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Challenges of the Natural Products Industry
The value of an independent retailer.
NOTE: See Full Transcript Below
There is a lot of consumer confusion about foods and supplements as nutrition. Unfortunately, it can be difficult to know which foods are truly healthy and which are not. With so much information available, it can be hard to know who to trust. This is why it is important to find an independent retailer to trust when it comes to finding healthy, natural foods and quality supplements..
Independent retailers have been around for decades, and they have a wealth of knowledge and experience when it comes to natural foods. They are passionate about health and helping others, and they are not limited by the restrictions that larger stores face when it comes to providing information about health and nutrition.
Independent retailers are able to provide customers with personalized, individual attention and advice on their particular health concerns. They are also able to provide customers with reliable information about the benefits of natural products, and they are free to share studies and results about vitamins and supplements.
In this interview Jay Jacobwitz and I will discuss the challenges in the marketplace for small independent health food stores, quality supplement manufacturers and even raw material suppliers.
However, it is also important to be aware of the challenges in the product supply chain. Not all products are of equal quality, and some are poor quality imitation or adulterated. This makes it difficult for consumers to make sense of what is out there. Additionally, the digital channel is the “Wild West”, where most of the problems reside. One reason is because it is difficult for Amazon and other online retailers to police their vendors and the hundreds of millions of products that are available.
Independent retailers have the advantage of being able to offer customers a more personalized shopping experience. This is due to the fact that independent retailers are often more invested in their customers and are willing to go the extra mile to ensure that customers are happy. This often results in customers feeling more connected to the store and more likely to return.
Overall, independent retailers offer customers a unique shopping experience that cannot be found in the mass market or conventional supermarkets. They provide customers with a unique product set, knowledgeable staff, and personalized service. Additionally, they are often the first place manufacturers go to when they have new dietary ingredients or innovative formulas. All of these advantages make shopping at an independent retailer a great choice for those looking for healthy, natural foods.
In case you can’t tell, I am a big fan of local independent health food stores.
Shop Your Local Health Food Store
Jay Jacobowitz
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 comprehensive consumer marketing service designed especially for independent natural products retailers. With over 40 years of wholesale and retail industry experience, Jay has assisted in developing over 1,000 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. Jay can be reached at (800)328-0855 or via e-mail at jay@retailinsights.com.
Transcript
SUMMARY KEYWORDS
independent retailer, natural products industry, health food store,
SPEAKERS: Jay Jacobwitz, Steve Lankford
Steve Lankford 00:30
Hello, and welcome back to Health Quest podcast. I’m your host, Steve Lankford. Thanks for joining me. I’m glad you’re here. I think this is going to be an interesting conversation. Today I’m going to be talking to Jay Jacobwitz. I’ve known Jay for a long time I’ve seen him over and over and over again, at many of the trade shows that we both visit. Jay is the president and founder of Retail Insights. This is a company a professional consulting service for the natural products industry. He helps stores understand current conditions, gives them guidance in how it is that they might actually move into or transition into these current challenging times that retailers and customers and manufacturers we’re all challenged by different things these days.
It’s a different time, not only in the natural products industry, but throughout all industry and retail. Everybody has challenges that they’re trying to manage. We’re going to discuss what some of those are today with Jay. So he’s been working with retailers. For many years, he publishes a newsletter that he makes available to retailers. He’s also a part of Whole Foods magazine. I’ve been interviewed by Jay once he does, or is involved in an annual survey conducted by Whole Foods magazine. And this is not Whole Foods, the grocery store. This is Whole Foods magazine that is geared towards the natural products industry. And it’s for retailers and manufacturers not necessarily geared towards consumers. But that’s where I would often look in order to get a sense of what’s trending in the industry, as well as issues that are facing retailers, manufacturers and so on. So it’s been one of my go to Resources. For many years.
He is involved in this annual survey, which I have been following. I don’t know it seems like at least a decade that I’ve been following this annual survey because they look at our industry, from the perspective of different size stores different market spaces. And it allowed me always as a small independent retailer to see how my store functioned compared to other stores that were in my same segment. So I’m not comparing myself to Walmart or Fresh Thyme or any of the big stores that are present in so many communities. It was really how do I compare to other independent retailers, I have a passion for independent retailers because I was one for over 45 years. And because I believe that the independent retailer is where so often, consumers can actually find an educated, caring, knowledgeable staff that is invested in the products that they carry. They act as gatekeepers to the industry, unlike many of the larger stores, which I think have jumped on the bandwagon because of popularity, but you can’t actually get the same kind of attention or curation of products that you find in independent health food stores.
