Progressive Grocer Independent

DEC 2016

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December 2016 | Defining the Independent Market | 31 NGA's Peter Larkin Guest Column T he supermarket business is not for the faint of heart. Low profit margins and constantly changing consumer prefer- ences make it challenging even for the best operators. Uncertain economic conditions and an explo- sion of new store formats have caused many to speculate about the demise of the supermarket as we know it. Yet despite challenges and headwinds, the grocery store isn't just alive and well — it's kicking. e traditional supermarket is undergoing profound change, while also maintaining its place at the heart of the food shopping experience for the vast majority of American consumers. Today's time-pressed consumers have shifted their shopping preferences to reflect their own needs and timetables. While the entire food industry is looking to stay ahead of the consumer trend curve, independent supermarket operators are continuing to innovate to meet shifting demands. Sales Growth Despite a tough marketplace, inde- pendents grew same-store sales by 2.1 percent — ahead of annualized inflation (1.2 percent) and well ahead of the prior year's 1.5 percent gains, ac- cording to the results of NGA's annual Independent Grocers Financial Survey. is study, compiled in conjunction with our partner FMS Solutions Holdings LLC, analyzed the financial and operational performance of inde- pendent supermarket operators in fiscal year 2015. In addition to benchmarks for financial perfor- mance and business strategies, the report provided an in-depth look at the economic, political and com- petitive landscape in which these retailers operate. Survey "profit leaders" (the top 25 percent of independents that exceeded 3 percent in net profits before taxes) outperformed publicly traded compa- nies by 4.09 percent to 3.52 percent in average net profit before taxes. Interestingly, for the first time in the history of this report, supercent- ers weren't listed as independents' top competitive threat, but instead were replaced by other conventional super- markets. Despite conventional-format competition, independents were able to grow their margins in total store and in most individual departments. Innovation Pays Off What's going on is pretty clear: Inde- pendent supermarket operators are in- novating and responding to changing consumer preferences — something they've always been good at, given their close ties to their communities and the consumers they serve. Whether it's online or in-store, here's a list of what independent supermarkets are doing exceedingly well right now and continue to improve on to become the store of choice in their respective areas: • Fresh, locally sourced perishables • Delis and baker- ies with astounding variety and extraordinary service • Superior store brands • Ethnic food variety reflecting an increasingly diverse shopper profile • Customized marketing platforms, such as frequent-shopper programs, that enable grocers to reach various demographic groups • Online shopping with delivery and pickup • Shopper-friendly mobile applica- tions that offer everything from nutri- tion data to scannable coupons When outside observers com- ment on our industry, they sometimes claim that independent supermarkets are no longer able to keep up with the fast-changing marketplace. To those skeptics, my response is simple: Check again. PGI Independents Set to Shine in 2017 NGA looks at how past performance sets up indie retailers for a stellar new year. By Peter Larkin Independent super- market operators are innovating and re- sponding to changing consumer preferences — something they've always been good at.

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