The Independent View – When opportunity knocks, open the door

When last we visited, I briefly touched on the idea that it is not the weekly circular or the counter presentation that drives additional sales and margin for independents. Instead, the driving force behind increased volume and increased margin is found in an independent’s ability to take advantage of market opportunities. 

Independents are built to move quickly and adapt to opportunities as the market makes them available. Normally, no pre-set planograms or corporate dictates prescribe what an independent produce department must look like. 

Additionally, independent ad programs are usually written at 50% of the required chain lead times, a time frame which further enables an independent to write promotions closer to market than larger competitors. Many of the larger chains write ad programs months in advance and simply take margin hits should the market not react as predicted. 

Independent retailers, through their ability to dance, bob and weave on a daily basis, can take full advantage of market opportunities to achieve the magical combination of driving sales while growing margin.

So where do these opportunities hide and how can independent retailers seek them out? The answer lies in the type of relationship retailers have with their produce supplier. The most productive wholesaler-retailer relationships are those that go beyond the transactional (you order, I deliver) and spend time searching out mutually beneficial opportunities that result in more packages through the warehouse and more dollars through the retailer’s registers. 

These relationships are characterized by a willingness on the part of the retailer to think “outside the crate” when it comes to merchandising, sizing or variety. On the part of the wholesaler there must be a significant understanding of just how retail produce departments work and how market opportunities benefit a particular independent. 

In short, both the retailer and the wholesale company must know each other well and appreciate the abilities and nuances each brings to the relationship.

What does an opportunity look like? There is no simple answer. An opportunity looks different to retailers in varying circumstances.  In general, opportunities are built from natural market ebb and flow, driven by sun, rain and seasonality. Occasionally man-made opportunity drivers manifest themselves as well, such as consumer demand (fresh kale) or warehouse inventory issues. However, the majority of opportunities become available when growing areas overlap seasonally or when the weather pushes crops up and out early. 

For retailers that are operating in a hyper-competitive, price-driven market, an opportunity might be 30 size iceberg, 2 ¼-inch peaches or 100 size apples. All three still have a high degree of quality but might be smaller than what the store normally carries. That being said, the right opportunity on these items can create a below-market retail that still generates strong margins. 

For example, when iceberg is $1.99 at a chain, a huge weekend front-table display of $0.99 lettuce at a 40% margin is a win for the wholesaler, the retailer and the consumer.

For independent operators that are in more upscale communities or near resort spots opportunities might look a bit different. Not as bound by retail price, these independents should focus on the items that send a message, items that reinforce the store’s identity. For the Memorial Day holiday, perhaps it’s an 8 row California cherry.  Now that’s a statement!

These opportunities are out there, normally in smaller quantities – which are perfect for independents, as chains require much larger volumes which typically cannot be supported. The same merchandising technique is applied – a front table that greets customers with an amazing piece of fruit that sets the tone for the remainder of the department and the store. 

Certainly, the retail is higher than the typical 10 ½ row $1.99 ad, but with every chain store and mass marketer blanketing the universe with smaller fruit, why not make a statement with a larger, more enticing product? And who says a produce department can’t carry both with a little bit of ingenuity?

The produce industry is fortunate to be unpredictable – and although unpredictability drives the big boys crazy, it is right in the wheelhouse of an independent willing to be creative and truly “independent.” The first step is to ensure that the relationship between the retailer and produce wholesaler is a mutually beneficial partnership. No one wins in a suspicious, antagonistic arrangement where taking advantage of one another is the hallmark of the relationship. 

Retailers and their wholesale partners should engage in regular, almost daily, conversations that are “push-pull.”

Independents should be constantly asking their produce supplier for opportunity buys that drive both sales and margins. Wholesalers should be constantly seeking out those opportunities and presenting them to a willing and receptive retailer. 

An independent retailer’s dependence on an ad that is written weeks in advance and produce counters and tables that never change is tacit acceptance of a status quo that produces the same result over and over again. 

Independent supermarkets have been handed a gift in the beauty of the produce industry’s unpredictable bounty. When combined with a responsive and innovative wholesaler, independent retailers can stake their claim at the top of the mountain as leaders in the retail produce arena.