The supermarket industry is changing rapidly, and independent grocers are no exception. Independents are used to being challenged by big chains and discount warehouses, but now they must deal with a new wave of competition from e-commerce, home delivery and meal kits, as well.
But independents are faring well. Despite a growing number of competitive formats, independent grocers’ margins are on the upswing, albeit a small one. While same-store sales were down 0.6% in 2017, they improved over last year, in which the category saw a 1.6% decrease in same-store sales, according to the National Grocers Association (NGA) and FMS Solutions Holdings’ 2018 Independent Grocers Financial Survey.
The improvement was partially due to the easing of top-line pressures, which marked nearly all of 2016 and most of 2017, NGA said. With margins rebounded slightly, 71% of independent grocers are looking at their business’ future with more optimism.
The profit leaders averaged 3.1% in net profits, down from 4.7% in 2016, underscoring that the market conditions impacted all independents. Grocers in the top 25% of net profits saw greater sales contributions by fresh departments, including produce, meat and deli, at higher-than-average margins.
The top independent grocers tend to operate slightly larger stores that averaged a greater number of weekly transactions at a higher transaction size. They focused on managing inventories, averaging lower shrink and higher turns across departments, and showed a high probability to reinvest into their businesses while minimizing long-term debt.
For the full story, go to this week’s Food Institute Report.