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December 20, 2014

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Small grocers work to tap niche markets

If independent grocers expect to survive and experience sales growth in a nation dominated by Wal-Mart supercenters and other large chains, they must differentiate and avoid head-to-head competition, an industry expert said.

Speaking at the National Grocers Association, held in Las Vegas last week, Art Turock, president of Kirkland, Wash.-based consulting company Art Turock & Associates, painted a grim picture for attendees if they didn't find a new way to compete in today's marketplace.

The National Grocers Association is the national trade association representing retail and wholesale grocers that comprise the independent sector of the food distribution industry. An independent retailer is a privately owned or controlled food retail company.

"The 'beat Wal-Mart' mantra is necessary but not sufficient and will not lead to sustainable sales growth," Turock said. "It's like waving a fly swatter at an 800 pound gorilla."

Instead, independent retailers need to develop a "Wal-Mart proofing plan" and avoid head-on competition where Wal-Mart is strongest: low prices.

Wal-Mart officials said they are not in the business of pushing other retailers out of the market.

"We think healthy competition is good for customers and helps to keep prices low," Christi Gallagher, a Wal-Mart spokeswoman, said. "Ultimately the customers will decide which businesses will be successful."

She said independent grocers are correct to try to service markets they feel are underserved.

"Wal-Mart started out as a small company, and we were successful because we met the needs of our customers," Gallagher said. "It's the way for other grocers to be successful as well."

But retailers said it is getting harder to compete.

Domestically, Wal-Mart has 1,471 supercenters nationwide and 65 of its Neighborhood Markets, a smaller, more traditional grocery store.

This year, Wal-Mart plans to open up to 230 new supercenters nationwide. Relocations or expansions of existing discount stores will account for about 140 of the supercenters, while the remainder will be built in new locations. Wal-Mart plans to open 30 Neighborhood Markets, according to the company.

In Las Vegas, five Neighborhood Markets are planned. Construction is scheduled to begin next month on one at the northeast corner of Ann Road and Simmons Street in North Las Vegas and one at at the northeast corner of Silverado Ranch Boulevard and Bermuda Road, said Amy Hill, a spokeswoman for Wal-Mart.

The other Neighborhood Market locations are at the southwest corner of North Jones Boulevard and West Lake Mead Drive, the northeast corner of North Jones Boulevard and West Craig Road, and the northwest corner of Lake Mead and Hollywood boulevards. Construction on those stores is expected to begin in 2005, Hill said.

There are seven Wal-Mart Supercenters in the valley, including a Wal-Mart store at 1807 W. Craig Rd. that is being converted to a supercenter. There are also five Wal-Mart stores and four Sam's Clubs in the Las Vegas Valley.

"Size doesn't matter," Turock said. "Strategy beats size."

Trying to become the low-cost leader in an area served by Wal-Mart will be a losing battle, he said.

Instead, retailers should cater to underserved customer niches where Wal-Mart doesn't compete, such as health-conscious and time-conscious customers, ethnic groups, urban shoppers and seniors.

Turock said serving seniors will be the next big growth market, as millions of Baby Boomers reach retirement age. He said many seniors want to be catered to in a smaller store when they do their shopping.

"For you to be first to serve those needs is very important to sales growth," Turock said.

Benjamin Chen, manager of 99 Ranch Market at Chinatown Plaza on Spring Mountain Road, said it's difficult competing against large retail chains. There is only one 99 Ranch Market in Las Vegas, owned by Jason Chen, no relation to Benjamin Chen. The California-based grocery chain is privately owned and has 21 stores in California and one in Washington. The Las Vegas store is one of four independent licensee stores.

The store is known in the Las Vegas community as an Asian supermarket, but Chen said it is much more than that.

"We are not looking at our store like an Asian store," Benjamin Chen said. "We are an American specialty grocery store."

Chen said 85 percent of the store's customer base is Asian.

The market excels in another area that Turock coached attendees on: specialize in something and do it 100 percent.

For Chen, that specialty is the store's meat and seafood departments.

The wide range of seafood is fresh and the meat department carries fresh meat sliced to order.

"Our fish department is the most popular in town," he said. "We have a fish tank that houses live fish, crab, lobster, clams and mussels."

The store uses a water purifying system to ensure product freshness and safety.

Pick out a fish and employees will prepare it -- and cook it -- for free.

"You can shop and go home and eat it and save a lot of trouble in your kitchen," he said.

Retailers at the convention said they will have to "think outside the box" to stay in business.

Darrell W. Wiley, president of Georgia-based J&J Foods, said he was "hit between the eyes" about how he needs to step up his thinking about competing with Wal-Mart.

"We've always been the low-priced leader," Wiley said of his almost three decades in the grocery industry.

But he said he understands that will have to take a back seat in order for his two stores to stand out in the market.

"Marketing to seniors was an interesting idea, and we already serve that demographic anyway," Wiley said. "That they don't want to shop at a supercenter was a light bulb for me."

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