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‘Independent squeeze’ pressures retailers

Things are changing for independent retailers. Again.

They still have advantages in being community-oriented players with personalized service. However, requirements for scale are increasing in this era of consolidation. Independents are squeezed between large brick-and-mortar chains and growing online competitors.

In truth, the definition of “independent” differs by retail channel, from food to pharmacy to mass. However, I tend to think of independents not just in terms of size, but also as innovative, entrepreneurial, customer-focused, and often family- or privately owned. They often support underserved markets.

Their longtime challenges are more intense now. For example, independent pharmacies face hurdles because their models — more so than those of chains — emphasize prescription business. This requires more labor to drive less profit, said Dave Wendland, vice president of strategic relations at Hamacher Resource Group. So despite being known for friendly and personalized service, independent pharmacies run the risk that consumers will instead embrace such competitors as Amazon Prime to provide fast delivery and lower prices, he said.

On the grocery side, independent retailers face a wide range of challenges from higher costs to supply chain complexities. That doesn’t even take into account the monumental task of competing with Amazon’s large selections, speedy deliveries and free Prime shipping.

Being a successful independent in this environment involves thinking beyond traditional roles, and taking advantage of new opportunities.

Here are some strategies to seriously consider:

  • Grow other categories or services: Independent pharmacies need to stay innovative by finding more growth opportunities. These could range from enhancing the front end to becoming a solution destination for diabetes or other conditions, Wendland said. It could involve adding such services as telehealth or point-of-care testing. “The good news is independents are far more nimble than a big enterprise,” Wendland said.

  • Get serious about partnerships: Independents can’t go it alone. They aren’t built that way. They need good partners. A case in point is Midwest independent retailer Coborn’s. Its many community partners include local health system CentraCare Health, which has installed satellite walk-in clinics in a number of Coborn’s locations.

  • Fill market voids: Store closures by competitors can open up voids for independents to fill. The most relevant example in recent months is outside of the food industry. The shutdown of Toys “R” Us may give new life to some independent toy stores. That kind of scenario could be repeated in other retail channels in the future.

  • Become famous for curation: We’ve all heard this before: “You can’t be all things to all people.” This is true for retailers, and especially independents. They are supposed to know their customers better than anyone. They’re in the best position to curate offerings for local tastes. If they don’t know what shoppers want, they need to ask. At the recent Summer Fancy Food Show in New York, one retailer said she follows exiting customers into the parking lot to chat and learn about their preferences. I say, “whatever works.”

  • Play the local card: It’s more challenging for consolidating chains to stay laser-focused on local needs. This creates opportunities for independents, a point that became evident to Robin McNamara, director of specialty foods at independent retailer Roche Bros. Supermarkets, based in Wellesley, Mass. As she relayed in a panel at the Fancy Food Show, she saw a customer in a Whole Foods store complaining about no longer being able to get a certain local item, because buying is now handled centrally since the merger with Amazon. McNamara’s reaction was, “We can get it for you, come see me.”

One more point about key moves for independents. These retailers may feel that competing with Amazon is daunting, but they need to at least make an effort to bring e-commerce into their operations. In a recent piece in Progressive Grocer (a sister publication of DSN), David Smith, president and CEO of Associated Wholesale Grocers, urged independent grocers to “Omnichannel your business.” His point wasn’t that independents should drop everything and make online shopping their major selling point. Rather, he said independents need to take into account today’s consumer lifestyles, which include the need to have choices on how to buy.

I’d argue that all of these strategies are useful because independents remain essential. They have outsized positive impacts on customers and communities. They even help to keep competitors on their toes.

Independents just need to stay independent-minded.

David Orgel is an award-winning business journalist, industry expert and speaker who was the longtime chief editor and content leader of Supermarket News. He is currently the principal of David Orgel Consulting, delivering strategic content and counsel to the food, retail and CPG industries. To read last month’s column, click here.
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