John Ross is CEO of IGA, the largest group of independent grocery retailers in the world.
Welcome back to Endcap, John—let’s get after it. Our cover story delves deeply into the rise of discount grocery retailers. What do you make of their here-to-stay encroachment and how are you encouraging IGA’s indies to compete?
John Ross: I think the heart of this question is about understanding and serving shoppers. If you are a low-income shopper who is unable to afford to shop a Whole Foods, then your best option is to shop a discount retailer, sometimes under duress. We saw this happen during the Great Recession. As the economy improved, shoppers whose economic fortunes improved with it had acquired firsthand experience of the allure of heavy discounters, and research suggests that many shoppers kept them as part of their regular shopping arsenal.
On top of that, shoppers became very smart and very informed with the rise of information that allowed any shopper to be infinitely smarter about what’s going on at retail.
Fifteen to 20 years ago, our ability to preshop and see who had the lowest price on ketchup was very difficult and limited only to paging through print ads. But now with a keystroke, we can become informed on value in a way that we couldn’t before. So as retailers, we have to step back and say, “The internet has made shoppers smarter.” And the smart shopper is going to demand more for their dollar than someone who is uninformed. And in this environment, we retailers need to be smarter, too, by adjusting how we market and how we merchandise to make sure we’re serving today’s smart shoppers. The payoff comes with loyalty, a rise in incremental baskets and increased shopper trips. And it also allows you to have a much deeper relationship with that shopper because you’re really serving all of their needs. And it’s an enormous opportunity for the independent.
Speaking of competition, what strategic initiative are you hammering the hardest with IGA’s operators?
We have an obligation to serve our neighborhood. And in that neighborhood, there are some shoppers that require discounts, and there are others that view the thrill of the discount as kind of part of how they're wired, so they’re excited, regardless of their income. Independents must embrace the obligation to serve their neighborhood, which requires figuring out how to serve low-income customers, high-value customers and high-service customers.
And as an independent, especially an IGA, we don’t have the luxury of segmenting out shoppers that we don’t want. So the first premise: Make sure you’re serving everyone well with the most effective tactics to blunt the effect of a discounter. Private label is a big piece of this. Our exclusive brand allows us to hit those same price points and we back them with a double money-back guarantee.
But you also have to be very, very conscious of the opening price points. Dollar stores in particular chip off at you on price points, especially replenishment products. The pet category is also a great example, and you have to pay attention to what they do to make sure we’re priced where shoppers feel like they’re getting just as good of a value from us and they are from them. But then you have to wrap it with all the other things that we do, such as our assortment, the complexity of our offers, all of the other ways that we can serve that shopper much better. That’s the way to pull those shoppers out of that dollar channel and back as a regular shopper.
There’s one more point, which is the independent channel needs the manufacturers’ help. As dollar stores figured out grocery was a place to grow their business, manufacturers got all excited because there was this new source of revenue and they started manufacturing specific products and unique items just for them, as well as deals to take advantage of that volume. And all the power to them for growing their business.
But what they cannot do is presume that those value shoppers aren’t also shopping at their local independents. The deals, the unique packages and sizes are really important. We won’t win this on our own. We need them right there at our side saying, “Let’s serve the value shopper inside of an IGA the same way we do inside of a discount format.”
Beyond its rapid growth, Aldi is also a pacesetter in other important areas deemed important by consumers today, including sustainability. How much of an influence do you see it having on the remainder of the top grocery banners?
You have to give a ton of respect to an international retailer that’s come to the United States and figured out a way to grow and thrive and prosper. And so many international retailers have entered the U.S. and failed. If you look at Aldi’s stores today versus what they were a few years ago, they have changed dramatically. And they do—and have done—what great retailers always do: They humbled themselves in the face of the American shopper, they paid attention to what was important to them, and they figured out a way to adapt their European model to our marketplace in a way that’s helping them to grow.
Often, the right business strategy seems so simple, but it’s so difficult to do. Listening to your shopper and getting what they want is the secret to growing any great retail business. But you have to actually do it. You have to listen to them and really pay attention to what they’re saying. And if what they’re saying is “I’m concerned about plastic waste in the ocean, and too much packaging,” and if that’s a meaningful attribute, you can form a relationship with those shoppers and you can really grow your business.
It’s ironic, however, because shoppers sometime say and behave in different ways. On one hand, we have louder calls for reducing plastic waste and excess packaging, yet on the other hand is the vast number of Amazon boxes outside homes today that use so much cardboard and energy waste. There’s this really funky value proposition going on, which means we need to be very, very thoughtful.
Do you believe online is a supplement or a replacement for in-store shopping?
I don’t think the shopper is making any distinction in their mind between in-store, pickup and delivery. To them, it’s all shopping and they’re making choices about what’s the most efficient way in order to get the products that they need. And they are proving they want to move seamlessly between what are to us two very different channels. They want to move seamlessly in a way that fits their needs by day, by hour and by occasion. And the retailers that approach it with an attitude of, “My job is to get the product to you the way you want it. You tell me what you want and I’ll figure out a way to deliver it,” are the ones that are building integrated solutions. They’re thinking omnichannel. They’re not so worried about the cost for an individual e-commerce transaction but are instead looking at the total loyalty effect.
What do you make of this so-called retail apocalypse, including as it relates to IGA’s base?
It makes great news and it’s a great headline. And certainly there have been some high profile failures in this last couple of years. But if you look at the story of retail, it’s always been a combination of growth maturation. You have some extinctions or reinventions and you see another cycle of it. The early years of supermarkets ushered in massive innovation by bringing all different kinds of shopping under one roof: the butcher, the baker, the dry goods guy, fresh produce. ... It was a massive convenience play and it changed the industry, and the suppliers changed along with it. The entire industry was built on convenience.
And if you look at what’s going on right now, so much of what’s driving e-commerce and what’s hurting so many other retail channels is the shopper saying, “I want a more convenient solution.” So it’s the same play, only in a new era, and the retailers that are paying attention to that are saying, “This isn’t new. It’s about how can I be more convenient and provide more solutions for my shopper than I did before?” They’re thinking it out and they’re growing.
IGA is also growing domestically, internationally and locally. We’ll have the best year we’ve had in 50 years this year.
Independent toy stores are growing. Independent bookstores are growing. Even Amazon is opening bookstores because Amazon gets it. Amazon’s an e-commerce business and a technology business, and if the shopper wants to shop a bookstore, it says, “We need to build bookstores.
The retail apocalypse is a great headline, but the data doesn’t bear it out. And it frustrates me when we as an industry use this language that’s self-defeating. If you look at the changing demographics and what shoppers want, it’s higher service, prepared meals, experience in their store that makes them feel like part of a family and people who care about their health. Today’s shoppers’ needs and expectations play right into independents’ sweet spot. So I believe this is an independent renaissance—not an apocalypse.
What’s the most unusual thing you know how to do?
I can do the auctioneer patter. I’ve have been an auctioneer for charity auctions because I can do the whole high-speed talking thing quite well.
Excluding your car and mobile devices, what’s the most useful thing you own?
What was your favorite childhood TV show?
Flipper. I so wanted that pet dolphin. I mean, how lucky were those kids? The dad had an airboat. They got to scuba dive. Apparently, they never went to school because they were always in the water with their pet dolphin. Seriously, I wanted their life.
If you could drink only one beverage for the rest of your life, what would you choose (excluding water)?
With a name like Ross, I have to choose scotch.