Rebirth

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If you were to close your store tomorrow, what would your customers miss most? I ask the question to help you pinpoint what makes your store different from your competitors.

While many of the services and products you offer are nice to have, few are critical to your success. You may imagine your customers equally enjoy every service and product you offer, but I suggest you ask, “What services and products can’t our customers live without?”

As competition expands, it becomes harder to develop and maintain services and products that truly differentiate your store, and more important than ever to do so.

“We Have Great Customer Service!”

Really? What does “great customer service” actually mean? It is tempting to assume because you and your employees engage most customers most of the time that you are providing great customer service. The bar is actually higher now.

For example, consider the programs this retailer has recently put into place: To better work with diabetics, the store offers blood sugar testing, with the in-store nutritionist coordinating with outside physicians and pharmacists. The nutritionist regularly conducts outreach efforts to doctors’ offices, hospitals, pharmacies and senior centers to inform them of the store’s nutrition-oriented approach and to develop referral relationships.

As part of the protocol for diabetics, the nutritionist recommends a six-week weight-loss program, and a smoking cessation plan. Through sampling, the store encourages children to try new foods that are both delicious and healthier than refined, processed foods. The nutritionist also oversees a general culinary nutrition program to promote better eating habits through simple meal planning and healthy snack preparation, tailoring individual recommendations based on lifestyle and food preferences.

The store educates through regular workshops and seminars on these and other health topics, and has an active digital presence centered on easy-to-prepare recipes, in an effort to have resources available to customers 24-7 online. Management says these free programs generate customer loyalty as shoppers learn how to eat healthier and feel better.

Quite an impressive list of competitive differentiators, wouldn’t you say? Now, substitute the word “dietician” for “nutritionist” and you have the program that conventional supermarket operator Wakefern/ShopRite is executing right now in 115 of its 321 Atlantic Seaboard-based stores.

Customer Counts

One of the recurring reports I hear from legacy independent natural products retailers around the country is that customer counts are flat or declining. These veteran stores typically have a loyal, but aging, customer base that has shopped for years. But this shrinking group is not being replaced by new, younger shoppers. With the expansion of natural and organic products into conventional supermarket, drug, convenience, mass market and other channels, it is easy to see why.

While U.S. households are increasingly embracing natural and organic eating because they believe the foods are better for them, these new consumers are simply adding natural organic items to their carts as they wheel around their regular shopping venue. You are going to need something more than just the same natural organic packaged goods your local supermarket is now offering if you hope to attract this new wave of customers to your store.

I am not the only one who feels this way. Remarking on the recent slowing sales trend in its independent channel, Steven Spinner, CEO of natural wholesale distributor, Providence, RI-based United Natural Foods, Inc. (UNFI), said in the third-quarter investor conference call on June 9 that independents are susceptible to more, different retailers carrying natural and organic products. “So independents have to shift their business model. They have to be better at perimeter. They have to be better at being differentiated, because if they’re going to try to compete on a price-per-price basis on organic cereal, it’s not going to end well,” Spinner asserted.

What Spinner means by “perimeter” is fresh, perishables foods. Over the last 24 months, UNFI has added over two million square feet of refrigerated and frozen warehouse storage around the country to support what management sees as the next wave of growth in natural organic demand. Spinner believes that independents will eventually figure out how to successfully incorporate perishables into their stores.

History Repeats Itself

In his remarks, Spinner noted that many of the newer retail venues, such as drug and convenience stores, have brought in only a minimal selection of natural organic items. This small offering, he believes, will eventually send shoppers back into independent retailers as they seek out a broader selection of healthier items. I believe he is correct.

Back in my wholesale distribution days, when conventional supermarkets first started carrying natural foods in the 1980s, our independent retailer customers got quite upset with us for servicing these new “inauthentic” competitors. But what happened was, after about six months, the independent retailers closest to these new supermarket competitors started seeing new faces. The new customers, who had been exposed for the first time to natural foods at the supermarket, began searching out more natural foods variety. These new customers were also hungry for information about natural diet, nutrition and health—­questions independents were well suited to answer. As a result, independents saw increased sales momentum, above what they had been experiencing prior to conventional supermarkets entering the natural space.

