Are Smaller Chains Relevant to Suppliers?

By Al McClain

In a world increasingly influenced, if not dominated, by mega-chains, three smaller retailers - Marsh Supermarkets, Golub / Price Chopper and Smart & Final - tried to demonstrate to large CPG manufacturers at the recent GMA (Grocery Manufacturers of America) Executive Conference, why they matter and should be important to suppliers.

Compared to Wal-Mart, with over 4,800 stores and $256 billion in annual revenue, the chains participating in the presentation are small potatoes, at least by the numbers:

• Marsh Supermarkets: 285 stores - $ 1.7B annual revenue
• Golub / Price Chopper: 100+ supermarkets - $ 2.1 B
• Smart & Final: 230 stores - $ 1.7 B

So, what can retailers like these offer their CPG partners?

With Marsh, it comes down to innovation. Marsh scanned the first item (Wrigley gum in 1974) and has a tradition of trying new things. Currently, their in-store kiosks called My Marsh are available in all their stores, and offer special promotions to attract and retain shoppers. Also, they have new "lifestyle" stores, which have music in their parking lots, residential type lighting, and even fountains at the entrance -- all designed to get consumers to slow down and take longer, presumably more enjoyable (and profitable) shopping trips. Their new European style wine departments have enabled these stores to become the number one wine sellers in their trading areas, and their re-styled departments are themed according to how consumers use products, rather than sorted according to an industry view. Next month, Marsh debuts its "Arthur's Fresh Market" designed specifically for aging baby boomers.

Price Chopper offers suppliers 10% growth per year, and an associate base with a literal stake in the results, as they own 55% of the company's stock. Their "MarketCenter" stores average 73,000 square feet, yet have the feel of New England marketplaces. Through their loyalty card program, they communicate to customers regularly, focusing on lifestages and lifestyles. They even have five customer newsletters/magazines that focus on specific lifestyle areas like families with babies, active shoppers, etc.

Smart & Final has always been a hybrid retailer, somewhere between a club and a mini supercenter. Founded in 1871, the stores have a warehouse look and feel, and operate on a cash and carry basis, with no membership cards. They try to be more nimble than competitors, offering more neighborhood-oriented assortment, knowing their shoppers well, and using direct mail and a loyalty card to keep customers.

While there is nothing revolutionary offered by these three chains, they are good examples of sharp regional operators, who are using things other than price to acquire and retain customers. They can't drive sales the way the mega chains can, but they certainly offer insurance of a sort to suppliers, and also the willingness to experiment and incubate new concepts.

Marsh management is looking for openness and flexibility in relationships with suppliers, while Price Chopper wants manufacturers to simply come and meet with them. Smart and Final has noticed that retailer-supplier relationships have become more creative of late, enabling more unique offers for shoppers, rather than everyone selling the same products and promotions. S & F also is concerned about sharing information with trade partners, and wants relationships that are built on mutual trust. They also have a particular difficulty in that they draw product from several channel silos, and wish suppliers would be more flexible in the way they define trade classes. Marsh would also like more resources for resets, shelf management, and the like.

As for the future, Marsh sees it as bright for the smaller formats, due to the aging population, combined with the desire for more convenience. Price Chopper sees more consolidation ahead, and regionals becoming more efficient. S & F believes the "big boxes" are difficult to shop, and that Internet shopping was written off too early.

Moderator's Comment: Without alienating their ‘bread and butter,' how can suppliers work more effectively with smaller operators to achieve a "win-win"? What retailers and suppliers are doing a good job, in terms of finding creative ways to work together?

The ultimate in the retailing industry is still getting your product into Wal-Mart and having it move well. Over the past few years, however, suppliers have generally realized that they had too many eggs in one very large basket, and are trying to make amends. - Al McClain - Moderator