An independent thinks local.

In an age when big-box retailers and national chains are scrambling to obtain the latest technology and greatest price strategies, some family-owned grocers are focusing on what they do best: serving customers.

To build loyalty with customers who might otherwise be swayed by pricing, some independents are developing a niche in the crowded retail world by offering more than food. These stores are sponsoring Little League teams, giving teenagers their first jobs and organizing monthly food drives. Springfield, Mass.-based Big Y Foods is one retailer that's grabbing attention in its community by filling nontraditional supermarket roles like teacher, baby sitter and community event organizer.

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"The world doesn't need another grocery store. Independent stores today should not be in the business of building supermarkets but in the business of building community centers," says Thomas Haggai, chairman and CEO of Independent Grocers Alliance (IGA), an international voluntary supermarket network based in Chicago. "Foremost on our minds is how to serve consumers. People don't buy at a particular store solely for price."

National and regional chains are struggling to win shopper loyalty by promising the best prices on everything from canned corn to fresh-baked doughnuts and prescription medications. This trend has challenged independent retailers, which often cannot offer the best prices in town on most products. The result has been a decline in the number of independent grocery retailers in the last two decades, a trend that some say will continue unless concrete steps are taken to win back consumer interest.

Yet, industry observers note that smaller stores have some innate advantages over massive mass merchandisers--for one, they are easier to walk to and walk through. Older customers, for example, often don't want to shop a 75,000-square-foot store just to buy a few items. Also, young people who don't have access to cars are more likely to shop or work at local grocers.

While convenience is an intrinsic quality that can draw traffic to a local grocer, many independent retailers are proactively developing a community presence to differentiate their stores. While increased involvement in the neighborhood can boost shoppers' good favor and purchases, that may not be the point. Family retailers often live in the same town as their store and interact socially with their customers. Many say they feel a responsibility to serve their community.

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SCHOOLING THE COMPETITION

Big Y Foods is one independent chain that actively develops programs to win and maintain a following. Competing against regional grocery chains including Stop & Shop, Wal-Mart and Target, Big Y has developed an interactive relationship with its customers through its ongoing commitment to community education.

Founders Paul and Gerald D'Amour's mother was a schoolteacher, and education for children has been an important part of their business philosophy since their first 900-square-foot store opened in 1936 in Chicopee, Mass., at an intersection where two roads merged to form a "Y." Though the independent retailer currently has 49 stores in Massachusetts and Connecticut (25 of which are World Class Markets--the others being smaller grocery stores and a Table & Vine fine wine and gourmet food store), it is still owned by the same family and strives to maintain a friendly local attitude.

"We have always felt it's important to give back to the youth of the community--well-educated children make smart consumers and good future employees," says Claire D'Amour-Daley, Big Y's vice president of communications. "We're not really sure if the return on investment for our education programs and scholarships really comes out. It's just important to us as a local business."

One of Big Y's first formal education efforts began in 1981 as an annual scholarship program. The scholarships, offered to both the store's employees and customers, recognize academic merit and achievement. Six scholarships were awarded the first year, and the retailer now awards about 225 scholarships totaling more than $175,000 a year. The store also recognizes the efforts of area law enforcement officers and firefighters, who protect Big Y's customers and employees, through a unique series of eight scholarships that are available specifically for dependents of these public servants. Awards are given to both traditional and non-traditional age students at the undergraduate and graduate levels.

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While its scholarships award high-performing students, Big Y also has a program that supports students who may need a little extra help. The chain's Homework Helpline program offers free one-on-one homework assistance by phone for students in kindergarten through grade 12. A staff of 25 certified teachers answers calls Monday through Thursday between 4 p.m. and 7 p.m. during the school year. During a typical call, the staff identifies the child, grade level and problem, and then a teacher helps the student interpret written directions, reinforces learning principles, reviews problems step by step and encourages independent work. The program is currently in its 10th year and answers about 400 calls a week.

The Homework Helpline is accessible to deaf and hearing impaired students through a Telecommunications Device for the Deaf (TDD) and also staffs Spanish-speaking teachers. The teachers are paid for their work, and funding for the hotline is provided by vendor partners and the local news media.

"The teachers we hire are very talented. They need to have the ability to teach without a blackboard. Not everyone can do that," says D'Amour-Daley. "All our feedback from the kids and their parents has been very positive."

Schools also benefit from Big Y's support. Education Express is an electronic point-based program that allows area schools to receive educational equipment. The program enables customers to purchase money-saving products with their Express Savings Club card, a store loyalty card, to earn merchandise points for the school of their choice. Schools then redeem those points for free equipment and supplies. The program is only available during certain periods and is free to customers.

During the most recent point-tallying cycle, 700,000 Express Savings Club members signed up to earn points for a local school. Shoppers can track their point totals by checking their printed grocery receipts.

With the credits earned, schools in the area received 5,000 calculators, 4,000 playground balls, 2,500 pencils, 1,300 dictionaries, 1,200 glue sticks, 400 color TVs and VCRs, 250 digital cameras and 250 computer printers, among other items. Since its inception in 1994, the Big Y Education Express program has awarded more than $7 million in free supplies and equipment.

"Our shoppers really appreciate this program," says D'Amour-Daley. "However, all of our company's giving does backfire a little. People sometimes get upset when we can't donate to everything. We won't sponsor scuba class or karate or anything like that. We stick to the 'three R' basics."

