BIG Enough to PROSPER

Being small has advantages in the fiercely competitive food retail industry.

Independent grocers and specialty stores often are closer to their customers than larger players and can adapt quickly to serve shoppers' changing needs. While they generally can't compete on price with value-oriented giants, they can offer more specialized merchandise and personal service. And with less overhead than the major supermarket conglomerates, they can afford to carve out a niche too small for larger competitors or try a new concept that others have overlooked.

Specialty market Provenance has achieved sales growth of at least 8 percent every year since it opened in 2002.

"Our challenges in [being] a small market, we're not going head to head with Stop & Shop and Costco. It would be silly to try to do that," says Clyde Ripka, owner of Ripka's Bridgeport Market in Bridgeport, Conn., and four delis in the area. Instead, the 7,500-square-foot grocery market lures people headed home from the train who want something interesting for dinner.

Its merchandise includes an assortment of specialty foods, such as olive oils, cheese, bakery items, a butchery, fresh produce and prepared foods, along with a center aisle that offers paper towels and other essentials. It also features an 800-square-foot cafe restaurant and bar.

Ripka's, which opened in June, is the first grocery market to serve downtown Bridgeport in several decades, Ripka says. Exposure has been a challenge, because most people don't think of visiting Bridgeport for gourmet food items. But once consumers step inside, they appreciate the experience, he says. "I grew up in the restaurant business. It's all about acknowledging people and making sure they feel they're taken care of."

While Ripka's got off to a slow start in the summer, many independent grocers are faring better this year than last, according to the National Grocers Association. Its 2013 Independent Grocers Financial Survey of 146 grocers indicates same-store sales rose 1.46 percent on average in fiscal 2012 from the prior year, while net profit increased 1.65 percent from from a year earlier. Fewer than 2 percent of companies reported profit declines.

Above and Beyond

Going above and beyond with specialty merchandise or personal service will convince shoppers to return to a small merchant. "It goes back to that local flair, having that personalized experience, being part of the community," says John Gatesman, president and CEO of marketing agency Gatesman+Dave Inc. in Pittsburgh.

Independent midsize players also have relied on the local community's support and will add merchandise or departments to better serve customers. In Minnesota, family-owned Coborns, which began in 1921 as a single grocery shop, has added drycleaning, fax machines and postage stamps as a convenience to shoppers. The company, with $1.2 billion in annual sales in 2012, also has expanded its online shopping and delivery service to the Twin Cities market. CobornsDelivers.com has improved the company's brand recognition and also allowed for more precise data-driven decision-making. "We continue to build our brand and expand our geographic footprint," says Emily Coborn, director of TopCo program management.

The company, with 47 grocery stores and 100 total locations, including convenience stores and pharmacies, also has distinguished itself through its natural and organic department. "Our natural and organic department is almost a store within a store," Coborn says, adding that the company has hired on-site experts to answer nutrition questions in most of its stores.

To provide more information to shoppers, Coborns has added the NuVal scoring system, which allows shoppers to see the nutrition of the food they are buying at a glance. "It's one of those investments we're making in our stores, so we are viewed as a resource to our customers who want to live healthy and may have dietary needs," Coborn says.

Healthy and Convenient

Consumers' growing demand for natural foods spurred Melissa Rosen to launch Los Angeles-based Locali Conscious Convenience, which combines the concepts of a natural foods store with the convenience of a c-store. The banner, which also features a deli offering soups, salads, sandwiches and smoothies, stocks organic produce and vegan meats. It also offers a freezer section, grab-and-go foods and a selection of natural sodas and energy drinks, as well as health and beauty products. "We are small, [nimble], able to have more control over all of the inventory in our stores, able to closely examine what we are bringing in and...able to react very quickly to what does the community want," says Rosen, co-owner and CEO of the company.

The store also features a warmer ambiance than most c-stores. "The customer service experience is unique. It's sort of a throw-back. It's a very homey, 'Cheers' experience when you come to our store," Rosen says.