But like a lot of small parts of any industry, the independent retailers have had their challenges across the board. So we’ll discover maybe what some of those are, maybe what some of the solutions are, and maybe what you as a consumer might consider when looking at the value of an independent retailer. One of my questions is where do people get the information that they can rely on? I always thought it was the independent retailer. But there must be other sources that are driving this movement forward as well, because it certainly is continuing to grow.
So Jay has a unique insight into this part of our industry. He is not a retailer, he’s not a manufacturer. He doesn’t make raw materials. He looks at our industry with a critical eye to help us understand what’s actually going on. What’s the trend. How does this affect us? So these are articles that I read every month that Jay writes for Whole Foods magazine. Whole Foods magazine has also published many of our podcasts over the last seven years or so. And so they’ve been a resource. And we have been one of their tools for outreach. And so I’ve always been pleased to be associated with Whole Foods magazine. It’s one that I’ve read for decades. So it’s in that capacity, I’m pleased to introduce to you, Jay Jacobwitz. Jay, welcome to Health Quest podcast.
Jay Jacobwitz 05:21
It’s great to be here, Steve, and thanks.
Steve Lankford 05:24
Well, I’ve always appreciated the time that you’ve chatted with me when we’ve been meeting up at the industry because you have this unique perspective. And of course, I’ve read your articles. And I followed this annual survey every year with a great deal of interest. I read your recent article in Whole Foods magazine about attracting the younger generation, we talk about the changes in the shopping habits of the younger generations, and it’s clearly different. They have different resources than we had when I started my business back in the 70s. Before we get into that topic, exactly. Jay, tell our listeners a little bit about your history, and how it is that you morphed into Retail Insights and what kinds of things you are doing today. In addition to that,
Jay Jacobwitz 06:14
I came to natural foods organically. No pun intended. There were some health issues in my family with my father. And I began to think about what were the things that were controllable, and one of them seemed to be diet. And so through college, I angled in that direction I shopped in the local health food store, I think my diet consisted pretty much of whole grain bread, raw honey, butter, and the occasional baked potato. So it wasn’t really a balanced diet. But these were fresh foods and Whole Foods that I ate and actually I survived. So here I am, I got invited to a wedding from an old friend that I had moved away from back on the East Coast. And I came back for the wedding and I met all these people that were just great people. And they all a lot of them turned out to be working for this small startup, natural foods wholesale distributor, called Llama Trading Company. And it was in Brattleboro, Vermont.
I was living on the West Coast, I had just finished school. And I had such a great time that I decided to move back there. And I moved back and everybody kept saying, you know, this natural food distribution company needs a sales manager, why don’t you go apply for a job? So after about 30 days of contemplating my navel and walking around the woods in the Berkshires, I decided to go for an interview. And lo and behold, I got the job. My boss at the time, asked me a question I had never had before, which was, what is your salary requirement? Well, I hadn’t thought about that. My rent at the time was $140 a month. So I said that, how about $160 a week, he said we took 150. And I said yes. And the rest is sort of history.
That was a 20 year, roller coaster ride, where we were eventually sold to or merged with United natural foods. So it was quite the learning experience. And my responsibility in the company was for the independent natural product sector. So these stores at that time, and we were talking the 1977 78 era when natural foods were just getting going and recall if you will, or if you can, that you could walk into a supermarket in 1980. And you could not find yogurt, there was the independent natural products retailers, who were starting with miniscule stores 400 square feet, 500 square feet, 800 square feet, sometimes even fitting within that space, a stone mill grinder where they were grinding wheat berries that they would buy in 50 pound bulk bags to make their own fresh flour. It was an amazingly bootstrap organization.
And so I came to appreciate the belief system that these retailers embraced in selling natural foods, there was hardly any supply remember, as sales manager for the wholesale distribution company, getting my first $15,000 opening order for somebody who was opening a store, I couldn’t fill that order, I couldn’t come up with in good conscience more than eight or $9,000 worth of products that I knew would sell well. And so there just wasn’t the supply at that time. Sometimes you’d have to fill a shelf with a 40 or 50 SKUs stock keeping units of the same bottle of juice just to make the shelves look full. So it was quite a different time. But I came to believe then as I do today, that it is the independent natural products retailer that possesses the soul of the natural organic industry.
