an independent grocer is tough no matter where you are. From Berlin to Beijing, a chain store lies around every corner.
In Canada, of course the relationship between chains and independents is somewhat symbiotic. Chains franchise and wholesale to independents and the independents are often allowed to carry the chain’s private label lines.
But how do independents compete in countries where chains haven’t the slightest interest in their survival? There’s no better country to answer that question, perhaps, than the U.K. Here, stellar chains abound.
The largest–Tesco, Sainsbury, Asda and Morrisons–share 76 per cent of the market and have enormous buying power and deep enough pockets to run loss-leading promotions. Independents must also contend with the upscale Waitrose chain and the exceptional member-owned Co-operative.
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Standing out amid the giants is not easy. One of the best at doing so is Guy Warner and his three Warner Budgens stores.
In his youth Warner had no intention of going into retail. He studied theology at the University of Toronto, then returned home and found himself uninspired and working at his family’s gas-station business. When an opportunity arose to buy a store under the Budgens banner, something clicked and he hasn’t looked back since.
Warner’s stores are situated in the affluent Cotswolds area of England, but customers still don’t want to pay more for branded product that’s cheaper at Tesco.
Two years ago, his wholesaler, Musgrave, which owns the Budgens banner, took a remarkable decision to lower their wholesale prices to retailers on branded products so that they could match Tesco on price without taking a hit to their margins. The move reportedly cost Musgrave 13 million pounds ($21 million) per year. But it worked.
“It was the single most successful wholesale initiative I’ve ever seen,” says Warner. A year later his sales were up slightly, an impressive result considering the move drove significant price deflation into every basket.
With price perception under control, Warner has been free to spotlight areas where independent retailers thrive. Warner wants to give customers the choice of buying a locally grown or manufactured product, a leading brand and a cheaper alternative.
Ninety-five per cent of his sales must be bought through his wholesaler, but the five per cent of free choice has allowed Warner to source from more than 60 local suppliers. Getting listed is straightforward and quick. “I look at it, taste it, and if I like it we’ll put it on a trial at one of the stores for a month and make a decision.”
The best local products will give their category a halo effect, Warner says, letting people blend their baskets and trade up for a special occasion.
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“This isn’t a typical supermarket or a niche food store People can get the paper, Lurpak , local sausages and bleach,” says Warner. “The choice of a brand and an alternative is what we’re trying very hard at.”
His stores benefit from relationships with other independents nearby. The deli counter at his Moreton-in-Marsh store, for example, recently began selling cream cakes after Warner struck a deal with the local bakery.
The volumes required to buy short shelf-life cakes through Musgrave were too high. Four of the baker’s lines are being rolled out to Warner’s other stores following a successful trial.
Communication goes beyond the walls of the store. Warner commissioned a teaching specialist to write a project for school children aged seven to 11 to learn about bread.
Over the course of a week, the children visited the bakery that supplies Warner’s stores, in a bus paid for by the company. They learned how to make bread, then designed and made their own loaf, created the branding and pitched it to a panel from the store.
The winning loaf was then produced by the baker and sold in Warner’s stores, with all the money going to the school. Warner says the project costs more in time than money and the feedback is glowing, with teachers praising the week as one of the children’s favourite.
To excite adults, Warner launched Taste Club four years ago. Born from a desire to learn about his customers beyond transaction numbers and anecdotes, the free online club offers them coupons and samples of new products.
The newsletter also includes articles about restaurants and recipes from local chefs. The 50 per cent e-mail open rate is testament to the high level of engagement within the club.
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The Taste Club also holds lunches three times a year. A chef creates the menu with products from Warner’s stores, which he supplies for free. Tickets for the set menu are sold for 19 pounds and sell out in 36 hours.
Warner says the restaurant owners love the program because he gets a full house on a weekday and takes 70 per cent of the revenue, with 30 per cent donated to local charities.
It all seems like a lot of extra work for a grocery store to do. But as well as looking pleased that he’s able to play a role in his community, Warner says it’s essential.
“If you don’t, you’re just another supermarket competing on price and price alone, and you’d be a lot weaker for it.”