Walmart rolled out a local-and-sustainable food option at the beginning of this year with the hope in delivering an affordable healthy option to their consumers. Walmart is one of the last of the large grocery corporations to implement a healthier option, but within a projected 5 years a local option will be available at the Walmart closest to you. It is my intention in the post to inform and to educate local grocers on the steps they need to take to ensure that this power play by Walmart does not affect their stores bottom line. I will analyze Walmart’s switch to local and uncover the details of their plan.
Starting from the basics… What is local?
Local according to Walmart’s vocabulary is any fruit of vegetable that is grown within a 400-mile radius of the store location. Great for local grocers… yes I agree. It also means that the food you are getting is fresher, and that the transportation distances are cut. But local does not equate to free of harmful pesticides (organic), which should be at the forefront of our vegetable and fruit purchases.
Is local better than organic?
This is where it gets hazy. Local does not equate to pesticide free, so from that perspective local is not better than organic. The healthy option has become the option of choice in recent years, yet this new word “local” may confuse consumers, as they deduce fresh equals good for you, which is not necessarily the case. Although local combined with organic is the gold standard of food today and you will definitely pay a pretty penny for them. (I paid $11 dollars last week for locally grown organic honey as I was told that it would cure my allergies.)
The question many grocers have been asking is how is this new option offered by Walmart going to affect me? Superstores such as Costco’s and WinCo have had a significant impact on the bottom line of independent grocers and now Walmart is going to join in the battle. It is definitely something that independent grocers need to become wary of. Here is Walmart’s plan (ref. Progressive Grocer)… My suggestion, become familiar with it and learn from it:
- Reformulating thousands of everyday packaged food items by 2015 by lowering sodium content 25 percent and added sugars 10 percent, and by removing all remaining industrially produced trans fats. Walmart will also collaborate with suppliers to boost the nutritional quality of national-food brands as well as its own Great Value private brand in major product categories.
- Providing healthier choices that are more reasonably priced, thereby saving customers around $1 billion annually on fresh fruits and vegetables through a range of sourcing, pricing, and transportation and logistics moves that will cut extraneous costs from the supply chain. Further, the company will considerably reduce or eliminate the price premium on such popular better-for-you items as reduced-sodium, -sugar or -fat products.
- Developing strong guidelines for a simple front-of-package seal enabling shoppers to identify at a glance healthier food choices like whole grain cereal, whole wheat pasta or unsweetened canned fruit.
- Offering solutions to populate food deserts by opening stores in underserved communities in need of fresh, affordable groceries.
- Ramping up charitable backing of nutrition programs that inform consumers about healthier food choices.
Now for you, the independent grocer, here is a 5-step plan to combat Walmart’s strategy inspired by Michael Bergdahl’s book What I learned from Sam Walton.
- Commit and communicate a clear business strategy – Do not change your company’s culture. As an independent grocer you have your niche, perfect it and focus on it, do not divert from it.
- Take care of your people – If you take care of your people they will take care of you.
- Take care of your store – Cleanliness, esthetic’s, ease to find products etc. Spend time to re-evaluate your store setup and see if there is any way that you could improve it.
- Analyse the technical aspect of your business. Are you using energy efficient lights. Does your grocery POS system allow you to target your customers? What are your freezer temperatures?
- POCKETS strategy – pricing, operations, culture, key product, expenses, talent and service
- Develop a loyal customer following. The way to do this… Market to your customers and measure the effectiveness of your marketing. Social media is the cutting edge.
In sum good luck! Competing against Walmart is no small task and I wish all the best to you.