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Thriving in a Big-Box World

Thriving in a Big-Box World

by Shari Barbanel | December 16, 2014

With competitors such as Whole Foods and big-box retailers like Walmart and Costco hitting home runs in the supplement sales game, independent natural products retailers continue to step up to the plate to stay relevant.

Vitamin Retailer (VR) asked independent natural products retailers to weigh in on the changing industry, and how they not only survive, but also thrive in the shadow of the big boxes.

The participants are:

Ramona Billingslea
Marketing Manager
Betsy’s Health Foods
Two stores in Houston, TX
www.betsyhealth.com

Michael Kanter
Chief Visionary Officer & Co-owner
Cambridge Naturals
One store in Cambridge, MA

Ken El-Talabani
COO Sunrise Health Foods
Three stores in Lansing, IL, Flossmoor, IL & Valparaiso, IN

VR: How long has your store been operational? How did you come to/choose to run a health food/supplement store?

Billingslea: The first Betsy’s Health Foods opened in February, 1993. Our second location opened August, 2014.

Betsy Billingslea was originally an RN who became very ill. In her effort to make herself and her family healthier, she found supplements. For the first 12 years or so of her involvement in the industry, she worked in and then managed several independent health food stores.

In the early ’90s, with the encouragement and backing of her husband, Richard and son, John, she decided to take the plunge and open her own health food store. She named it Betsy’s because she already had a customer base in the area who recognized that the Betsy name meant knowledgeable, quality service and great products.

Kanter: We opened in January of 1974. I was brought up in a family that was involved in numerous causes that supported creating a fair society and a healthier environment. Organic and local were part of my upbringing as long as I can remember. On top of that I needed to earn a living especially with a growing family.

My wife, Elizabeth Stagl, and I (partners from the beginning) realized early on that we could combine our desires to work for a better planet, a healthier community and strong local economies along with running an ethical business.

El-Talabani: Our company was founded in 1961; we have three stores ranging from 53 years Lansingstore, Flossmoor [which opened in] 2002 and Valparaiso, IN [which opened] one year ago. I choose to get into the industry from a tragedy that happened to a friend’s father who passed away way too early from diabetes. I knew that there had to be a better way to look at our health.

VR: What are some of the strategies you’ve implemented or have considered implementing as an independent retailer to compete with big-box retailers?

Billingslea: Even before the big-box retailers came into play, we have always been in a competitive market, so our key strategies have always been to offer the best in customer service and to have the knowledge that gets customers the right products they need.

In addition, early on we gathered mailing lists of customers by offering a drawing for a free product each month to encourage people to sign up. Our mail list was and remains private. At first, we mailed a full newsletter to our customers each month. Besides articles, the newsletter included a coupon and sales items.

Eventually, the newsletter became too expensive to mail, so we still print them to hand out to customers in the store. Instead, we mail a postcard each month, which offers customers extra savings on product. We have more than a 30 percent return on these postcards.

When we knew the big-box stores were on their way within the next few years, John began a business model that he specifically designed to make us competitive with the big- box stores on price. Even though we couldn’t match the big box, we could come close on enough important items. The key to John’s plan was the knowledge and customer service that makes our independent store unique so that people prefer to stick with us rather than taking their business to the big-box stores.

Besides buying smartly, this plan means we emphasize time and resources on educating our employees on product and service techniques.

Kanter: We communicate in various ways our connection to the community, our intention to remain as a locally-owned and independent store and our support of numerous local non-profits. We seek out as many locally made products as we can. We are in involved in the “local movement,” founders of Cambridge Local First and deeply connected to helping to build strong, local economies.

Though we carry many national brands, we also seek out brands and products that are more unique (direct orders) and those that will not be found everywhere! We carefully search for companies that produce outstanding products that are ethically sourced. As more than one customer has put it recently: “I like the way you curate your product selection.”

We have become over the years quite the expert at using social media to communicate our values and our contributions to the community. We also make sure all staff are aware of our significance and our participation in the local movement.

