Guest blog by Bobby Brannigan, Founder and CEO of Mercato

The other day I overheard a phone call between one of our sales representatives and an Independent Grocer. It went something like this:

Sales Rep: Hi, this is Nikki from Mercato. We are the only e-commerce and delivery platform designed exclusively for independent grocers. I was hoping to talk with you about getting your store online and growing your business.

Grocer: Oh, I’m not even thinking about that right now. There is a store across the street and they aren’t online, so I’m not sure it is important for me. Plus, I’m really busy.

The sad truth is that we hear conversations like this all the time.  It’s almost 2020, and here is a merchant who isn’t even thinking about getting online. That isn’t even the worst part! The worst part is how far this is from what the big chains are actually thinking and doing. To them, e-commerce is yesterday. They are already there. They have already moved on to the next big things.

How is the independent grocer supposed to compete in a world where the resource gap between the “haves” (Kroger, Amazon, Albertsons, etc.) and the “have-nots” is this large?

The Independent Grocer’s Edge  

My family is in the grocery business, and I grew up working in our family store. I’ve had the privilege of seeing what makes Independents so amazing, and why they really do have a gigantic advantage over the big chains. It boils down to a few key things:

Quality of the food – from prepared to fresh food, it doesn’t get any better!

Quality of the employees - nobody cares more about the customer experience.

Quality of the customer service - a constant drive to serve every customer as if they are family.

No matter how much money Amazon and the others spend, they will never be able to compete in these areas. These are the virtues that Independents can use to their advantage.

Growing up in my family’s Italian grocery store, I’ve also seen first hand the real disadvantage independent grocers have when it comes to technology, innovation and marketing. Even more troubling, the gap is widening as the big companies acquire smaller chains and increase their investment in the future. Despite these difficulties, and because Mercato loves to help independent grocers, we have prepared a strategic roadmap to success.

Competing With the ‘Big Guys’

Phase 1: E-commerce and Delivery

I’m sure you’ve heard the stats by now. According to a study by FMI, 20% of grocery sales are expected to occur online by 2025. That may seem like a long time from now, but many stores on the Mercato marketplace are already seeing 10-15% of their retail store sales happening online.

The percentage of U.S. consumers who purchased groceries online over the past year grew from about 23.1% to 36.8%, according to Coresight Research, an online marketplace for independent grocers.

Online grocery shopping is without a doubt here to stay. The Independent can win by embracing this change and getting online.

List all of your products online. The number one concern for online shoppers is freshness and quality. Prove to them that the Independents are the only ones who understand this by listing all of your prepared foods, amazing produce and high-quality dairy and meats.

Know your online customers. Drop them a nice note in their bags. Figure out how to create an experience for them that shows your dedication to their satisfaction in the same way you would the person in your physical location.

Packing is key. Make sure that every online order that leaves your store was packed by an employee who knows your customers and can pick the highest quality cuts, the freshest produce and ensure items aren’t missing.

Phase 2: Data

What makes Amazon so successful? What makes Kroger’s tick? What makes Albertsons profitable? Simply put, data. Without data, they have no idea what to stock on their shelves, no idea what the competition is charging for similar products, and no idea what hot new products are on the minds of their customers.

Independents are at a real disadvantage here. If they only have 1, 2 or even 10 stores, how can they capture the same amount of data as a company with 500 or 1000 locations? Even more challenging, they aren’t data analysts. If they had the data, many of them wouldn’t even have the time to crunch it all. So, what to do?

Find any source of data you can. Data is information, and information is power. Many big wholesale suppliers have sales trend data. Be sure to remember that this data can be influenced by the particular products the supplier is promoting or offering at that time. It’s not always the complete picture.

Embrace competitive data. What are stores in the local market charging for similar products? Where is the sweet spot between profitability and over-charging? Knowing this information can give stores a huge advantage.

Find help. If a merchant doesn’t have the time or skill to know what to do with the data, find someone who does. Hiring data analysts can be expensive and time-consuming. Think about contractors, consultants or other sources of not just data, but analysis. It will pay off in the long run!