And as you point out, Steve, all these different channels, the mass market channels, the Walmarts and the Targets and the Kroger’s you cannot get the same level of service you do not have the same level of nutritional knowledge, nor do you actually have the permission as an employee in one of those large organizations to actually interact with the consumer about their particular health concern. I don’t know if you’ve ever had any fun going into one of these stores. I won’t name the national chain, but we have very prominent large national health food store chain that if you go into that store and you ask in the natural living aisle, the person servicing that aisle about your particular health concern, they are not actually permitted to engage with you in answering that question, they will shunt you off to a kiosk or with some database information or something like that.
So the fundamental difference between the independent retailer which existed then, without competition, but still exists today with an abundance of competition is that ability that freedom, that empowerment of the workforce, to engage with the customer about their particular health concern. Now, of course, we are a regulated industry, the natural products industry, for those who don’t know, is regulated as a type of food, vitamins and supplements are regulated under the Food and Drug Administration as a type of food.
And there was a battle in the 1990s, for what we could and could not say about the products. And we in Congress got a bill passed, that protected our free speech rights to be able to tell the consuming public about the benefits of natural products. So within the parameters of the law, we can in fact share useful information about the benefits of nutrients, the studies and the study results of what’s going on with vitamin D or vitamin C. And to be able to share that with people well, you cannot get that same sort of hands on personalized individual attention and information, and really virtually any other channel, but the independent retailer.
Now, that being said, social media has in fact, changed the calculus here quite substantially because you can in fact, as you said, there must be other channels, other ways for people to get information. But as you can go to social media, you can get lots of information, but you need to be careful, because it’s kind of the Wild West, how do you know, the information that you’re getting on social media or in the digital world is actually reliable is actually authoritative? And sometimes it is. And sometimes it isn’t?
Steve Lankford 12:02
Well, you’ve covered a lot there. And it is really the problem, I see that consumers as well as the small independent retailers face in this world today. Because it is where somebody has a passion for health and for helping others where this takes place in the independents. And as you alluded to, there are limits on speech that have really curtailed what you might learn in a bigger box store. These stores have responsibilities across the nation, many times they have very serious concerns about being within the legal parameters, and in doing so sometimes have really restricted the access to information, even that information, which is legal.
This is where I have this concern. Because as we have this large internet of information, we are starting to realize if we haven’t already, that it’s not all equally reliable, equally trustworthy. And there are problems in the product supply chain, that not all products are equally good. Some are actually poor quality, imitation, some are adulterated, there are huge challenges buying through basically an unknown source from an unknown brand. And so how is it that people start to make sense of what’s out there? Is this having any kind of impact that you’ve been able to detect, from your research on consumer confidence in supplements? I mean, we used to worry that if people got supplements that didn’t work, or were poor quality, it might just turn them off completely. Are there challenges that you see in that distribution side above the independent retailer that is identifiable as a problem?
Jay Jacobwitz 14:07
I would say the digital channel is the Wild West. And that’s where most of the problem resides. If you’re a brick and mortar retailer, I think the baseline quality is much more assured. And that’s your question will a bad report or a bad outcome or an adverse event turn people off to natural and organic products and supplements? And I keep seeing the surveys and I’m sure you do too, that each year, a greater percentage of the general society population is taking multivitamins and supplements and so forth. So it does not seem that the negative headlines that we see from time to time, actually rather chronicle every year has really turned off the consuming public.
There’s a recent study out on vitamin D questioning its reliability, but the study was poorly constructed. In fact, I would say it was intentionally constructed To show that there was no benefit. That’s because these people were not deficient in vitamin D. They were healthy, they did not have osteoporosis. And so vitamin D did not have a significant effect on those issues with them. Well, they didn’t need vitamin D, in order for a remedy to have an impact. But have they included vitamin deficient osteoporotic participants, they would certainly have seen. And there’s plenty of evidence to that effect that does have a benefit. So I think the consuming public is pretty smart. And I think at the margins, of course, you have people who are uninformed, or uninvolved, and may be taken in by bad actors.
And on the supply side, I think we do have bad actors, there’s no question about there, especially with outlets like Amazon, where they have how many multi millions of vendors on the site, and how many hundreds of millions of products that are available, their ability to even police that at all is highly questionable, and certainly not 100% effective. So if you are an uninformed consumer, and you’re not careful, and you shop in a place like Amazon, and you’re not careful about the source, and taking the steps that you would need to vet any suppliers that you’re planning on buying products from, then yeah, at the margins, we are going to have some bad product and some consumers that have a bad outcome.