El-Talabani: We run a program called Healthy Perks that is our frequent shopper program. We are currently looking to use the data to talk to our customer directly and entice them to shop in areas around the store where that don’t currently shop, also offering them a reward to bring a friend to join our Health Perks program.

VR: What can an independent retailer offer customers that a big-box retailer cannot?

Billingslea: Service, knowledge, service. As an independent retailer, we work hard every day to develop true relationships with our customers that the big-box retailer usually cannot accomplish. We greet customers by name, remember what we last talked to that customer about, take time to really listen to not only customer questions, but also make small talk. We may even be able to point out new products we know a customer will be interested in because of our past discussions with that customer.

This community of retailer and consumer is largely made possible by our ability to have low employee turnover. Customers get to see the same staff week after week, rather than seeing a new face every other time they come into the store. Low employee turnover also means that manufacturers are eager to train our staff because they know that the employees they are teaching will still be at the store passing on that information to customers the next time the manufacturer comes back to our store.

Finally, as an independent retailer, we are able to be more flexible in our product offerings than many big-box stores. We don’t have a corporate office in another state dictating what we will carry each month or what our sales will be. We are a part of the community we serve, and we can respond to their ever-changing needs with alacrity the big-box stores lack.

Kanter: Independent retailers can generally offer more “one-on-one” customer service. We can cheerfully accommodate special orders, we can stock items that are not always best sellers and we can usually be more directly involved in supporting local non-profits.

El-Talabani: One strength that we use to our advantage is their ability to be flexible and adapt more quickly than the chains. Personal service, I currently visit bigger box stores and find that they offer a lot but have no one available to help unless you ask for assistance.

VR: How important is providing education both for your staff and for your customers on products, trends, etc.? Do you see this as a differentiation?

Billingslea: As I have mentioned, our education program is one thing that we hope differentiates us from not only the big-box competitors, but also other independents in our area. We have regular trainings from our manufacturer reps, our own training program that is taught on a mentoring basis, and special training group sessions that we also implement. We also have a staff that is highly motivated about learning product because they love helping people and also love this industry.

Kanter: Educating our staff is critical to our continuing success! We have very frequent staff training sessions, sometimes several times a week. Our customers expect us to have a great deal of knowledge about our products particularly but not limited to our supplements and body care items. That knowledge (when combined with superior customer service) is part of what makes us “stand out” from the competition.

Beyond that, our customers can come into Cambridge Naturals and be assured we will try to help them get the best information and the most-valuable products to help them in their health journeys.

El-Talabani: Education is still what drives our stores. The difficulties I see is that consumers are coming in with their smart phones with a Google page open asking if we carry a product. Many times we do but often we find the product to be a product that is just trying to make a quick sale and has no efficacy to it. That is where the education comes in. Staffs have to know how to direct a customer to the correct product that will work for them.

VR: How do you and your staff advise customers with questions? Do you have resources available to them? Do you offer seminars?

Billingslea: We provide product information according to DSHEA (Dietary Supplement Health and Education Act of 1994) guidelines. We do as much as we can from what we know. When we are in doubt, we have reference books in the store that we can look at. We also encourage customers to ask their pharmacists about potential interactions or make appointments with their health care providers when their questions are outside of the DSHEA guidelines. Besides our in-store newsletter, we offer literature provided to us by manufacturers about product. We also have a website, blog, Facebook and monthly email where we share health and product information.

Kanter: Most customers have questions! We work with them one-on-one and will very often bring in other staff who have better knowledge of conditions or products depending on the subject. Of course, we never diagnose or prescribe and we regularly remind all staff of that absolute rule. As well, we have a book section focusing on useful topics and we will research topics for our customers on line as needed.

El-Talabani: We have used a lot of third-party literature that we give the customer, and also use a program called Aisle7. At this time we have not offered seminars for a while, but we are looking to have one or two big events a year to bring in educators to the customers.

VR: Does your inventory change due to competition from the big-box stores?

Billingslea: In the past several years, we have definitely reduced the products we carry of lines that have chosen to enter the mass market, choosing instead to emphasize lines that support the health-foods industry.