Mercato is committed to helping in this area. With our network of merchants rivaling the sales of some of the larger chains, we have access to the data that Independents need to compete, including pricing recommendations based on your local market competition, product recommendations based on online data and aggregated sales trends, and insights and suggestions for overall product mix and promotional strategies to improve profitability.

Phase 3: Supply Management

Many Independents don’t spend a lot of their time negotiating pricing with their suppliers or researching alternatives to lower their costs. As a result, the 16oz package of Cheerios that an Independent sells for $4.79 is available at the local chain for $3.59 and at the nationwide player at $3.09.

Even with diligence around negotiations and keeping suppliers on their feet by getting competitive bids, the buying power of any Independent can’t match the superstore. How do we change this?

Start with your supplier. The average Independent is probably using the same supplier they have been for years. Bring in a competitive supplier from time to time, push for better pricing constantly, and challenge your suppliers by showing them that price matters to you.

Join a larger group or association. There is power in numbers and in aggregation. Always try to be negotiating as part of a larger group. This way you punch above your own store’s weight and can get access to bulk pricing.

Mercato is poised to be there for Independents in this area. With the aggregated buying power of the merchants on the Mercato online platform, we can deliver all sorts of benefits, including bulk pricing and access to hot new products that your suppliers might not even carry.

In the end, the winners in grocery will be the ones who innovate, create passion among their customers, and have the best economics. The best strategy for an Independent is to keep doing the things they are great at, and then to find partners who are great at the rest to fill in the gaps.

Mercato now has over 750 merchants on our platform. Some are multi-store chains. Some are huge public markets and some are small specialty stores. What they all share is the courage to compete and the desire to stand up for the things they worked so hard to build.

Bobby Brannigan, Founder and CEO of Mercato

Guest post by Chris Cialone, Director of U.S. Sales Operations Wonder Rewards

Usually it’s the big chains that get the credit for leveraging the latest in technological innovations. We’re all used to seeing the splashy headlines announcing Kroger, Ahold or Amazon about to launch another new tech-centric feature or capability.  And it makes sense, one would think – the big guys have the big budgets, have innovation labs, and have R&D funding.  But independents have something the retailers don’t have – faster and nimbler decision-making abilities.

Unfortunately, many independents don’t capitalize on this strength, waiting instead for technology to filter down – and by then, customers aren’t as excited and any point of differentiation is long gone.

Today’s regional supermarket chains should find partners that can provide them a technological edge. Companies like Wonder Rewards, who have the ability to launch a turn-key, 100% digital loyalty marketing program that drives incremental sales by attract new customers, retaining the best customers, and offers up-sell and cross-sell opportunities.

Wonder Rewards uses transactional data to:

 Plan out a responsive customer journey

 Analyze data for insights and segmentation

 Design marketing campaigns using insights

 Execute those campaigns with offers and content in personalized texts, notifications or email

 Report on results, re-calibrate and optimize campaigns

What other technology is under-utilized by independents? Globalization. Technology has made the world smaller, it is now possible for a local grocery retailer to expand their customer base to include consumers in other countries, and these consumers LOVE American-made consumer packaged goods. There is a high trust factor to consumable products made in the US under stricter government safety regulations that exists outside of the US. Technology, like that made available to independents allows products sold by grocery retailers to be sold and delivered to the doorstep of millions of consumers in Asian countries. 

In another example of an attention-grabbing headline from a big chain, last August Kroger released a statement saying that “e-commerce enables Kroger to quickly scale to reach new customers and markets where we don't operate physical stores, starting with China.” And that the arrangement will “meet Chinese consumers' growing demand for high-quality, organic food products.”

Independent stores can now do the same with the Wonder Rewards online marketplace. You can expand the size of your customer base from your local market area to include millions of Chinese consumers who appreciate the value and quality of American made consumer package goods.  A logistic partner manages the process from product placement on the online marketplace to shipping direct to your new Chinese customer’s doorstep.

E1 Marketing Edge is an example of an emerging tech-centric company that can expand the size of independent retailers’ market from those within a reasonable driving distance to a global audience, regardless of language or culture. Interested? Stop by booth # 1204 at NGA to learn more.

