Brown and Cole Closing Stores
By George Anderson
The family-owned Brown and Cole grocery store chain is closing eight of its 31 stores in the Pacific Northwest and the owner says he has no choice as shoppers desert his stores
for Wal-Mart.
Craig Cole told komo 4 TV, “The American worker and local business are becoming road kill in Wal-Mart’s march toward worldwide domination of commerce.”
Moderator’s Comment: What is the current state of independent and small chain grocery in the U.S? What strategies and tactics are independents and small
chains currently using to effectively compete with larger competitors?
First, let us say that we have enjoyed a number of visits to Brown and Cole stores over the years and fondly remember writing a special report on principle
centered management that included a profile of the chain.
It saddened us to read the news of the store closings. Brown and Cole and other independents and small chains in the Pacific Northwest such as Haggen’s,
Larry’s and others have, for us, exemplified some of the best qualities of what local grocery is all about.
Craig Cole may be right that “the American worker and local business are becoming road kill.” His anger is misplaced, however, because it is the American
consumer, not Wal-Mart, that is putting them in face of oncoming traffic. –
George Anderson – Moderator
My blog (urbanplacesandspaces.blogspot.com) has an entry linking to three great articles in today’s Austin American-Statesman (registration required). The new Whole Foods store opening tomorrow is eatertainment-retailtainment to the max. They even sell clothes. Two other entries cover HEB and their Central Market concept. Another entry is about the department store thread, and I came across a book by Cecil Hoge from the late 1980s about Sears competing with Wards. Both entries are relevant to this thread.
I think this is a time of tremendous opportunity for the independent grocer. I work with many independents that have effectively used Wal-Mart as muscle to cripple and destroy ineffective publicly held chain stores who are obsessed with Wall Street and their multi-million dollar CEOs who have no meaningful supermarket experience. It is a thrill to watch these retailers, some with as few as one store, continue to grow and thrive in a competitive environment. Their methods are not always grand prix, but rather demolition derby. These retailers are like coyotes – they adapt and survive. As the chains depart from the marketplace, these creative independents find ways to consolidate and absorb the sales of their fallen competitors.
In the past, I worked for what I call a grocery store company and a grocery company. The difference was that the store company operated as a collection of independent stores. The grocery company won on the logistics side and the store side. The store company had higher prices, but positioned themselves up market so it worked.
It worked until they tried to go down market. It worked until they sold out to an LBO specialist. The new owners cut service and now their stores are deserted.
The grocery company expanded and put the independents out of business. They managed to keep successive waves of comparable stores out of their market with the help of a “coopertition” partner, a company they never competed with. But, they now face Wal-Mart and Target. Wal-Mart competes on logistics, just like the grocery company. So what did they do? They devised a coopertition cross shopping strategy that forces people to shop at Wal-Mart by eliminating specific nationally branded items. Why? To fight off Target.
I have no knowledge of them doing this specifically other than my own observations. If everyone is going up market to escape Wal-Mart, Target is waiting for them just above where Wal-Mart happens to be.
This coopertition is driven solely by the planogram. The grocery company could very well stock the item that makes me shop at Wal-Mart, but they decided to remove the item from their inventory. It is not a slow mover. They just substituted several other brands that don’t meet expectations. They manufacture more food now using the same logistics that built their grocery empire.
There is a need to redefine what grocery is. RFID will be normed quick enough, so there is no real differentiation there. Everyone will go there. Then, what?
It’s hard to second-guess operators as sharp as these. So I’m sure they did the right thing. The overall competitive climate is getting tougher all the time. Most success stories I hear against Wal-Mart involve making strong statements on perishables, or upscaling. But the anti-Wal-Mart sentiment out there is growing. Just about every day I hear new stories of communities of all sizes and demographics fighting proposed Wal-Marts in their cities and towns. Based on anecdotal reports I hear, that is already affecting Wal-Mart business to a degree. I don’t see that as becoming a very significant factor, but I also believe Wal-Mart has to take serious, genuine (vs. PR window dressing) steps to counteract arguments of how it brings down wages, benefits, standards of living, etc., in the communities it serves. I still love Wal-Mart, as you all know, but I also believe this would be a wise course for them.
George is right that we have to blame ourselves for supporting Wal-Mart by shopping there if we disapprove of what they are doing to the independents and small chain grocers. We all enjoy lower prices and love to get a deal but feel very badly about the stories of Wal-Mart employees being underpaid and having inferior or no healthcare insurance. Many of us think that it might be a good idea for the government to, in some way, level the playing field, particularly in the area of healthcare. That’s ironic when in so many ways it’s the government’s fault that we have the healthcare mess in the first place. As a general rule, the more the government gets involved, the more expensive things are due to bureaucratic waste and politics. And they don’t have a very good track record regarding looking out for the public’s best interest versus big business either. Look at the USDA and FDA for current examples.
It used to be the joke among independent supermarket operators that they could sell their stores, put the money in Wal-Mart stock and make twice the money. Wal-Mart stock has traded up and down in a $10 price range for most of the last five years, so that part of the equation doesn’t hold true. But many smaller retailers still believe they can reap greater rewards by cashing in, and that hurts the overall independent segment of the industry.
This isn’t, by the way, an indictment on what Craig Cole is doing. Like George, I’ve had the good fortune to visit several Brown & Cole stores and have nothing but respect for Craig and the way he operates his company. I have to believe that he and his team tried to work the numbers on these eight stores every way they could and ultimately saw fit to devote their resources to the remaining 23 locations.
As to the second part of the question, there remain big pockets of the country where independents are thriving, including here in tri-state area (NJ, NY, CT), in upper Midwest and in New England. Not coincidently, these areas are also homes to some of the best wholesalers — Wakefern, SUPERVALU and C&S. And that’s the key to operating a successful independent today. Working with the wholesaler, the independent must create a virtual chain that gets product to the consumer in the most efficient and effective manner while tying the shopper to the store through customer service and unique product offerings.
I saw a presentation at the mid-Atlantic ICSC meeting last year and the point made about Wal-Mart Supercenters and supermarketing is that, after a year, the #1 and #2 chains in the market recover (provided they respond) but that the #3 and #4 chains lose significant market share, or worse (like close stores).
Also, I remember reading a piece I think in the NYT many years ago about a Chick-fil-A franchisee. One of the points he made is that for years he would focus most of his attention on his lower performing stores, and as hard as he worked, it was difficult to get these stores up to the average. He then came up with a new strategy–get rid of the lower performing stores and spend all his efforts making the better performing stores even better.
Things to think about.