The rise of social media and other technology is helping to level the playing field for small retailers who generally don't have large marketing or IT budgets, says Jason Richelson, CEO and founder of ShopKeep POS in New York City. Richelson previously owned the Green Grape, a wine shop in Brooklyn, with Amy Bennett.

By offering low-cost cloud-based software such as point-of-sale systems, loyalty programs and timekeeping and bill-paying apps that run on iPads, ShopKeep helps small merchants compete with larger players, Richelson says. "The technology that has been available in the past is so frustrating, we're really helping them with that," he says.

Tech-savvy stores can outperform larger players, and ShopKeep's Same-Store Sales Index indicates specialty food stores saw sales increase 18 percent in July 2013 from a year ago, outpacing larger competitors.

Partnering with tech companies can save independents the trouble of developing their own systems and applications. As more of its customers have become price-sensitive, Shop 'n Save stores in Western Pennsylvania partnered with Aisle50 to offer customers savings of 30 percent to 60 percent on select items. The deals are loaded to customers Shop 'n Save Perks Card.

Shop 'n Save, an independent grocery chain with more than 70 stores in Western Pennsylvania, Ohio and West Virginia, also works with Gatesman+Dave Inc. on communications and branding. The retailer uses the slogan "Just Right" to describe its emphasis on quality and service. "It is that personalized experience" that customers seek out, Gatesman says.

By participating in the communities they serve, independent retailers also can win loyalty. Shop n' Save has been a sponsor of the Pittsburgh Vintage Grand Prix event, helping to raise donations for designated charities. Over 12 years, the retailer says it has helped to raise more than $3 million in donations. "They come across as being very neighborly, very down to earth, part of the community," Gatesman says.

Besides ongoing customer service and community involvement, independents have to keep investing in their locations to keep customers coming back, says Andy Graiser, co-president of A&G Realty Partners, which advises retailers on real estate matters. With Walmart and Target opening more small-format locations, small grocers have to look at each location in their portfolio to determine if they will be able to stay competitive, he says.

"There are a lot of great independents out there who will outperform. They've got the customer right. They've got the customer loyalty. They've got the merchandise right," he says. "But there [are] also a lot of small ones that need to look at their operations as a business." If they don't have capital to invest, they might be better off selling the business for its real estate.

But others have made the opposite determination. Many have carved a niche by providing specialty foods the giants overlook. Fiesta Mart, which has stores in Texas, specializes in international foods, particularly Mexican items. The store pulls heavily from the Hispanic community but also appeals to consumers who like the retailer's extensive produce department, says Peter Lara, a marketing representative for the Houston retailer. In July the company launched Fiesta Market Place in Sugar Land, Texas, featuring an eatery, Caribou Coffee coffeehouse and Red Mango frozen yogurt shop within it.

Local Flow

Many small and midsize retailers focus on local foods as a way to serve the community and draw a loyal customer base. They're stocking more locally grown foods and adding signage that provides origin and sourcing information.

"It's really the consumer awareness that's become the trigger," says Peter Lyons Hall, creative director of WarwickInfo.net, a directory of retailers in Warwick Township, N.Y. Consumer interest in how food is farmed combined with recent food safety scares have strengthened demand for products from local producers and retailers, says Hall.

"We also live at a time when people are really, really invested in local business and keeping their neighborhood unique," says Tracy Kellner, co-owner of Provenance, a small shop with two locations in Chicago. The company has achieved sales growth of at least 8 percent every year since it opened in 2002. "There's a lot of things here nobody else carries in the city," Kellner says.

Kellner says she invests time and money to train workers on the products available, including how they're made and how to use them, because that's something her larger competitors don't offer.

"[People] care about who is making their food and how they're making it," she says. Provenance's attention to detail is what keeps people coming back.

Ann Meyer, who serves as senior editor of Retail Leader, also is president and CEO of L3C Chicago L3C, a media services firm.