Investments in People Key to Independent Operators, According to New FMI Report

   WASHINGTON, DC — April 6, 2001 — Faced with a continuously tight labor market, the most profitable independently-owned and operated supermarkets are significantly increasing investments in associates at all levels, according to a new study from the Food Marketing Institute (FMI).

Operating Results of Independent Supermarkets,1999-2000 provides the most current comparative financial performance information for independent supermarkets. Presenting data for four types of store formats – conventional supermarkets, super stores, small grocery stores and natural food stores – the report covers critical operations subjects: sales data, productivity measures relating to personnel, space utilization and inventory, and departmental statistics such as inventory turns and percentage of total store sales.

The study largely focuses on the operating results of stores with conventional formats — full-line, self-service stores under 30,000 square feet with annual sales of $2 million or more.

Although their overall operating expenses were lower than other stores, the most profitable conventional supermarkets invested a higher percentage of their expenses into staffing. The payroll expenses of these stores were highest at 47.3 percent of expenses, compared with 41.2 percent for the least profitable stores. When considered as a percentage of sales, among the different formats surveyed, natural food stores made the highest investment with payroll (excluding fringe benefits) comprising 16.3 percent of sales while conventional and superstores invested around 10 percent of sales.

The most profitable conventional stores reported a median annual sales growth of 5.2 percent versus 3.0 percent for all conventional stores in the sample and 0.7 percent for the least
profitable stores. Gross margins were higher in the most profitable stores, which also turned
grocery inventory much faster than other stores — 12.9 times, compared with 12.2 times for all stores and 10.9 times for the least profitable stores.
     
The sales mix in the most profitable conventional supermarkets differed from other stores in the study. Meat departments play a larger role in these stores, averaging 22.8 percent of sales and a 29.4 percent gross margin in the most profitable stores, compared with 20.4 percent of sales and a 27.8 percent margin in all conventional stores. Interestingly, the average percentage of sales from produce was lower 9.6 percent in the most profitable stores, compared with 10.6 percent for all stores and 10.3 percent for the least profitable stores.
Other highlights:

• Nearly one-third of companies operating conventional stores have a Web site for marketing themselves on the Internet. But among these retailers, only seven percent allow customers to purchase groceries online.

• Reflecting an industry trend toward providing more personalized service, 42 percent of companies with conventional stores have a home delivery service for their customers.

• The average amount of shrink as a percentage of total sales in conventional stores ranged from 0.95 to 2.10 percent among the middle 50 percent of respondents, with the median at 1.5 percent.

• Twenty percent of conventional stores have a frequent shopper/loyalty program, compared with 39 percent of superstores.
  

“Independent operators have proven time and again that they can compete in any market with the utmost efficiency and with optimal management performance,” notes Michael Sansolo, FMI senior vice president and president of the Institute’s new Independent Operator division.   “This new study is an easy-to-understand tool for independent retailers to evaluate their own operating results against industry benchmarks in order to pinpoint strengths, weaknesses and improvement opportunities.”

To purchase a copy of Operating Results of Independent Supermarkets, 1999-2000,($30 for FMI members/$75 for non-members) or for more information, contact FMI Publications and Video Sales (tel: 202-220-0723; fax: 202-220-0879; e-mail: publications@fmi.org) or visit the Intitute’s Web site at www.fmi.org.