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Weather a stormy economy with these tips

NFM Staff

September 30, 2008

6 Min Read
Weather a stormy economy with these tips

by Allie Johnson

It's the topic on every retailer's mind right now: How do you survive when costs are skyrocketing, customers are balking and everybody's feeling the pinch? If you take a few strategic steps—and avoid some common mistakes—you'll be much more likely to make it through to better financial times.

"It's a tough time, so you need to do everything humanly possible to stay in business, to keep the business alive, because eventually we're going to come out of this, and things will pick up again and go back to normal," says John Stanton, Ph.D., professor of food marketing at St. Joseph's University in Philadelphia. "In the meantime, it's better to focus on the things you can control and not what you can't."

So what can you control? Your service, your costs and your prices.

Keep your cool

During hard times, it's especially important not to let the customer see if you're struggling. "Make sure your aisles are faced, your floors are clean and your shelves are stocked, so the customer doesn't walk in and say, ‘Things are getting shabby and downcast around here,' " says food retail consultant Rance Baker, owner of Creative Food Concepts in Denver. "Put on the best face possible."

Providing an inviting shopping experience is one of the best ways a retailer—especially an independent retailer—can stand out from the crowd and make the customer feel that shopping in that store is a pleasant experience that makes it worth paying a little bit extra. "Bigger guys have more room for belt tightening," Baker says. "So smaller stores should offer some sort of customer service you can't get from the big guys—a clean store, friendly staff. Every time I walk in that store, I should be so glad I walked in."

Part of providing great service means remembering that, like you, the customer is trying to stretch dollars. For example, stores in the Boulder, Colo.-based natural grocery chain Sunflower Farmers Markets make it easy for customers to create an affordable meal out of on-sale items. "We show them full meals they can create within our flier," says Chief Operating Officer Chris Sherrell. "You can get a pound of ground beef for $1.99, a tomato for 30 cents, a head of lettuce for 33 cents and have a complete meal for four people for under $5—you can't do that at a restaurant."

Cut costs where you can

During tough economic times, trimming costs without going too far is critical. Natural foods retail consultant Jay Jacobowitz, president of Retail Insights in Brattleboro, Vt., recommends taking out your profit-and-loss statement and scrutinizing expense line items. Here are a few places you'll likely be able to trim costs:

Staff salaries. "Start with your biggest controllable expense, which is compensation," Jacobowitz says. "Ask yourself who is typically sitting on the tofu bucket waiting for you to tell them what to do next." Though no one likes to make staff cuts, Jacobowitz says getting rid of employees who aren't pulling their weight makes good business sense—and will boost the morale of hardworking employees. But whatever you do, don't let good salespeople go, he warns. "That creates a vicious circle," which leads to sales—already down because of the soft economy—plummeting even further. "When the economy picks up, you're behind the eight ball, trying to find skilled sales help."

Advertising and marketing. "If there is some of your advertising or marketing expense that's not delivering for you, that's a good candidate [to cut]," Jacobowitz says. When you do advertise, it's very important to target your campaigns. "It doesn't make sense to waste a penny on the marginal customers you had a few years ago who were maybe trying organic," Professor Stanton says. "You really have to find the customers who believe the product is important and are willing to pay the extra money."

Product cost. "If you haven't already, think about contacting your primary suppliers, such as your largest supplement lines and your major distributors, and asking what you have to do to get to the next level of discount," Jacobowitz says. "You may be able to, by shifting around your supplier mix, consolidate orders and gain one or more percentage points in discount, which should go directly to the bottom line." Sherrell says Sunflower Farmers Markets has been selling more local items to save on freight and trucking costs as well.

Price strategically

"It's a hard time to raise prices. You're feeling the crunch, but so is that guy walking in the door," says Baker of Creative Food Concepts. That's why it's important to act tactically.

Don't raise prices as a knee-jerk reaction. Instead, step up your comparative shopping. "Get out there and do more of that so when you have to adjust your prices, you know what everyone else is doing," Baker says. "Watch constantly so you can stay in line with the other guys." That strategy is working for Sunflower, Sherrell says. "We want to be the last one to raise the price. If we have a competitor not going up, we're going to wait until they do."

And as a concession to the consumer who's worried about putting dinner on the table, do your best to keep staples reasonably priced. "Don't mess with your basics if you can get away with it," Baker recommends. "Keep your apples, your yogurt and your milk as cheap as possible—those things the customer has got to have on a daily basis—so they feel less of a crunch."

At the same time, it's important not to try to compete on price alone. "That's one of the biggest mistakes you can make," Stanton says. "People must think there's value in things besides the price. You have to remind them what that value is." You can do that with in-store promotions. "I'm high on in-store promotion because you've got people in the store probably saying, ‘Should I or shouldn't I?' and you want them to say ‘I should,' and not feel guilty for spending that extra money."

On the other hand, there's nothing wrong with having a blowout sale during tough times to get people into the store, Stanton says. "You could do something like all the ingredients for a salad: ‘Tonight, you can have a healthy organic salad for only this much money.' Then have lettuce on sale, have carrots on sale, have tomatoes on sale; have three or four pieces of produce on sale, but not the organic olive oil."

In these tough times, the best thing any retailer can do is make small, strategic changes—and not let the economy scare you into making drastic moves. "Stick to your game plan and stick to your guns," Sherrell advises.

Allie Johnson is a Kansas City, Mo.-based freelance writer.

Natural Foods Merchandiser volume XXVIII/number 10/p. 52,56

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