In fiscal year 2020 (ended on March 31, 2021), many retailers saw a 17% increase in sales boosted by an increase in transaction size to an average of $31 and a big upswing in online orders, according to NGA and FMS Solutions' joint study.
And while inflation was high and continues to creep up, sales still gained 13.5% once adjusted for the price increases. NGA and FMS Solutions also noted that while hard-dollar expenses rose in areas such as wages/benefits and supplies, sales gains accelerated at a faster a rate prompting a drop in total expenses as a percentage of sales to 26.9%, down from 28.8% in 2019.
According to the study, the biggest contributors to record grocery retail sales were dry grocery, dairy, frozen, and meat.
Independent retailers prove resilient
“All of grocery retail had record sales in 2020, but the pandemic brought consumers back to independent grocers in record numbers,” said Robert Graybill, FMS CEO and president.
“Whether one-store operators or small regional chains, independent grocers did what they do best during difficult times: Take care of their communities.”
Independents managed to improve their margin to 28.4% across departments, with the biggest departmental increases driven by dry grocery, dairy, and beer/wine/liquor.
“The combination of high sales and better margins resulted in record net profits before taxes, at 5.02%, up from 1.05% in 2019,” Graybill noted.
Independents also managed to put pandemic sales gains to use by reinvesting into their business, with 62% increasing capital expenses. According to the study, both store remodeling and new store openings among small, independent retailers reached their highest levels in many years.
Hiring and retention challenges
Independent retailers' ability to deliver increased retail sales was not without its own set of challenges, however, including hiring and retaining staff.
The joint study noted that hiring and retention is the top marketplace concern among independent grocers, with 71% of independents reporting that hiring during the pandemic has been a challenge, and 64% reported it had a negative impact on retention.
“With continued elevated retail demand, the biggest competition now is not for the consumer dollar, but for independents’ greatest asset: people,” Graybill said, noting that part of the reinvestment strategy for many independent retailers moving forward will be allocating more capital towards its work force.
“Alongside the important role in feeding America’s communities, the pandemic has illustrated the agility and resiliency of independent grocers,” added NGA President and CEO Greg Ferrara.
“As the supermarket industry continues to navigate these changes, independent grocers are in a unique position to find innovative and creative ways to better serve their customers."