As far as big-box stores that are actually part of our industry, we are staying aware of what brands seem to be most popular in those stores and seeing if we want to carry a different line that offers the same benefits instead. We try to match prices as closely as we can, especially for big movers.

One of our biggest moves in the last several years brand-wise has probably been to bring in our own private label in order to increase customer loyalty as we knew that the big-box stores were getting closer to coming to our area.

Kanter: We seek out more unique and higher quality items than the big-box stores. That search is an ongoing exercise! Yet, we are careful to carry some of the now more mainstream items that though customers can get them elsewhere they clearly would prefer to purchase them from us.

El-Talabani: Yes and no. No, competition has brought those items in because they are good sellers, discontinuing items would only drive our customers back to our competitors to purchase their favorite items. Yes, we are looking for more local, private-label and other products that the larger stores can’t stock and that many don’t find financially rewarding.

VR: Do you see competition from the likes of Whole Foods and Sprouts in the industry increasing in the coming years?

Billingslea: Sprouts and Whole Foods have literally arrived at our back door this past year, and we are definitely feeling the hit. Even though we are largely a supplement store, we are seeing fewer customers a day since these stores opened. Our prices compete and are even better in many cases with these giants, but the convenience of getting groceries and supplements in one spot has definitely cost us some business this year.

If the Sprouts and Whole Foods of the market squeeze out the independents, my concern is that the level of product education that independents are able to provide to consumers will be ultimately felt in reduced use of supplements overall because consumers won’t have the knowledge to make the smartest choices.

Kanter: Of course! No end of competition. We cannot rest on our laurels (but neither can they). On the one hand, competition helps keep us focused on ramping up our best practices and on communicating our mission and value to the community. But truth be told, it can get exhausting. It helps to know that our customers still appreciate us and continue to support us in spite of all the opportunities to purchase many of our products elsewhere. But there is no rest for the weary. Don’t go into retail if you think it’s not going to be intense! That said, locally owned retail offers an incredible opportunity to be very creative in marketing and store esthetics.

VR: How do you best position yourself in the industry now for what lies ahead five years from now?

Billingslea: For our stores, the plan is to make ourselves as convenient as possible, which means looking at our locations versus our customer base, looking at expanding into even more locations and still providing the customer service and knowledge that set us apart from the big-box stores.

Kanter: Trying to predict the future, especially five years out is risky. That said, we will continue to work on our strengths and especially our customer service and our product selection. I have often said that having a business like ours is like having a baby that never grows up—it always needs attention and always needs to be changed.

And one thing has changed. There is now a significant force in the natural products industry that champions very effectively the benefits of locally owned organic and natural foods retailers. Becoming a member of the Independent Natural Food Retailer Association (INFRA) has been huge for us it offers us tremendous advantages that we did not have before. We have experienced benefits both in buying opportunities (better margins) and in the availability of enhanced product sales information that is critical to our success. And we are further encouraged with the networking that such a community provides. INFRA is well run and a strong force for the independent retailer.

El-Talabani: Honestly we are spending a lot of resources on this. Sunrise can differentiate itself from the counterparts by offering specialty, high-quality products, but, just as important, we need to effectively communicate the difference to customers.

VR: Is social media a big part of your future marketing plans? How can you best utilize it vs. the large retailers?

Billingslea: As I mentioned, we already use Facebook, a website, a blog and monthly email campaigns to reach out to our customers over the internet. Since we don’t sell our products online, our main focus is to get people interested enough in what Betsy’s has to offer when they find us on the web that they actually want to come into our store. Since we are completely local, our social media is inherently local. We can more immediately speak to local issues or events, and hopefully we have a better handle on what our fans want to hear about than a nationally-run social campaign might.

Kanter: Social media has been a big part of our recent past and it certainly will continue to be. We have to stay current on best ways to communicate and combine that with our continued superior product selection. It is good to have some younger people, particularly our daughter, Emily Kanter, who is our marketing director, keep up with the movement of social media.

El-Talabani: Social media needs to be a part big part but honestly, we are trying to figure out what that looks like. VR

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