Small grocers say there’s a reason their shelves are still relatively bare. Major manufacturers of consumer goods, faced with insufficient supply and high demand, prioritize their largest retail clients, such as Walmart (WMT) and Amazon (AMZN), according to a trade group representing independent grocery stores in the United States. Without access to key products, small grocers say, they’re losing out to customers and facing yet another hurdle as they try to survive against big chains.
It’s not a whole new problem. In the run-up to the pandemic, independent grocers were frequently advised that they could not purchase goods or unique items found in large chains, according to Christopher Jones, senior vice president of government affairs and counselor to the National Grocers Association. “What happened during the Covid pandemic is that this issue has really been magnified,” Jones said.
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There are no publicly available data on out-of-stock products in small versus large stores. But Burt Flickinger, a retail analyst at the Strategic Resource Group, said he and his team tour supermarkets across the country every week and find in the pandemic that chain stores “have much better supplies than independent stores.”
“Supercenters and wholesale clubs are getting a lot of merchandise more often,” he said.
Independent traders—who are more likely to be located in low-income communities and rural areas than chain stores, the Agriculture Department has found—purchase their goods from small to medium-sized wholesalers. These wholesalers have relationships with large consumer products and food producers. But stores like Walmart, Amazon, and other major retailers, which usually buy directly from them, are the main buyers for these manufacturers.
Known in the industry as ‘power buyers,’ large retailers have had an advantage over the years when purchasing products because they order greater quantities than smaller wholesalers do, said Rudolf Leuschner, associate professor of supply chain management at Rutgers University, who studies the relationship between suppliers and buyers.
It has an intuitive meaning: Large retailers and the purchase of clout make them a top target for suppliers, he said, and often get discounts, special packaging or new items early.
Manufacturers ought to “offer them the best quality, the best service on anything, so they mean more to you,” Leuschner said, comparing it to how airlines make the most of first-class fliers over passengers seated in a coach.
And when local grocers have goods on hand, they still have less versatility to get those products to customers than national chains that can distribute their stock through their store base, said Mark Baum, Senior Vice President of Industry Relations at the IMF, a trade association representing both large and small grocers.
Independent grocery stores claim they notice the consequences.
Robert Rybick, CEO of Geissler’s Supermarkets, which has eight stores in Connecticut and Massachusetts, said that when it comes to such basic paper products, he’s struggling to have the same options as larger chains.
He said that only 24-packs of these goods have been delivered from his wholesaler, and most of them are off-brand items. It doesn’t have the same range as the larger chains, which also have four and twelve packs. That hurt his ability to attract customers to a tight budget, who sometimes can’t afford those larger sizes, he said.
“We just couldn’t compete with big box stores on paper and cleaning supplies,” he said.
In addition to the challenges faced by smaller retailers, Walmart, the country’s largest retailer, is tightening demands on its suppliers, increasing fines for products shipped late or not in full. In September, Walmart revealed that it would adopt new requirements for suppliers. In February, Walmart started charging suppliers 3 per cent of delayed products if 98% of the order is not shipped to stores or warehouses on time.
Jones of the National Grocers Association said that Walmart’s decision was a “demonstration of the influence and control Walmart has over trade” and would make it much harder for small grocers to procure goods. “This means that suppliers must give priority to their delivery to Walmart over all else.”
Walmart refused to comment on Jones’ characterization of his new laws.
The National Grocers Association is now calling on Congress and federal antitrust authorities to examine whether large retailers are breaching the Robinson-Patman Act of 1936, a statute that “requires a seller to treat all competing customers fairly equally,” according to the Federal Trade Commission.
“We need strong antitrust regulation to encourage and secure these competitive markets and maintain a fair playing field to prevent these larger competitors from behaving in ways that are detrimental to their smallest rivals,” Jones said.
