Learning From Independent Grocers Turnaround in 2015
Despite a two-year decline in profits, North American independent grocers were able to turn these numbers around in 2015. The NGA’s Independent Grocers Financial Survey reports strong financial indicators for the industry, confirming what many already know: independent grocers are resilient and driven towards continued improvement.
Results of the survey yielded the following:
In 2015, the study found that same-store sales at independent grocers grew by 2.1 percent. When you take into consideration a 1.17 percent food-at-home inflation, the result is an adjusted sales gain of 0.84 percent. Compared to a 0.9 percent decline in 2014, sales increases are on the upswing. Sales, in general, moved slightly away from non-perishable food products towards perishable categories, such as meat and deli, ultimately contributing to the increase in profits as consumers spent more per visit.
Independent grocers have shifted their mindset away from viewing big-box supercenters as their top competitors. Instead, they have turned their attention to traditional supermarkets. Though it’s hard to compete in the industry, independent grocers are strategically differentiating themselves and appealing to their unique customers’ needs. They are looking to go niche.
Labor costs continue to be a rising expense for independent grocers. About 71 percent of the study’s respondents reported their healthcare costs had risen in 2015. Grocers are also bearing expenses due to minimum wage increases and rising turnover rates. The turnover rate for part-time employees was 42.2 percent in 2015, resulting in additional costs for attracting and training new hires.
Independent grocers have been making improvements to operational processes. Proper inventory management and the launch of programs to manage store shrink are among a few of the fundamental changes noted by the survey.
Modern marketing has mostly moved online, and independent grocers have developed new marketing strategies, accordingly. Social media, mobile marketing, and other online marketing channels have become a vital part of driving independent grocers’ businesses. Most respondents in the study reported several years of marketing online using social media.
The NGA largely attributes the increase in net profits of independent grocers to higher sales and better margins. Grocers on average reported margins of 27.26 percent. Combined with sales gains, operational improvements, and changing marketing strategies, net profit before taxes for independent grocers increased to 1.44 percent in spite of rising labor costs and concerns with competition. This certainly marks an improvement from 0.91 percent in 2014.
By using these insights to make further improvements in meeting the needs of customers, independent grocers can continue to progress through similar efforts that support fiscal gains and improved operations year after year.