Your Local Fruit Stand is a Bellwether
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\"IMG_0139\"On the corner of 7th Avenue and 12th Street in Manhattan is a fruit and vegetable cart. Others just like it are scattered across New York City. They tend to be run by hardworking immigrants willing to stand up all day and put up with whatever weather comes their way. I’ve passed this stand thousands of times as I walk to and from work. Last fall, I stopped for the first time noticing that the same blueberries and blackberries that have now become my breakfast staples were cheaper than in the grocery store down the street; the same box and brand, but 25% less.

In retrospect, it makes perfect sense since my grocery store pays more in rent than the street vendor does. It wasn’t just that the berries were cheaper; when I actually compared the other fruit and vegetable prices, everything else was too. I started buying avocados, eggplant, onions and melons. Not only was it cheaper, but it was more convenient. Yes the selection was narrow, but it met my needs. The vendor was friendly, and his name was Ali.

In my first transaction, I realized that the sales protocols were different. I understand the self-service routine of the farmer’s market where you pick over and select what you want to buy in the midst of other frenzied Saturday morning customers. Ali, on the other hand, rarely takes care of more than one customer at a time. He doesn’t like you touching before you buy. He curates your purchase for you. He asks when you are going to eat something, what you are making, and will make suggestions; plus he will not sell you anything that isn’t ripe enough.

It is always a polite exchange, and even when I don’t stop by, I get a friendly nod of recognition. It has become one my beacons of humanity as I move through my neighborhood. I haven’t stopped going to the grocery store or the farmer’s market, but Ali has received a piece of my weekly budget.

\"IMG_0148\"The grocery industry is in trouble.

Everybody else is targeting grocery customers. Sales in the grocery ‘Center Store’ for non-fresh food products have declined with each passing year. The convenience store business has done a good job overcoming the perception of higher prices and lower quality. Many of the major drug chains have expanded their food offerings. Some specialize in single-serve and expanded dietetic offerings. Dollar Store and mass merchants have chomped off pieces of this business as well. Costco, Trader Joe’s and Aldi have taken their bits, too. Ask Millennials where they do their shopping for food and household supplies and you’ll get a list of eclectic locations, on and offline.

It isn’t just the chains and alternative channels that are offering new options. The Farmer’s Market movement, which 10 years ago had a 50% failure rate, has stabilized with some 8000 markets across the country. Project for Public Spaces, a non-profit in New York City, runs a training program for farmer’s market managers. The markets themselves have improved, as small farmers have learned more about the customers they serve. My market in Abington Square in the West Village on Saturday mornings has some 15 stalls, with everything from bread, veggies and fruit, to artisanal cheeses and mushrooms. The farmer’s market is fun and interactive. Even CSA, community supported agriculture, has made its inroads into big cities.

And it isn’t just North America where the grocery store is under assault.

Across many emerging economies, organized retail started with grocery and hypermarkets. In Argentina and Brazil, modern supermarkets took fewer than 10 years to dominate food distribution; they offered hygiene, safe parking lots and international brands. But even in South America, traditional farmer’s markets have been on the upsurge. They have looked at the grocery store and improved their merchandising. Often, vegetables and fruit are pre-bagged and simply priced. The transaction is quick and easy. Many of traditional street markets are immediately adjacent to public transportation. It’s a new version of grab-and-go. Just like Ali’s fruit stand for me, it’s convenient.

The big, traditional city-center markets have also cleaned up their act and added value offerings like smoked meats, small-batch pickling, and even “fresh” or “new” wine sold by the jug. In spite of challenged parking and security concerns, they have become a destination, almost like the shopping mall was 20 years ago, but with a new sense of authentic charm, with tempting smells and sounds.

In the face of so much competition, where is American Grocery Store innovation? In mainstream America, we have no true national chains. Neither Kroger nor Walmart have the same presence as say, Tesco in Britain, or Carrefour in France. Both Walmart and Kroger have had their butts kicked as they have tried to invade markets with strong regional players, like HEB in Texas, Wegman’s in upstate New York, and Meier’s the Midwest.

The big regional American players have built superstores that duplicate the European hypermarkets. All of them have aggressively built private label brands and localized their mix of offerings. Many have the advantage of being privately held, which has sheltered them from vapid shareholders looking at quarterly results. The regional chains seem to operate more consistently store to store, unlike Walmart and Kroger where the strength of the individual store can vary greatly. Part of the success of Whole Foods is that it functions like a series of regional businesses. Company headquarters may be in Austin, but the regional offices do much of their own buying and control their own destinies.

What is the future of grocery?

About 80% of our weekly purchases are routine. After a certain age, we have landed on the brands of juice, butter, yogurt and mustard we prefer. We have settled into our choice of laundry soap and bottled water. Yes, we may vary our purchases by season or occasion, or buy on deal, but our basic brand palate remains the same. But what if our kitchens could order for us? What if replacement was driven not by highly-merchandised shelf presence, but by storage efficiencies and easy recycling? I am not bullish on the long-term future of the supermarket, as we know it, along with the consumer packaged goods companies that rely on them for distribution. There is change streaming into the pipeline. We like the experience of buying fruits and vegetables, there is some sensual pleasure to it; but walking down the laundry aisle or staring into the milk cold case? These commodity products could easily be replenished automatically through smart appliances that interface with online grocery orders.

Years ago at a retail conference in Istanbul, I heard a street vendor talk about how he organized his offerings. He knew which way the eye scanned his cart and the order in which a buyer thought about selecting produce; lettuce is always bought first, then the tomatoes and cucumber. He talked about sun angles and how he repositions his cart from morning to afternoon. It was a brilliant, simple string of merchant logic.

The unstoppable marketing professional I am, I tried last fall to help Ali rethink his signage. He smiled and took me for a Village idiot. He is just fine with his simple approach. And I predict I’m going to short A&P and Kroger over the long term. Ali is going to do just fine.

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