Differentiation: the difference between thriving and surviving

What it is that separates the independents who thrive and prosper?

That was the question posed by leading US natural products consultant Bob Burke at last month’s National Health Store Conference.

Answer? In a word — differentiation. And it was examples of how successful independent retailers are achieving that crucial differentiation that formed the core of Burke’s compelling keynote talk.

First, he set the scene and outlined the challenges facing US independents. And there are some pretty big (and familiar) challenges too — not least the web. “Look what happened to the independent video stores and booksellers — could independent health food stores be the next up?”.

There were other pressures too, coming from the average consumer’s increasing savviness on where to get the best deal and an expectation of low prices. There was the growing mainstream offer of traditional health food ‘exclusives’ — and a discernible shift in emphasis away from supplements towards food as main source of nutrition, with the enjoyment of food taking over from — or at least vying with — perceived ‘healthiness’ factors.

But successful US independents are finding ways to successfully differentiate themselves, sometime apparently against all the odds. None more so than for Cambridge Naturals in Boston (one of several case-histories highlighted in Burke’s talk — available here in PowerPoint form).

In just five square miles, Cambridge Naturals has to compete with no less than five Whole Food Markets, six supermarkets, three Vitamin Shoppe stores and 14 GNCs. But after 37 years in business the store seems to be going from strength to strength thanks to its high service model emphasizing supplements, personal care, healthy snacks, raw foods, gluten free and allergen free foods. Burke summarizes Cambridge Naturals as “dynamic and willing to change” and “being all about local and engaging that local community”.

Deb’s Natural Gourmet meanwhile sets itself apart by “promoting good food and fellowship” (could a supermarket ever offer ‘fellowship’?) and uses everything from cooking classes to cook books to do it. The store also likes to “stand up” on issues like GM — one photo from a recent protest day features the memorable slogan ‘Eat Chard, Be Hard’. Simple but effective techniques to boost sales last year included offering a free piece of focaccia with a bowl of soup — net result: soup sales up $45k in 2010.

US independents are also benefiting from having a proactive retailer association in the form of the Independent Natural Food Retailers Association (INFRA). Providing purchasing, marketing and educational services, INFRA aims to be inclusive, while being retailer owned and operated. As the Association proclaims: “Independents can do more than just survive, we can thrive and this is best done together”

So, here is Bob Burke’s bullet point summary of “What separates the independents who thrive and propsper”:

• The most powerful competitive advantage independents have is engaging each and every customer is in a one-on-one conversation that blossoms into a deep relationship over time.

• Done well, your customers will spread enthusiastic word-of-mouth kudos for your store, driving new customers to you

• Ask your vendors, distributors and brokers, how you can achieve deeper purchase discounts on an ongoing—not temporary— basis. Pass along all or most of these discounts in your shelf pricing. In this way, you will protect your gross profit margin percentage while keeping your competitive price gap as small as possible.

• DO NOT discount by cutting your margin. This is a shortcut to bankruptcy.

• View their stores as a brand, separate and distinct from the products on the shelf.

• What’s your unique message? It has something to do with how you add value to the shopping experience beyond the products you sell

• All Customers are Not Created Equal. Focus your resources—time, money, attention—on the dedicated 20 or 30% of your customers that provides most of your profits. – Jay Jacobowitz (US retail consultant)

The 6h National Health Store Conference was made possible thanks to the generous support of our Conference partners — Viridian, Natures Aid, A. Vogel, The Health Store and Comvita