Dive Brief:
- The National Grocers Association and FMS Solutions released their annual “Independent Grocers Financial Survey” that found independent grocers saw sales decrease 1.62% in 2016 compared to the year prior, according to the Shelby Report.
- The study showed independent grocers’ net profits came in at 0.9%, compared to 1.44% in fiscal year 2015. The survey consisted of more than 100 retailers in 33 U.S. states and seven Canadian provinces.
- “While 2016 was a disappointing year for net profits, the independent grocer has proven its ability to recover in the past,” Robert Graybill, president and CEO of Pasadena, Md.-based FMS, told Progressive Grocer. “We expect to see some continued consolidation as a result of tough competition from both online and new brick-and-mortar retailer.”
Dive Insight:
Sales at independent retailers are not looking good, with a drop of 1.6% last year. This could be a trend that will continue due to an increase in online shopping and more larger retailers offering some products that were once somewhat exclusive to a niche, independent store. There are recent signs of problems with smaller grocery store players after Central Grocers and Marsh Supermarkets filed for bankruptcy in recent days.
Coupled with the influx of online operations such as Amazon and more discount retailers like Lidl coming to market, the prices of items at many independent stores seem even more expensive because they need to mark them up due to the nature of the store and the fact that they have no big company behind them.
With some of the larger retailers adding value-added components to their stores—such as vast produce selections, dining areas and even health and wellness sections, dry cleaning, movie rentals and childcare — more consumers are inclined to partake in a one-stop shopping experience, further negating the appeal of an independent store. This is something the smaller stores can’t do because of money and space constraints.
The secret for reversing the trend could come down to customer care. Some of the larger retailers don’t offer the same personalized service that an independent store can offer, and many consumers want that. Holding in-store specials can also attract more shoppers and improve sales. If independent stores struggle financially, they could go the way or Central Grocers and Marsh Supermarkets, or become takeover targets by the bigger chains.