By Amy Neale
Independent Grocers have seen immense profits and success over the last few years with the pandemic surging demand to an unprecedented level. While pandemic conditions haven’t been easy, grocers have navigated the challenges well. Unfortunately, it also kicked off the cycle below and dangers loom for the independent grocery store that doesn’t proactively reinvest in marketing to head off profit loss.
Pandemic Strikes: Demand Sores
As businesses shut down, consumers stock up on supplies and eat at home more. Marketing spending decreases heavily or is eliminated completely as independent grocers try to keep up with supply and labor issues.
Pandemic Today: Inflation Blind Spot
Inflation gives profits a large bump even as demand cools from pandemic highs. Consumers are also becoming more price sensitive with rising costs and looming recession. Units and market share begin to drop for independent grocers who don't reinvest in marketing and competitive merchandising. Cost of transportation, labor, and other fundamentals increase, while Big Box chains utilize marketing spend to gain market share from smaller retailers. The Fed works to get inflation under control by increasing interest rates and targeting higher unemployment. At the same time, fears of recession persist.
Cliff Ahead: Blind Spot Revealed
The Fed accomplishes lower inflation by continuing to raise interest rates and targeting an unemployment rate of above 5%. This results in an economic recession. Profits decline due to quickly tightening margins and lower inflation, revealing the loss of market share and volume of units sold. Margins are reduced by very strong price competition and increasing underlying costs, such as labor and transportation. Due to this, profits begin to drop faster than the number of units sold. Consistent marketing, purchasing power, and additional spending from Big Box retailers make it difficult to maintain and regain lost market share.
Savvy retailers who look ahead can offset the challenges of the recession by:
• Going Past the P&L by Monitor Lift Reports on the Top 100 Items
• Merchandise Effectively for Consumers’ Increasing Sensitivity to Price
• Reinvesting in Marketing Programs to Prevent Market Share Loss
Check Your Blind Spot, Prepare Your Marketing
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