Independent Grocer Benchmark Survey Reveals Optimism for the Future

June 26, 2018

By: Peter Larkin
NGA President and CEO

With the explosion of new formats and competitors in the marketplace, alongside some continued food deflation, 2017 was a challenging year for independent supermarket operators. However, as the true entrepreneurs of the industry, independent grocers are responding in innovative ways to these challenges, and according to the latest NGA benchmark survey, the majority (71.7%) said they were optimistic that 2018 would be a better year for business.

For the past 13 years, NGA, in conjunction with our partner FMS Solutions Holdings LLC, has conducted the annual Independent Grocers Financial Survey. This study analyzes the financial and operational performance of independent supermarket operators within a fiscal year and provides an in-depth look at the economic, political, and competitive landscape in which these retailers operate.

Survey respondents represent a wide array of companies throughout the United States and Canada: 41.1 percent of respondents were located in the Midwest; 23.3 percent in Canada, 15.1 percent in the South, 12.3 percent in the West, and 8.2 percent in the Northeast.

While 2017 was a disappointing year for net profits, which decreased to 0.09 percent, same store sales were down -.60% compared to -1.62% in fiscal year 2016. Independent grocers rated competition, led by conventional supermarkets and supercenters, as their highest concern to growing sales and profitability. Dollar stores, hard discounters, and online retailers rounded out the top five perceived competitive threats. Although not listed in the top five, competition from restaurants/foodservice was once again an area of increasing concern. In addition to competition, the other issues with growing intensity of concern were staffing, hiring and retention; health care costs/compliance, the economy, and regulations.

Additional insights from the report:

  • In a reversal from last year, single-store independents were able to drive slightly higher margins than multi-store operators.
  • Profit leaders, the top 25th percentile in net profits, saw a greater sales contribution by fresh departments, including produce, meat and deli, at higher-than-average margins.
  • Labor and benefits remained the largest expenses, reaching a new record of 15.16% of sales.
  • While center store remained the largest sales contributor, nearly four in 10 dollars were generated by perimeter departments, including produce, floral, meat, deli, bakery and seafood.
  • E-commerce is an area of great potential for independents, with 19.4 percent saying they offered click and collect services, 9.7 percent offering home delivery, and just 2.8 percent offering both home deliver and click and collect. Of those stores that did offer e-commerce services, the average online transaction size ($105.73) was much larger than the in-store transaction size ($26.93).

There’s no doubt that the supermarket industry is rapidly changing, from technology to the competition from new formats and shifting consumer trends. However, independent grocers are nimble enough to quickly overcome obstacles; and with strong ties to their communities, they know what consumers want and need. I share the same optimism about the future of independent grocers as the work diligently to differentiate themselves in a fiercely competitive marketplace to become shoppers’ stores of choice.

For more information on how to download this report, please visit: https://www.nationalgrocers.org/resource-center/.