Steve Lankford 16:20
I wonder sometimes how this affects the raw material manufacturers? I just did an interesting interview with a company called Vesta ingredients, and they make innovative raw materials. And how do they actually then start to populate this information out to the consumers? how do consumers get information on these innovative products that we used to learn about because companies, any one of the well-known vitamin companies would invest in this raw material because of the science that they saw. And that that would then get translated and moved to the retail side and those retailers would be taught about these innovative ingredients. And they would find a home in the marketplace if they were in fact, as good as the science might suggest. So is there a challenge on that side of the industry that and I don’t know how much you work with that raw material side? But do you see challenges there in trying to introduce new and innovative products, which I always thought came out of the independent retailer, ultimately, what do you see now that’s happening?
Jay Jacobwitz 17:37
I think there’s a mix of channel distribution for raw material to make it to market. Obviously, as a raw material, you could become a branded ingredient. And then you would appeal to or sell to existing brands to add your novel ingredient into their formulations without getting too far into the weeds. Steve, the regulatory environment around this. And as I said, we are regulated by the Food and Drug Administration, the whole requirement to have a new dietary ingredient announcement and other aspects of regulation that are always seeming to be ratcheting up the regulations around what qualifies as a nutritional product in our industry. So there’s a lot of complexity there. So I wouldn’t want to be a raw materials manufacturer trying to introduce innovative new product, because the other route is to go the Clinical Trial Route, which it used to be expensive. Now I think it’s just astronomical and out of reach for any sort of small, underfunded, individual raw materials supplier. So yeah, it’s a steep climb, and it’s getting steeper.
Steve Lankford 18:47
And yet there seems to be no shortage of these innovative raw materials coming into the marketplace. I just wonder sometimes how successful as a whole they are, or if it’s a big marketplace that it eventually gets winnowed down to some few winners. And again, I don’t know how that happens. But I know that even all of the levels of the distribution chain, but it starts with these raw materials suppliers. They are the ones who bring the supplements to the vitamin manufacturers who then bring it down to the retailer. And I wonder how these products ever are going to fare in the mass market. You go into a drugstore, at least around where I am. And they have a handful, a few cherry picked products from our industry, the best sellers from the best companies, but they certainly don’t have extensive presentations of these.
And rarely do I see anything that’s new and innovative that hasn’t already made a splash by the independents. And so I wonder why is it that consumers seem to shy away from going to the independents is it just They don’t think there’s an advantage to it. I mean, I used to hear, Oh, the health food store is more expensive. I don’t know if that’s still the case, I wouldn’t be surprised because of the labor and everything that goes into it.
But is there a loss to the consumer, if in fact, we don’t continue to have these independents, and I do believe that they’re shrinking, if I can judge from the numbers that I read that the number of independents like myself retiring or simply closing up their stores, the numbers are shrinking, because new people aren’t opening health food stores are, at least from my limited perspective, I’m not seeing it. What are you seeing on that independent retail side as far as the growth of that side of the industry or the reduction of that industry? And where do you see the future evolving for independents?
Jay Jacobwitz 20:54
In my experience, Steve, the good independents are doing well, the independents who have a pattern, say of neglect or disinvestment in their businesses who haven’t, as you said, in our earlier discussion, asked themselves, why would somebody want to shop in my store, if the good retailers, the good independents that are asking that question daily, waking up at 3am, in a cold sweat, asking that question and trying to answer it, if they have just ridden the wave of growth that we’ve seen in the industry over the past 30 to 40 years, and haven’t really done much thinking about why it is and how to sustain it. And yeah, so it is true.
But as I said at the beginning, here, the pipeline is the diameter of the pipeline is getting wider, there’s more products coming through, there’s more consumers at the other end, taking up the interest in the products. And so that’s why we’re seeing success in all these channels, such as the mass market and the conventional supermarket, channel and online. So from an independent natural products retailer perspective, as a brick and mortar store, yeah, I’m facing a lot more competition, even though the whole market itself is getting larger.
So I think that the good retailers that are independents will continue to do well, because they are remaining dynamic, they’re not paying attention to any one thing. They’re paying attention to the several things that they need to pay attention to including, basically the three P’s people, product and place. They’ve always been superior and people because they’re people have always been more knowledgeable than any of the other channels to the product. They have for most of that history, had a unique product set a unique assortment today, that is much less unique.
And as you point out, the raw materials, suppliers, the innovative products, the startups and how those come through, I think the independent channel is still the place that a manufacturer with a new dietary ingredient and innovative formula would want to try to come through, you can go online first. But that actually is not the least expensive way to do it. Nor is it the perhaps the best way to reach consumers. I think of Warby Parker, the eyeglass retailer that started as an exclusive online business. And now I think they have something like 100 stores or 150 stores, brick and mortar stores, because they’ve realized that it’s actually more efficient and less expensive to acquire new customers when you actually have a physical presentation.
