5 Common Problems Facing Independent Grocery Stores
by The Ottimate Editorial Team
Independent grocery stores have evolved into sleek, modern-looking businesses over the past decade. And they have fought tooth and nail to get to their current status: market share darlings. The consumer thirst for organics and natural foods has not wavered. However, the grocery model remains unchanged: stores still source goods for a specific price, then sell those goods for a higher price, to profit.
While that sounds fairly simple, the grocery world is anything but. From logistics to inventory management, independent grocery stores face multiple challenges that require strategy and the use of shrewd business solutions.
Repetitive, error-prone processes in the warehouse and the Admin office are a huge bugbear. To make matters worse, issues which might easily be solved with automation in another industry, might be met with skepticism and resistance in the independent grocery space. Automation provides simple, cost-effective solutions to a broad spectrum of issues — including labor shortages — but independent retailers have often experienced less-than-breezy integrations with tech products that weren’t quite ready to handle the demands of a high-SKU-count store.
Common challenges that face independent grocery stores — and how to go about meeting those, head-on — are what we’re here to unpack. Let’s take a look at:
- Inventory Management
- Labor Shortage
- Cash On Hand
- Managing Multiple Locations or Departments
- Final Thoughts: 5 Common Problems, or Common Opportunities?
1. Inventory Management
Picture this: a customer walks into your grocery store. They’re hosting a party, and specifically need the brand of refried pintos that you normally stock. They’re making a massive triple-batch of Seven Layer Dip, it’s everyone’s favorite. They’re stoked. But the shelf is… empty. So the customer asks a staff member to check out back. No extra box (UNFI didn’t deliver today, but now is not the time for excuses). And the party’s tonight, so the helpful staff suggestion to soak some bulk beans? Not so helpful.
This kind of situation can turn a customer off, sometimes for good. Your store stands to lose business, and you might take a hit on Google Reviews. Out-of-stocks are one of the most expensive of all the grocery store problems. Staying on top of your inventory should be top among your priorities — but what happens when perpetual inventory isn’t practical? What if you can’t afford the robust inventory management tool of your dreams?
Deep breath. There are other ways. Freeing up time for your Receiver, AP team, or even finance clerk, for example. That can make a world of difference toward preventing out-of-stocks. If software to directly tackle the problem is off the table, where else could you streamline things to get more bandwidth for your existing employees?
An inventory management tool can beef up your inventory management and provide better control over inventory. But with a little extra bandwidth, your employees can also:
- Forecast your inventory needs and optimize order quantity
- Get an alert-system in place for when your stock falls below safety level
- Track inventory movement to ensure proper internal controls and avoid misappropriation
2. Labor Shortage
The labor shortage has become one of the most pressing grocery store problems. Over 6.3 million retail workers quit their job between January and October 2021.
The massive exodus of retail workers last year and the supply chain disruption has left independent grocery stores with a major labor shortage that may expand as grocery stores continue to witness growing demand.
A combination of strategy and technology can address staffing woes:
- Automate mind-numbingly repetitive functions. Using a digitization tool like Ottimate helps automate payments and invoice processing. Ottimate empowers you to get more done with fewer accounts payable and finance team members.
- Offer excellent incentives. Let’s face it — your employees have options. If a competitor offers better pay and incentives, that’s hard to ignore. If a wage hike isn’t in your immediate future, get creative with PTO, paid time for jury duty or civic engagement (like local and federal elections), and kincare. You can improve employee retention by increasing and improving your employee incentives.
- Consider large tech solutions. You can innovate yourself, or take inspiration from Walmart’s self-checkout option or Amazon’s “Just Walk Out” feature: Customers walk in for grocery shopping with a card or a digital wallet app, choose the food products they want to buy, and leave.
Sound risky? Maybe not for Bezos. But you can also use smart shopping carts. Smart carts identify and “weigh” items to calculate costs in real-time. They also help shoppers navigate by telling them where to find milk, toilet paper, or any item they want.
If the idea of your shoppers interacting with a robotic shopping cart isn’t the kind of vibe you’re going for, don’t worry. There are friendlier solutions for independent grocery shoppers, who tend to rely on the tangible community fabric that their store’s friendly faces have to offer.
Accountability is a wonderful thing. But instilling a high degree of accountability (and holding one’s employees accountable) is a challenge for any organization, at any level. What can you do to increase the likelihood that your staff will adopt a pro-accountability culture?
Here’s what you can do to improve accountability:
- Use internal controls. If you have a perishables-heavy inventory, mind those expiries. And while you’re at it, minimize the risk of theft and provide a framework where there’s little room for errors.
- Delegate the receiving of the inventory, the recording of inventory, and the invoicing processing to different people. Having more folks monitoring the flow of inventory reduces the chances of collusion.
- Lead by example. Have everyone from the GM to the Front End Manager practice accountability. If something is amiss, immediately “go direct” and inform the relevant staff to get it sorted.
4. Cash Flow
When cash on hand is low, everyone gets tense. Without the right tools in place to manage and facilitate cash flow, that tension can result in lost sales, lost customers and lost employees. Keeping a close eye on multiple variables will help manage cash flow: the price of the items in your inventory, the forecasted demand for those items, and any foreseeable changes in credit terms with vendors, distributors, or third party shopping entities.
Collectively, these variables can considerably impact your cash on hand.
Here’s what you can do to avoid a cash crunch at your independent grocery store:
- Monitor cost of goods sold (COGS).
You can use Ottimate to better understand your COGS, while managing and storing invoices in an easy-to-access digital filing cabinet.
- Minimize days sales outstanding (DSO).
If you offer goods on credit, make your collections faster. Send a gentle reminder when payments become overdue, and if feasible, offer shorter credit periods.
This isn’t an exhaustive list. There are so many more things you can do to manage cash on hand—people have written whole books. But you’ll have a serious leg-up on the situation if you pay attention to the above, and dig into understanding your financial statements.
5. Managing Multiple Locations or Departments
It’s easy to see how managing multiple locations and departments can amplify grocery store woes, from accounts payable (AP) to warehouse inventory.
Having more locations and departments isn’t a problem in itself. It’s just a catalyst that can exacerbate existing problems. But here’s the good news: You can use many of the solutions discussed above to address issues that plague scaling businesses.
To make it easier for independent grocers to grow while managing multiple locations and departments, we recommend the following:
- Adopt a robust AP automation solution. More locations and departments means more invoices and accounting entries. Using Ottimate will make it easier to track invoices and eliminate the need to manually entering data from every statement and PO.
- Consolidate invoices. Ottimate eliminates the complexity of dealing with multiple location and department invoices, separately. It consolidates all invoices on a single dashboard, integrates with your existing accounting software, codes them appropriately according to your General Ledger and line-item needs, and even “learns” the way you prefer to split your invoices.
Final Thoughts: 5 Common Problems, or Common Opportunities, for Independent Grocery Stores
Independent grocery stores have always juggled multiple business challenges. The pandemic-induced preference for online groceries is no worse than the grocery store wars of the early aughts. The key question to ask is, where is the opportunity? How can we find the bandwidth to double down on the things that we do well?
Keeping your cost structure lean ensures you’re ready to face challenges with fortitude, as does keeping an eye out for technology that will give your current employees better bandwidth. If you have folx on staff who are resistant to tech solutions, remind them: automation in one department is an excellent way to find extra labor dollars in another.
Ottimate helps achieve a comfortable balance between purchasing demands and accounts payable workflows. Streamline your AP process and get granular insights about your independent grocery store with Ottimate. Book a demo today!
The Ottimate Editorial Team
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