Now, the wave of new consumers seeking natural organic options for the first time is much larger than it was in the 1980s. Back then, perhaps 20 million people were interested in trying natural foods. Today, 200 million or more aspire to use natural organic foods more regularly, with the main roadblocks being limited access to the products, and perceived or real higher prices. With organic snack bars beginning to appear in convenience stores, and drug stores upgrading from conventional to organic cereals in their food aisles, the same variety-seeking phenomenon is set to repeat itself.

But you would be wise to be patient: the forces that drive supply and demand are dynamic, localized and cyclical. In the last 12 to 18 months, conventional supermarkets, club stores such as Costco, as well as other non-traditional retail channels have aggressively added space for natural organic products. Independents in these areas will suffer the effects for a while. We saw this once before in the 1990s, when Whole Foods Market and Wild Oats were rapidly building stores in overlapping trade areas. The new supply of space for natural organic items temporarily outstripped then-current demand in those markets. Eventually, demand caught up with supply, and independents resumed growth.

Accelerate or Coast?

As an independent, it is perhaps easy to be discouraged about your new competition and to despair of ever being able to recapture the sales growth and momentum you once enjoyed. It is also true that, for many founders of today’s legacy natural foods stores, this may not be the time of life to take on risk, raise your investment and pour new energy into your store to better compete. It is understandable if you feel this way.

And if you have relatively low population density in your trade area, you may be able to float along for several more years without reinvesting in your store and without much new competition. What I wouldn’t count on, however, is being able to attract a buyer for the business who is willing to pay you a premium for future sales growth.

Going For It

What I am now seeing around the country are new and expanding independent stores, usually driven by young entrepreneurs starting up, or the next generation taking over an existing operation. Sometimes, all it takes to boost sales is a new vision. One of the most reliable keys to success is, as Spinner said, competence in fresh, perishables foods around the perimeter of the store.

A reinvigorated deli prepared-foods program can spark the imagination of customers looking for healthy, quick and delicious lunch on-the-go, or grab-and-go meal solutions for dinner at home. By adopting a young perspective on prepared foods choices, adding options such as raw, paleo, gluten-free and vegan, you are more likely to attract a whole new set of younger customers. Many of these may be daytime workers nearby, and not necessarily homemakers doing pantry stock-up shopping.

Another option you might consider is hiring a professional culinary expert to consult on redeveloping your menu. Trend-forward, plant-based dishes, innovative flavor combinations and attractively redesigned food presentations can create excitement and new profits. An updated fresh foods program is one of the fastest ways to create word-of-mouth buzz in your community, and to transform your store into a more desirable shopping destination.

Coupling your competence in fresh foods with your superior nutritional expertise, complete selection of vitamins and supplements, quick, friendly service and local ownership, you should be able to successfully compete with any new-channel retailer jumping on the natural organic bandwagon. From 20 million shoppers yesterday to 200 million today, the natural organic pie is massive and growing fast enough to support you and your reimagined store for the next generation. WF

Jay Jacobowitz is president and founder of Retail Insights®, a professional consulting service for natural products retailers established in 1998, and creator of Natural Insights for Well Being®, a comprehensive marketing service designed especially for independent natural products retailers. With 38 years of wholesale and retail industry experience, Jay has assisted in developing over 1,000 successful natural products retail stores in the U.S. and abroad. Jay is a popular author, educator, and speaker, and is the merchandising editor of WholeFoods Magazine, for which he writes Merchandising Insights and Tip of the Month. Jay also serves the Natural Products Association in several capacities. In 2014, Jay received the Natural Products Association’s Industry Champion Award for notable contributions to the industry above and beyond commercial success. He can be reached at (800)328-0855 or via e-mail at jay@retailinsights.com.

Published in WholeFoods Magazine, September 2015