Chris Cialone, Director of U.S. Sales Operations, Wonder Rewards

Twitter: @Chris_Cialone 

Special Guest Blog by Peter Larkin, President and CEO, National Grocers Association

Often cited as the one of the greatest catalyst of change within the retail grocery industry, technology is an area that independent supermarket operators must understand, and embrace.  Technology continues to have a profound impact, where virtually every detail of the supermarket industry is being touched by new solutions and platforms.

I see three technology threads, each entwined with the other. One is the explosion of mobile applications and programs that are turning grocery shoppers into high information consumers. According to Pew research, smart phone adoption among Americans has more than doubled since 2011. Not only are shoppers becoming more sophisticated, but they are using technology as a way to gain more information, transparency, and convenience. At the touch of a mobile screen, consumers can instantly access to updated information on locally sourced perishables, competitive promotions, price checks and recipe ingredient lists. In turn, this migration to the digital space is shaping customer relationships with retailers. Today’s shopper does not want to be talked to but instead wants to be a part of the conversation.

Consumer product manufacturers and marketers make up a second technology thread. By analyzing large chunks of customer data and retail sales, manufacturers, retailers and service suppliers are exploring innovative ways to touch their target audiences. Big data though can be vast and hard to harness. Whether it’s social media, a mobile payment system, or loyalty programs, technology can effectively create many new opportunities for savvy retailers to learn about and to connect with their shoppers to better serve their needs. A good place to see and learn about a number of these innovative solutions is right here at www.advancingretail.org.

The third thread is in the store itself, where technology is increasingly employed to improve overall store productivity to program more effective lighting, to boost checkout efficiency, to track shopper traffic flows to improve layout and sales per square foot, or to offer customers immediate cost savings via real time wifi connections as they shop. A great, and very recent, example of this is Sedano's Supermarkets launch of a “robotic supermarket,” which entails an automated fulfillment center where AI-enabled robots will assemble full supermarket orders of up to 60 items.

While the landscape is quickly evolving, many independent grocers are taking advantage of cutting-edge technologies to engage with their shoppers, find efficiencies, and reach new and existing customers where, how, and when they want. Independents have been making their move into digital. They are hiring dedicated staff, dedicating marketing budgets to digital initiatives, more effectively leveraging social media platforms, and integrating the latest technologies into their business strategies.

With the dramatic pace in which new apps and tech solutions are coming on to the market, it can all seem a bit overwhelming, but technology will play a defining role in the supermarket industry.  Those retailers that are on the forefront of implementing new technology and embrace the hyper-connected, tech-savvy consumer are positioning themselves for success. I’m one who is convinced that these threads will weave into a pattern of rising sales and profits.

And that’s why the 2019 NGA Show will kick-off with a new educational event, spearheaded by our partners at CART, entitled “iRetail: Technology Innovation Reshaping the Grocery Industry.” The event is designed to give supermarket operators a framework for navigating fast-paced innovation while maintaining a focus on the importance of people and physical stores as we move into the future. Despite increased competition from all angles, it is an exciting time for the supermarket industry – and we at NGA are bullish about what the future holds for the independent grocers! Known as the true entrepreneurs of the industry, independents are nimble enough to quickly overcome obstacles, and are finding innovative ways to respond to changing consumer preferences, which is something they’ve always been good at given their close ties to their communities and the consumers they serve.

On July 1, 2010 Peter Larkin became the president and chief executive officer of the National Grocers Association (NGA). NGA is the national trade association representing the retail and wholesale grocers that comprise the independent sector of the food distribution industry, representing over $131 billion in annual domestic sales. He also serves as President of the NGA Research and Education Foundation.

Prior to joining NGA, he established his own government relations consulting firm, Larkin Public Affairs, in 2008. From 1996 to 2007 he was President and CEO of the California Grocers Association and also served as the President of the CGA Educational Foundation and as an officer of the California Shopping Cart Retrieval Corporation (a for-profit subsidiary of CGA).

From 1989 to 1996, Larkin was Vice President of State Government Relations and Environmental Affairs for the Food Marketing Institute (FMI) in Washington, DC.  Prior to FMI, he managed government and media relations programs for The Kroger Co. He also held similar positions with Philip Morris U.S.A.  After earning a bachelor’s degree in political science from the University of Vermont in 1976, he served as legislative assistant to U.S. Representative Donald Mitchell (R-NY).