Steve Lankford 23:26
Well, Jay, I know that you have a particular outreach to retailers. Let’s describe what you do with Retail Insights. And then I’m going to ask you about what are some of the characteristics of some of the better health food stores. But before we get to that, tell us about how you assist stores to become better stores more informed more service to their customers? What’s that business model that you have?
Jay Jacobwitz 23:53
Well, we have a two pronged approach. There is the consulting side, which is strategic, it talks about expansion. We have some measurement tools that allow us to project the potential of certain markets, so that somebody looking to expand their store or go into a new market would know how to right size that store and what to invest in it. Based on what we project, the results will be at a certain size and with a certain product assortment. So that’s the consulting side in terms of helping retailers become better retailers.
Once they have that store. We have a number of tools that are all under the umbrella of our Natural Insights for Well-being Nutrition Newsletter, and it is a 360 degree marketing tool. That the basis of which is the natural and nutrition research that’s going on around the world. I don’t know if you’re aware, you probably are aware you’re probably one of the few people that actually knows this, that there’s 10s of 1000s of clinical trials of the nutrients that are in our industry going on at any given time all around the globe and so what we do is we distill the highest quality studies into a monthly newsletter with about a dozen studies or a dozen and a half nutrients and studies.
And we package that up in a digestible form. So that it’s appeals to the lay reader. In other words, the customer who’s coming into the natural product store with a diagnosis of metabolic syndrome, or osteoporosis or diabetes, they can read the latest research on these conditions through our newsletter that this retailer has subscribed to. So in a nutshell, that’s it and we provide tools in store for that we provide tools digitally for the retailer, and we provide tools for them to be able to outreach into their communities.
Steve Lankford 25:43
Well, let’s talk then about the independent retailer, how would you describe the advantages that are to be found at an independent retailer? Why should customers seek out independent retailers?
Jay Jacobwitz 25:59
Well, it’s an interesting question, and I think the answer largely remains the same as it was all those years ago. Steve, when we first started in the industry, with COVID, the conventional supermarket industry went from less than half of conventional supermarket retailers saying that they had a wellness program in 2019. The survey by the Food Marketing Institute found that less than half I think, was 49% of the Kroger’s. And the Stop and Shops of the world had a wellness program that they had intentionally designed either for their employees and or their customers, post COVID, the 2021 survey, I believe the number was now 79%, or 80%, had instituted a wellness program.
And what that included was both on the employee side, so the employees could have mental wellness attention, they could have time off, they can have educational materials. And on the customer side, they implemented store tours, and they hired more nutritionists, and they even had quick medical clinics, with skilled nursing on site and so forth, all with the idea that everyone had become acutely aware of the importance of natural immunity and resilience.
And so we estimate that an additional 50 million people in this country, as a result of that unprecedented surge in wellness marketing by the conventional supermarket channel 50 million people were exposed to the idea that, hey, natural organic is a path to immunity and resilience that they had never considered before.
So I would say an answer to the question about how an independent retailer can secure their future would be to think about reaching out to those new communities newly aware of resources inside the natural, organic industry that they hadn’t thought about before, and making themselves aware of them. And how do you do that? Well, guess what, Steve, the digital channel has become so crowded and actually so expensive, that it’s one of the noisiest places to be and as you know, from marketing 101, getting your message into the minds of the consumer is the first step without that you have no hope.
And so actually going back to an analog sort of marketing approach, where as you find kindred communities, maybe they are birthing centers, maybe they are weight loss clinics, maybe they are Grief counselors, remember, you can give a lecture at a hospital, you could go to a homeowner’s association and give a lecture on Aging Gracefully and healthily, with nutrition, these analog methods. And I might also say direct mail is something that retailers should consider as well, the independents have actually a new opportunity to reach out to consumers in an analogue way that has not only a better chance of being heard, but a wider audience than even just three or four years ago. And I would remind you that back in 1980, and you remember we talked about not being able to get yogurt in a conventional supermarket, the only place you could get yogurt would be in an independent natural products retail store, as conventional supermarkets began picking up natural products.
