Is Everyone Your Customer?

merchandising insights

Written By:
Jay Jacobowitz
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In the early 1970s, when natural products were just getting started, most food shoppers did not strongly believe that, “You are what you eat!” Perhaps just two in 100 shopped in natural foods stores to avoid the highly processed foods in conventional supermarkets. Today, 20 out of 100 shoppers say that they have healthy food habits, a tenfold increase from 30 years ago.

jay jacobowitzMy grandmother said it best: “You are what you eat!” I remember Grandma Leah gently sautéing celery, onions, peppers, tomatoes, zucchini, garlic and herbs to make a ratatouille the two of us would eat, dipping our toast into the sauce, on my Saturday visits to her home in the late 1950s. I loved her recipe so much, she would make extra for me to take home in a glass canning jar.

From 2- to 20-in-100
In the early 1970s, when natural products were just getting started, most food shoppers did not strongly believe that, “You are what you eat!” Perhaps just two in 100 shopped in natural foods stores to avoid the highly processed foods in conventional supermarkets. Today, 20 out of 100 shoppers say that they have healthy food habits, a tenfold increase from 30 years ago.

If all 20 of these healthy-foods eaters shopped in your store today, your sales would triple. We estimate 2007 sales for the average independent natural products retail store at about $1 million per year. If independent retailers got all of today’s natural products business, the average sales per independent retail store would jump to $3 million.
Our industry has grown to more than $30 billion from less than $1 billion in the 1970s. Independents’ market share is about one-third, or $10 billion. Conventional supermarkets, natural supermarkets, big-box discounters and vitamin chain stores get the other $20 billion. By definition, then, everyone is not your customer.

Fear, Anger, Sadness
How does this make you feel? Many independents I speak with feel sad, angry, afraid or a combination of all three emotions. They feel sad because some of their long-time customers did not stay loyal when new competitors opened. Some feel angry because they believe the manufacturers betrayed them by selling to the “mass market.” And some independents feel afraid because they believe that there is nothing they can do to combat large competitors. But take a step back for a moment.

The growth in our industry is phenomenal. From 1978 to today, sales to the independent retail channel have grown at a compound average annual rate of 8%. That’s 8%, on top of 8%, on top of 8%, every year for the last 30 years. And that’s not counting the more-than-10% compound average annual growth rate for the other $20 billion in new natural products sales in other channels, including conventional and natural supermarkets, vitamin chain stores, big-box discounters and others.

Would You Trade Industries?
What other retail industry—or any industry, for that matter—has had such long, unbroken and consistent growth?
Department stores like Sears, Kmart or Mervyn’s? They are struggling or out of business.
How about music stores? Oops, MP3 downloads have destroyed that industry.
How about restaurants? Shoney’s? Bennigan’s and Steak & Ale? Chapter 11.
Maybe linen and clothing stores? Linens N’ Things? Steve & Barry’s? Closing stores.
Gadget retailers? Sharper Image? Gone.
Coffee giant Starbucks? Closing 600 stores.
Even conventional food retailing has been in slow-growth mode for at least the last decade. Albertson’s, the third largest supermarket chain in the country, sold itself two years ago, citing “competition.”
Every one of these other industries has struggled with slow growth, but not the natural products industry. Why?

Thanks, Grandma!
More people are realizing Grandma had it about right. Just behind the 20% of shoppers who say they have healthy food habits now, there are another 50% of shoppers who say their food habits are improving. Altogether, 94% of shoppers believe in the connection between food and health, including about 24% of shoppers who say their food habits are not healthy today.*

With so many consumers believing in the connection between food and health—and more important, beginning to buy healthy foods based on this belief—you don’t have to be a futurist to imagine our industry doubling again in the next five to 10 years. At that point, independent natural products retailers should be averaging $2 million per year, up from $1 million today. Here’s another forecast: these independents won’t be sad, angry or afraid; they will be focused on taking advantage of the “food-is-health” tidal wave overtaking the consciousness of the American consumer.

How Important Is Attitude?
Refugees from the slow-growth department store, music store, restaurant, clothing and conventional food store industries would, I suspect, gladly embrace 8% compound average annual growth for 30 years, with forecasts for more double-digit growth ahead. To those who are casualties of stagnant industries, independent natural products retailers who complain about competition might seem to be, well, a little ungrateful.

We started our industry with shoppers from one or two million households buying natural products. Today, more than 20 million households regularly buy natural products, with another 50 million households beginning to add natural products to their pantries. Independent retailers whose business is flat or declining in this market may benefit from a little self-reflection.

If you were a first-time shopper in your store, what would you think of your presentation? Is it as clean, neat and well-lit as your competition? If first-time shoppers are turned off by what they see, they may not even listen to what you have to say, or may be less trusting of what they hear.

If you are angry, sad or afraid, it is likely that your customers and employees can sense this. Allowing these emotions to color your interactions will make it difficult to set a positive tone in your store. One of the most powerful trends in shopping is that customers expect to be pleased. Because there are so many exciting food choices today, shoppers do not need to settle for any experience that doesn’t make them feel good.

Dawning Natural Consciousness
With years of strong growth ahead, there is more than enough natural products business to go around for everyone. And each retail channel is best at serving certain needs, and not best at serving others. If shoppers want a deal, they’ll go to Wal-Mart, Costco, or Vitamin Shoppe. Folks who want an exciting experience will shop Whole Foods. If people need to put dinner together quickly, they’ll swing by their local supermarket on the way home from work.

Independent natural products retailers are best at providing a soothing atmosphere, a knowledgeable salesperson that really listens and responds to each customer, and products that actually work, or your money back. Shoppers looking to relax and have a real conversation with someone who helps them sort out confusing information about food and health naturally gravitate toward independent retailers.

With 50 million more households just beginning to go deeper into natural products, you should have every hope and expectation that you will be able to do well—very well—in this market, and for years to come. True, everyone is not your customer. But, if you do your job well, you’ll get your share. WF

* Institute for the Future; Consumer Health & Nutrition Survey, 2007.

Jay Jacobowitz is president and founder of Retail Insights®, a professional consulting service for natural products retailers established in 1998, and creator of Natural Insights for Well Being®, a holistic consumer marketing service designed especially for independent natural products retailers. With 31 years of wholesale and retail industry experience, Jay has assisted in developing over 800 successful natural products retail stores in the U.S. and abroad. Jay is a popular author, educator, and speaker, and is the merchandising editor of WholeFoods Magazine, for which he writes Merchandising Insights and Tip of the Month. Jay also serves the Natural Products Association in several capacities. He can be reached at (800)328-0855 or via e-mail at jay@retailinsights.com.

Published in WholeFoods Magazine, September 2008