Gourmet Retailers Facing Competition on All Fronts
According to Gourmet Retailer’s annual reader survey, smaller food and kitchenware stores are feeling more optimistic about business conditions than a year ago. However, they remain wary of their larger competitors, especially online sellers and Whole Foods.
The survey, conducted in June, pointed to online retailing as the biggest threat to the gourmet retail sector, identified by 41.5 percent of respondents. That was followed by Whole Foods, 25.5 percent; chain supermarkets with more than 11 stores, 23.3 percent; organic/natural food stores, 20.2 percent; and independent supermarkets with one to 10 stores, 18.2 percent. Despite its hyped push into organics, Walmart ranked only seventh, at 17.2 percent.
For solely food retailers, 30.2 percent ranked Whole Foods as their No.1 competitor, followed by online retailing at 28.1 percent. Among kitchenware retailers, 80 percent pointed to online retailing as their top competitor.
Overall, respondents reported slight improvements for 2011 over 2010. Slightly better results were predicted for the current year with both customer count and average transaction size on the uptick.
Among food categories, gourmet retailers were particularly bullish on sales gains in 2012 in beer/wine, produce and meat/seafood. Other healthy gains were expected this year in local merchandise in general, as well as cheese/deli, organic, ethnic foods, fresh bakery and coffee/tea. Food sellers indicated that they are benefiting from customers "watching their spending" and eating more at home. They’re also "starting to buy more specialty items" and "want to know the provenance of the products."
Among the respondents, nearly three-fourths operated a single store and 60.2 percent said their sales were under $1 million with a mean of $7.5 million.
The fairly positive survey around specialty foods comes amid increasing momentum at Whole Foods, the successful public offering of Natural Grocers, and the just-announced IPO filing by Fairway. Many newer specialty food shops also seem to be finding a greater welcoming in major cities amid a strong trend toward natural foods, local offerings, and the healthy foodies culture.
According to the State of the Specialty Food Industry 2012 Report from the NASFT (National Association for Specialty Food Trade), cheese claimed the top spot in spending for specialty foods, followed by meats, poultry and seafood; chips, pretzels and snacks; coffee, coffee substitutes and cocoa; and bread and baked goods.
- The Gourmet Retailer 2012 State of the Industry – Gourmet Retailer
- Specialty food retailers thrive, expand in Austin – Austin Business Journal
- The State of the Specialty Food industry 2012 – Specialty Food Magazine
- NASFT: Five hot specialty food retailers – Chain Store Age
- How to Compete with the Big Chains? Think Locally – entrepreneur.com
- Specialty Food Industry Tops $75B: Study – Progressive Grocer
- A Cheese Shop, Homey Yet Sleek – New York Times
Discussion Questions
Discussion questions: What steps should smaller gourmet food retailers be taking to position themselves against greater competition from Whole Foods, other larger food sellers, and online retailers? What do you think of the overall outlook for smaller specialty food stores?
Few retailers believe that thou shall not covet…and tradition approves all forms of competition. That’s why smaller gourmet food retailers are aggressively energizing the marketplace with unique offerings, ideas and settings.
Smaller specialty food stores will prosper in direct relationship to their skill to innovate new products and ideas, to make their stores fun to visit and make people proud to be known as its customers.
Local, local, local. Small gourmet food retailers can differentiate themselves through an exclusive assortment of local products sold by a highly knowledgeable, customer service-focused staff.
There is plenty of room for local gourmet stores throughout the country. The keys to their success are location, selection, value pricing (not lowest pricing) and customer service. The better these stores do, the more they boost the local gourmet food entrepreneur/manufacturer. It’s a win-win proposition.
There is no single solution. Great customer interaction and education is critical to near-term success. Fresh and perishable products are difficult for the larger retailers to effectively compete on. Packaged products and kitchenware are another story. The internet will be the competition.
Smaller gourmet food retailers have the benefit over online retailers due to the hands on, one-on-one relationships offered through their staff. A great example of this is The Brooklyn Kitchen which offers a knowledgeable and friendly staff that share valuable information with shoppers regarding the goods they sell. The shop also offers a wide variety of classes demonstrating everything from pie making to pasta making to pickling, as well as offering private parties in their kitchen. I think smaller specialty food stores have a positive outlook over larger stores and online retailers due to the in-store services they can offer as well as their customer-staff interactivity.
Having worked in a gourmet retail shop in the past, I know the customers appreciate the staff and the interaction that is offered. Sure, Whole Foods and Fairway are “superstores” compared to a small gourmet shop, but I have never witnessed the same, friendly customer support at these big stores as I have seen when working in a small shop.
I think the outlook for smaller specialty stores is very positive. They can capitalize on local products, offer better service through a deeper understanding of the products they sell, and operate with greater agility. Offering classes and other special services can help them as well.
Smaller gourmet retailers have such an opportunity to differentiate that makes the outlook very positive, as long as they continue to build relationships with local shoppers.
These stores can be a real treat to visit — a great place to indulge the small luxuries that we want. Communicating with the local community well and and often with what’s new, featured items, and demonstrations will drive more frequent visits. Keep it authentic, fun, and high quality; shoppers will understand the value.
It seems to me that foot traffic outside the storefront would be an important ingredient for success. Large windows. Bright interior. Displays in the window featuring compelling products. We could use one here in Lincoln, CA.
I find that shopping Homegoods gives me a chance to try new gourmet products economically. I do, however, think that small stores with a strong community presence will thrive as long as they keep the “common touch.”
Gourmet stores must have a point of view that is distinct. They must communicate that distinction so that it is crystal clear to every prospect in their trading area. Play to your strengths.
A good retailer can beat a 500 pound gorilla in any given category. You just cannot beat them in all categories. It requires discipline. Remember, you are an agent for your customer — not for your suppliers.