And remember, I was in the wholesale distribution business at that time, the independent natural products retailers that were in the same trade areas as those supermarkets that were now picking up yogurt that were now picking up soy milk, and that were began competing with the independent retailers. I had all these irate, independent entrepreneurs, retailers calling me saying, How could you do this? How could you sell to this conventional channel? They’re just piggybacking on us and they’re not the authentic retailers and all that stuff.
Well, guess what? Six months down the road, those independent retailers began seeing new customers come in whose interest had been piqued in the conventional supermarket and who wanted to find out a little bit more about this natural product industry. And from there, the trajectory of growth The next 30 to 40 years was pretty much straight up because of that, I believe, as I’ve just mentioned to you about the vast expansion in this wellness facility that conventional supermarkets put in for their employees, and for their customers, and again, that store tours, it’s for skilled nursing. Its nutritionists giving the information and menus and so forth. All that exposure to the idea that natural and organic is a path to health, and immunity and resilience. That 50 million group of consumers that hadn’t considered before is our now expanded pool of new customers that if we just find a way to reach them, can expand our business.
Steve Lankford 30:40
Well, one of the things that happened during the COVID years was a movement towards shop local, and local health food stores were seriously one of the important resources, I mean, our store, we closed the doors for two months, but we did mail order and curbside service. And we did a lot of business because people were very interested in that. And that’s what the independents could actually bring to the table was an understanding of what was available. What is happening in the shop local movement. Is this something that retailers can and should take advantage of in their promotions.
Jay Jacobwitz 31:24
I’ve done an informal survey of independent natural products retailers across the country. And you may recall that as the lockdowns took effect, and everyone was rightfully concerned about their health and the health of their loved ones, there was a welling up of gratitude among the consuming public, that stores like independent natural products, retailers stayed open, and worked with the consuming public on the front lines. Today. They gave thanks, they hung signs out of their windows, thanking the medical community for manning the hospitals and treating the ill. And that same sort of sentiment flowed over to any business that had stayed open and continued to serve the public.
Well guess what, two years in, that sentiment has seemed to fade. And people have perhaps forgotten of the sacrifices and the risks that the frontline retail folks serving them took. And I don’t know how hopeful I am that the shop local movement has gained long lasting strength from the pandemic, I think people have become a little less concerned about it.
But that being said, there are local movement type organizations in many communities that have done very well in raising awareness of the importance of supporting the local businesses and how $1 spent in a local business circulates in the local community rather than leaving that community. So I think people realize that, but after in terms of the hierarchy of needs of the consumer, that’s somewhere down the list, it might be somewhere from one to 10, it might be somewhere five, or six or seven behind inflation, and convenience, and other items like that that are and selection and access. So it’s a nice to have that I can shop local. But if I only fuel for my cars costing me $5 A gallon, I’m gonna cut out one store that I’m going through this trip, and I’m just going to get what I need, essentially. So the local shop local, perhaps takes a backseat to those more immediate concerns.
Steve Lankford 33:28
This is what we I say as independent retailers, even though I’m not one, it’s certainly where my interest in passion is still for the independent retailers where the challenge is to figure out how to meet the marketplace in today’s world. And this is one of the things over many years, people would complain about other resources, but without trying to figure out how to effectively compete. So this idea that we can be more proactive. As a small store, we can certainly be more local in our outreach.
There’s all kinds of groups, as you have mentioned, that would be interested in our information. It’s one of the things that I did as a retailer, I taught classes wherever I was invited. I taught classes at the university in their learning and retirement program. And so there are ways that retailers can outreach to the community and teach others about what makes them special. I’ve also found that many retailers are seemingly find it very difficult to rise to the occasion. They’re busy enough as it is it’s very difficult to imagine themselves going out and doing this but I always found that it was worth the effort. Do you find that a lot of the successful stores are doing that having cooking classes. That was another thing that we did for many years back in in the late 70s and early 80s.
You mentioned the grocery stores at that time. You couldn’t get whole wheat bread You couldn’t get granola, you couldn’t get yogurt, and you couldn’t get anything organic. And so the health food store was the place where you could get them. Until that has been now adopted by many of the grocery stores. And one of the things I always find interesting about shopping in a grocery store is they have a healthy section. And they call it that the healthy section. What does that say about the rest of the store. And I know a lot of people have raised that point.
But the consumer, it seems like doesn’t really care if their store sells tobacco, or liquor, or all of the bad foods that are out there. The fact that they have the few things that the consumer wants, that’s the convenience factor. And so the stores who really seem to have no interest, they have these wellness programs.
