How Amazon, Walmart And Whole Foods Are Losing To Mom-And-Pop Grocers

Once upon a time, mom-and-pop grocers could succeed with the basics: standard product offerings, a good location and decent customer service. But as leading grocery chains and e-retailers like Whole Foods, Walmart and Amazon continue to innovate, they are rendering many independent grocery stores obsolete. To survive, these local players within small markets are stepping up their game to compete. 

“For truly independent grocers, there’s so much great competition from existing grocers,” Weitzman executive managing director Bob Young said. “Small format grocers used to be able to offer better levels of service.”

Weitzman leases more than 44M SF and manages more than 22M SF of retail space throughout Texas with a focus on grocery-anchored centers. Across that space, Young has seen many chains offer new services aimed at customer convenience and many small operators struggle to keep up.

Grocery shoppers have never had such an abundance of options from which to fill their pantries and refrigerators. Busy consumers can order groceries online from e-commerce retailers like Amazon Fresh and Thrive Market, or opt for delivery from local grocers using Instacart or Shipt. Then there are the big-box chains like Walmart that have a pool of shipping and distribution resources, usually resulting in cheaper products. 

This shift in customer preference toward online convenience is a costly expense that forces independent grocers to charge higher prices than the big chains, decreaing their appeal and ability to compete.

Competing With A Niche Concept 

It is for this reason that local staples like Ann Arbor, Michigan-based Zingerman’s are carving out a space for themselves in the market.

“Strengths lead to weaknesses,” Zingerman’s Community of Businesses co-founding partner Ari Weinzweig said. “Every grocery store now has high-quality olive oils and goat cheese, and when that’s more widely available, [we're forced to] compete with everyone.” 

When Zingerman's first opened its doors as a corner grocery in 1982, many of its specialty foods were novel. Since then, Zingerman’s has turned into a community of businesses that includes a creamery, a bakery, a deli, a coffee company and several other concept locations throughout Ann Arbor.

“If a grocer goes in a neighborhood where large grocers already are, they have to have a merchandising niche that’s specific to their area, and then they must have the wherewithal to operate the store well,” Weitzman's Young said.

For example, Young has seen concepts linked to a cultural group, such as an Asian market with fresh fish and imported goods, succeed in a trade area matching its demographics. 

The Definition Of Great Shopping

Sevananda Natural Foods Market general manager Ahzjah Simons said that though her Atlanta store competes with chains like Whole Foods and Sprouts, they also have somewhat of a symbiotic relationship. 

“Now that some of the major stores carry some specialty items we’ve been carrying for years, it’s more competitive,” she said. “But we sometimes tell customers to look at the chains for things we don’t have, and Whole Foods does the same for us.”

Sevananda and Zingerman’s focus on things that set them apart. 

“If your definition of great [grocery shopping] means free delivery, then there’s Amazon for you,” Weinzweig said. “If your definition of great [grocery shopping] is having a conversation with a store owner, tasting the product and learning where it came from, that’s us.”

A renewed interest in healthy eating has simultaneously revitalized interest in many small natural grocers, spurring the creation of more healthy options from national grocers. The so-called locavore (a person who wants to know where their food comes from, and consume food grown, raised or harvested nearby) is a new demographic of customers shopping at small grocers.

A Sense Of Community

Both Sevananda and Zingerman's have worked hard to attain something most big grocers lack: a sense of community. Sevananda’s distributes a magazine for co-op owners and hosts public programming and workshops for the community, while Zingerman’s hosts events such as food tours and baking classes through sister businesses for local residents.

Despite troubling retail trends, Sevananda is on the upswing. The consumer-owned store has been around for more than 40 years and has about 3,800 member owners. In addition to other perks, a board can vote to pay owners returns. 

“Over the last five or six years, we weren’t profitable and did not pay our owners,” Simons said. “We’ll be back in a position do to that soon. Sales have returned to where they were and are starting to surpass that.”