Do you remember those old Western movies where the settlers moving west would have to circle the wagons to better protect themselves from the arrows that seemed to be coming from all directions? Some co-ops may be feeling that way, as their once safe marketplace now seems to reveal competition coming at them from all sides. Just look at these recent headlines and news bites:
Safeway broadens distribution for “O” organics. Beginning March 27, 2006, the organic line became widely available throughout Safeway’s chain of 1,775 stores in the United States and Canada. The 150-strong product range includes beverages, bakery goods, cereals, canned and frozen foods, dairy products, and snack items. And they are serious! I walked one of their new Lifestyle stores the other day, and it had 80 organic produce items featured in the center of the store and O brand organic products on every end cap.
How about Trader Joe’s? Are they popping up everywhere, or does it just seem like that? If they are in your town, you know they do a great job and have excellent customer service and demo programs. Now they are even jumping into our territory of being politically active with their product selection. Trader Joe’s plans to drop its use of genetically engineered ingredients in its store-brand products ended. The mainstream grocery chain announced it would do just that, “effective immediately.” According to the company statement, “we will work with any new vendor to produce private label products for Trader Joe’s without genetically engineered ingredients. Our goal for existing private label products is to have all such products reformulated, if necessary, and certified within one year.” Eighty-five percent of the products sold at Trader Joe’s stores will be affected by this policy change. We can no longer rely on being the retailer in town that is willing to stand up for our customer’s best interest when it comes to product selection.
Then, of course, there’s Whole Foods. I’m sure you heard the recent news. “Whole Foods Market and Wild Oats Markets Announce Merger to Create Stronger Natural and Organic Foods Retailer, Better Positioned to Compete in Today’s Dynamic Food Retailing Environment.” According to John Mackey of Whole Foods, “We will also gain immediate access into a significant number of new markets.” Buying Wild Oats gives Whole Foods access to a smaller store format, and many of the smaller markets that wouldn’t have been financially viable with their larger stores are now part of their new growth strategy.
Roll up your sleeves and compete
So, what’s a co-op to do? Run screaming into the night? No, roll up your sleeves and compete. First off, you usually have between a year and 18 months before any of these guys can open a store after they announce their intent. So keep your ear to the local marketplace and start preparing. Even if the horizon looks clear, prepare for the future anyway.
I recently led a panel at the Eco-Farm Conference in California, a session titled, “Can small retailers compete with the big stores?” And the response was a resounding YES!
All three stores on the panel were of different sizes and served different demographics. Each of them had at least one major competitor and in one case all of the competitors mentioned within a few miles of their store. Here’s what they had to say.
First, do some detective work. Know your enemy, so to speak. What do they do well? Take a field trip with your staff, look at all the things that they do, and compare that with your store. Whole Foods does a killer job in prepared foods, Trader Joes has great prices, and Safeway combines an upscale shopping and organic experience with the opportunity to buy Kraft macaroni and cheese. Then take time to evaluate your store and define who you are and what you do really well. Decide where you can improve, or what may be an area worth letting go.
Brand yourself. Do you shout about all the good things you do? Most of the big guys do. Unfortunately, many of the co-ops I work with don’t. And it’s becoming more and more important to let your customers know who you are.
Look at this customer survey from the June 2006 Natural Foods Merchandiser: “I usually buy products from companies whose values are like my own.” In 2002: 46 percent. In 2005: 51 percent. The truth is that most of you do a better job in the values area than your competition, so start shouting. All of the panelists said they had started to do a better job of telling the community who they are, with great results.
Work with other local businesses. This was key for all three of the panel’s retailers. Join the local business group if you’re not already a part of it. Figure out ways to work together to promote each other.
One store stocked a local homemade ice cream from a well-known shop in town and donated a percentage of the sales to a local school garden project. The same store worked with the local bike shop and started a program called “Buy, Buy, Bike.” They gave their customers a token every time the customer rode a bike to the store to shop. After collecting a certain amount of tokens, the customer could redeem the tokens for a $10 coupon at the bike shop.
Develop your locally grown program as well. Make a big deal about how money spent locally stays local and doesn’t go to chains based in Texas or the U.K.
One store did events every weekend to keep the excitement buzzing. Customers looked forward to shopping Saturday just to be part of what was going on.
Everyday values. These panelists’ stores, like many co-ops, are thought to be high priced. Right or wrong, you need change that perception and let folks know the everyday value of your store.
Do what they can’t or won’t. Switch to being only organic in your produce department or deli. Make hometown meals. One store offered a locally grown breakfast every Saturday morning.
You may do store tours with kids, but so do the big guys; you need to get in the schools and become the local store that is educating the children about good food choices.
Become a CSA drop off spot. Many co-ops do this already with great success. It’s a great way to work with local farmers and get new customers into your store. Set up a table at the farmers market. (For more on Community Supported Agriculture and working with farmers markets, see p. 18 and p. 16.)
For many stores, bulk sales are dropping. Have classes on using bulk, or prebag your top sellers. One client of mine did just that and raised their bulk sales 200 percent.
Invest in your staff. Each of the stores mentioned that they took the time to get their staff the tools and training needed to do their jobs better. Have the staff help develop the plan to compete.
Recognize and respect your competition, but don’t fear them. Come from a place of “can” as opposed to “can’t.” If the “good enough” attitude is prevalent in your store, GET RID OF IT! Good enough isn’t. Expect greatness, and set up a culture that nurtures and encourages it.
Everything is merchandising. Walk your store; look at it with fresh eyes. Is there “Wow!” when you walk in (there will be at Whole Foods) or “Wow!” around every corner? Every end-cap? Steal ideas from other stores who do great merchandising and make them your own.
Prepare for a drop: everyone wants to go to and shop at the new game in town. Among the panelists discussing new competition, all of the stores prepared for a drop in sales, and it did happen. But because of the work they had done in advance, these stores not only got their sales back within a year, they all said they felt it made their business stronger. If these stores can do it, so can you.
The future is now, and I can’t wait to see how we all make our stores and the marketplace better.