But if you think they were serious about the wellness programs, they might consider the quality of the food that they’re selling, but that’s not going to happen. So this challenge is for retailers to find a way to bring consumers in by being better in some way. One of the challenges is in pricing in the stores that you work with, are you finding that they are able to effectively compete with the mass market and the online markets? Or is this perennially going to be the challenge, or one of the great challenges for the independents
Jay Jacobwitz 36:29
competing on price, Steve is what controls that is your size, I guess it begins with a philosophy, if you’re sensitive to it as an independent retailer, and you want to try to be competitive, if you just have one store, and you’re going to want to try to match prices, for example, with your larger competitors, that probably is not going to succeed. In fact, I can say with relative certainty that you are going to put yourself out of business.
But if you have that philosophy that you want to be affordable. And of course, you now have to square the circle, because by design, natural organic products are more expensive than the cost inputs for the ingredients of conventional products in general. So you’re going to have to get scale of some sort. So I would say that what I have seen in the independent sector is that the retailers that have put affordability, as a key part of their mission, have grown in size as an organization, they don’t just have one store, they have multiple stores. And they have increased their buying power gradually over the years. And they have paid attention to how to negotiate and develop relationships with the vendors so that they can, in fact, secure deals that are attractive.
And so but that’s a very slow, methodical process over the course of years. I would say though, that fundamentally, we’re never going to have parity with conventional foods, because our cost inputs are by nature higher, it’s more expensive to have a higher quality ingredient that’s natural and organic versus something that is mass produced. That is not
Steve Lankford 38:10
well, one of the things that I have found, because I have a grocery store that has a couple of aisles of foods. And so when I’m going into that grocery store, I will look in those aisles and see what there is that I need. And they’re actually oftentimes things that aren’t carried at my former store. And so there is that advantage to me. One of the disadvantages I have found that occurs not infrequently, is that there seems to be no loyalty to the product on the part of the store, a store is going to be dependent, I think almost solely on turnover. And if something doesn’t turn over, it’s not going to be there.
Whereas an independent may be able to maintain inventory in those areas that maybe aren’t so popular that they move a ton of product, but are still necessary for a part of the customer base. I’ve also found that one of the challenges that they only oftentimes carry a few of the skews of the products that might be available from that company. And so they don’t necessarily invest in a broad representation that’s available from a company but oftentimes more narrowly cherry pick the best sellers only which appeal to the most number of buyers but certainly shuts out interest or availability in these other products. Do you see that as a challenge at all? And maybe is that an area where independents can actually be better than the local grocery store and the depth of their selections?
Jay Jacobwitz 39:47
Yes, I do. And I think that actually independents have largely succeeded in doing that and having the more difficult to find products which oftentimes are higher quality, but the dilemma for the conventional side for the big mass market and conventional supermarket channel, is just exactly have you stated that they can’t afford to give shelf space to product that isn’t turning, if there’s a choice between something that returns 10 units a week versus once every other week, the choice is clear, the real estate is too expensive for them to if they have a faster turning product, they’ve got to put it in there. And they’ve got to take out the slower moving product. At that mass market, mainstream conventional level, there is no as you say, loyalty, because they can’t afford to be loyal, the independent natural products retailer, on the other hand, can sort of straddle the fence and have a blend of products that sell faster, along with a good selection of products that maybe they aren’t the fastest mover, but they are high quality, there is a purpose to them, they are unique, and the retailer understands them and is able to educate the consumer about them. And that, in fact, is the way a lot of independents are coming to market.
Steve Lankford 41:02
One concern that I have. And I know we’re getting close to the end of our time here, Jay, but one of the concerns that I’ve had is, this has always been an industry of innovation. And there have been 1000s of small companies that have started Mom and Pop manufacturers who create a bar cosmetic or some something to serve the community. And I’m wondering, is it harder for these kinds of innovators to find a foothold in an industry which seems so dominated by big conglomerates, both on the retail side and those big conglomerates that are buying up natural products, companies, this make it harder for these smaller, innovative companies to even get a foothold in the marketplace these days?
Jay Jacobwitz 41:51
I don’t think so I think as I said before, the diameter of the pipeline, the supply pipeline is getting wider. And if you think about it, think about the retailers who have support programs who have actually set aside funds to incubate innovative suppliers, and many of the chains in our industry have done that. And even some of the largest chains, Kroger, for example, has funds set aside and they have, in fact, they have trade shows for innovative suppliers to come and make presentations, and so forth. So I think there’s that opportunity that has expanded. And I think also, it’s still as viable to go through the independent channel, if you’re developing a new product, use your local geography, go to your local health food stores, put the product in there, get it going build up some consumer draw some demand for the product, and build incrementally from there. So I would say that, in fact, opportunity exists in equally or in greater proportion as it ever has.