SERVING THE COMMUNITY

Another program Big Y provides for the community is the Little Y Kids Club, a free babysitting service available to in-store customers. Not only do parents enjoy the complimentary service, but the personal interaction gives the stores' staff more insight into customers' preferences. Trained professionals supervise children ages 3 to 9 years old in designated playrooms for up to two hours while their parents shop. Each week, the staff has a new age-appropriate craft project for the children to complete, and monthly special activities are planned. Some of December's activities included celebrations for Poinsettia Day, Beethoven's birthday and the first day of winter. The group also has a Little Y Book Club.

"While some stores want kids to shop with their parents so they pull items off the shelves, we realize that many parents like to shop in peace. This way, they can avoid potential conflicts from the bombardment of advertising," says D'Amour-Daley. "It is a competitive point of difference for our store, and our parent shoppers love it."

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Big Y is very careful about security in the 10 stores that offer the babysitting service. Parents are given beepers while they shop in case a situation arises and the child needs attention. Video monitors of the play area are mounted throughout the store so parents can keep an eye on their children. And a matching identification bracelet, given to the child and parent upon drop off, must be presented for pick up. "This actually has presented some problems," says D'Amour-Daley. "We have had fathers try to pick the children up when the mothers had the ID bracelet. Even when the child is yelling 'Daddy, Daddy,' we still don't alter our policy."

"Our [Little Y Kids Club] staff is also very professional," she adds. "They are trained to work with kids. You won't see a cashier subbing in the Little Y Kids Club and vice versa. The staff gets familiar with the children who regularly come by, and they know the kids' names and personalities."

EDUCATION IN-STORE AND BEYOND

The Big Y stores also interact with local children on field trip tours. The retailer gives organized tours of the backrooms for school groups. "A tour of our grocery store is a cheap, easy field trip that can be educational and fun," says D'Amour-Daley. "They come through the store and we show them how meat is ground and things like that."

The grocer also produces a free educational publication for its customers. The store's Educating Kids glossy magazine is produced about seven times a year by an outside firm. The magazine has seven to 10 feature articles covering a variety of issues in education and health. Previous articles discussed warnings and tips for controlling food allergies, what to do with leftover pumpkins, how to benefit from the work of a school guidance counselor, tips for correct computer posture and recipes for kid-friendly nutritious snacks. The magazine also has a middle advertising section that features discounted products for Big Y Express Savings Club members.

"Our magazine has been really well received," says D'Amour-Daley. "The articles offer practical advice and tips that parents can use, such as the recent 'make sure your child eats breakfast before school' story. The book has the type of articles shoppers would find in a library. It covers all kinds of topics that show we're concerned with kids' education."

Another educational item the retailer recently published was a 2004 Washington, D.C., calendar, which was available free to all Big Y shoppers. The glossy calendar highlights 12 of the city's most notable buildings and monuments with brightly colored photographs and informative descriptions. A pull-out walking map of the National Mall and its surrounding areas and a subway system map are also included. The walking map was designed to help visitors navigate the nation's capital and provides relevant historical information on some of the city's most popular sites.

While developing creative programs and getting involved in the community is one way to differentiate a store and stay successful, some challenges to family-run businesses can come from inside. Despite having strong sales and a healthy customer base, some family-run grocers are running into problems because of generational changes in management. Problems can arise when the younger members of the family either aren't interested in continuing the business or aren't willing to accept the challenge of today's marketplace, analysts say.

A succession plan for a family business is a priority, says IGA's Haggai. If the family is not interested in continuing the company, the owners will often sell to a manager that has a similar operating style. Because family businesses tend to be more deeply tied to the community than chain stores, area residents are affected when a store closes or sells to someone who doesn't carry on its values, he says.

"The success of our company is due to the amazing resilience of our member families," says Hagai. "The workers at these stores put in longer hours, but they also have about a third less turnover. While other people come and go in your life, your family is always there--similarly, family-run businesses will always be there."

"It's more than selling food," he says. "Friends like to do business with friends. Shoppers like to feel like guests in the store, and they like to know that their store cares about them. Of course, small independent stores can't do everything for shoppers, but neither can the competition. We like to think that if a consumer ends up happy, we all win."

RELATED ARTICLE: STAYING STRONG

As most in the grocery industry know only too well, the retail environment is changing. Channel blurring and deep discount stores have challenged independent grocers, but analysts agree that these stores can still be successful. "The numbers are actually looking much better for independents," says Diane Hamilton, senior vice president for Retail Forward, a management consulting firm based in Columbus, Ohio. "It seems that the lower-rung stores have closed shop, and the independent stores that remain open today are even stronger. Sales and profitability have been healthy for the most part."

"Those who've survived this wave should be OK," says Hamilton. "The regional stores might struggle more than the small stores, which have more flexibility to change. Staying status quo or waiting for Wal-Mart to move in across the street will definitely hurt business. Independent stores need to start developing a strategy before new competition enters their market."

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With sales falling at independent grocery outlets, more stores are
closing.

                       NUMBER OF OUTLETS  $ SALES (BILLIONS)
                       2002        1992    2002      1992

TOTAL SUPERMARKETS*    32,981    30,400    $411.8    $286.3
CHAIN RETAILERS        21,560    17,690     340.5     204.3
INDEPENDENT RETAILERS  11,421    12,710      71.3      82

* STORES MAKING $2 MILLION OR MORE PER YEAR IN SALES.
Source: Trade Dimensions International Inc., based in Wilton, Conn.