Steve Lankford 42:51
That’s good to hear. Well, what it sounds like I’m hearing, Jay, is that there is a part of the industry at all levels, that is vibrant, active, engaged, and still doing those things that are so important throughout the distribution chain playing their individual parts. And I suppose like many industries, there are those that are going to morph into something else or change or not to as well. But a portion of that distribution chain is still viable. And so I’m so glad to hear that. And since we’re so close to the end of our time Jay, lets sum up I want to give you the last word is there anything that we didn’t cover today that you might think is important for our listeners to hear?
Jay Jacobwitz 43:37
I think the opportunity on so many levels is vast. Going back to just a couple of things that we touched on earlier, even though there appears to be forces that would push back against our industry in terms of quality or efficacy, that every year you see the surveys of what percentage of the population is interested in natural nutrition is taking vitamins and supplements. And while it’s not growing leaps and bounds, it is increasing. So we’ve gone from the 70% range close to the 80% range of people that take some sort of nutritional supplement, most usually a multivitamin and the typical things of the vitamin C’s and the vitamin Ds. So I see that continuing, I see innovation continuing albeit, they won’t solely come through the independent channel as it did back in the 1980. They’ll come from different channels, but the opportunity for and we’re we’ve focused I think in the area of the independent natural products retailer, there’s still plenty of opportunity for those independents that mind the three P’s that are dynamic people, product and place. They’ve always been excelling in people that they’re in the knowledge that their people have and how they empower them to engage the consumer in their particular health concern. The product as we talked about having the harder to find unique items as well as the top sellers.
And then place is one thing we haven’t touched on actually so maybe yes and answer to your question what I would say is that for the independent retailer to succeed tomorrow, you’re going to have to figure out a way to convince the person who is an Amazon Prime member, at their desk with their mouse clicking through an online catalog of products to spend $5 A gallon or even if it’s $4 a gallon on gas to get into their car and come to your store.
And part of that answer, I think, is paying attention to the place. When was the last time you refresh your flooring, your ceiling treatments, your lighting, your cash wrap? When was the last time you painted? When was the last time you redid your front window and displays? When was the last time you actually had a professional come in and give you some ideas about merchandising? When was the last time you came to your store in the morning with fresh eyes? And imagine yourself a shopper coming for the first time? What is your impression walking through the door? Are you immediately confronted by obstacles that keep you from seeing the entire store? Do you feel pinched and anxious? Or is there a wide Vista for you to see? Is the lighting Good? Can you see the signage and be able to identify where things are taking that moment to look with fresh eyes in your physical presentation, I think is actually an area that has been under invested by independence in general, and is in fact an area where they can gain those consumers that they would like to attract?
Steve Lankford 46:33
Well, that’s a good rationale and a good reason why people should at least investigate these independent stores, you don’t know what you might find there. And you certainly may find products that you haven’t heard of before, you may learn something from the staff and the owners of that business. One thing that I use for the last 30 years of my business, I got this from Tom Peters. And the quote was, I don’t do one thing 100% better I do 100 things 1% better. And that particular phrase just allowed me to look at all of the little things that we do in our store, and how can we improve it from displays to pricing to literature to anything that you want to think of? How can you make it better? And so with that kind of motivation, I had the incentive to take that fresh look frequently at our store and trying to have this sense of well, how can we improve it, and not just rest on our laurels.
So I think that was a good place to end our discussion today, Jay, it’s so interesting, because this is so different than the kind of interviews that I normally do and probably for you too. So I hope that our listeners will take this to heart. And at least if they are a natural products consumer, consider the value of their independent retailer. And maybe if they’ve drifted away, give them a new shot and see what happens, encourage them, and they can serve you well. I do believe the independent is one of the best resources for us. And I want to thank you for what you do for the independents for all of these years and those that you work with for the efforts you put into the articles that you write and the research that you do. It’s been most impactful to me. And I got to think to a lot of the retailers that are paying attention. You’ve been an excellent resource. So we want to thank you so much. So Jay Jacobwitz President and Founder of Retail Insights, I’d like to thank you so much for being my guest today. It was most interesting.
Jay Jacobwitz 48:39
It’s been a pleasure, Steve. Thanks.
Steve Lankford 48:41
I wish you the best. Take care. Bye bye.
Jay Jacobwitz 48:44
Bye.
Steve Lankford 48:45
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Close 49:36
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