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The future of rural grocery stores

Rural grocery
Ryan Pesch, community economics educator,
discusses connections between local foods
and local grocery stores at Pierz Foods

Like most American institutions, the rural grocery store is facing change. Big box competition from nearby towns is fierce. Rural customers travel freely to larger towns nearby. And the graying of the American workforce means pending retirement among rural grocery store owners who have played a vital role in small-town community life for decades.

For Kathy Draeger, the director of Extension's Regional Sustainable Development Partnerships (RSDP), this change hits home. "When I moved to my husband's family homestead eight years ago, I made a commitment to shop rural. Talking to my rural grocery owner taught me the struggles rural grocery stores face. I was concerned, because my families' access to healthy food relies on what I can get from my small town grocery store."

Draeger led RSDP staff and colleagues throughout Extension to study rural grocery store change, with funding from a host of partners* and help from grocery store owners themselves. The survey was sent to 279 Minnesota grocery stores, and 69 percent responded. RSDP is using these survey results to better describe current conditions, and to consider what resources should be mobilized to help rural grocery stores thrive.

Under new ownership

A critical finding of the study is that rural grocery store owners want to pass the baton to a new generation. In fact, 63 percent of store owners said they do not intend to own their store 10 years from now. But these intentions haven't resulted in plans. In fact, a large percentage of respondents said they do not have a plan to transition their business. (See chart, right.)

Years own

Kathy Schaff, director of Grow Minnesota!℠ at Minnesota's State Chamber of Commerce, notes that rural grocery store owners are not alone. "Urban, rural, large and small businesses all struggle with succession planning. Over the past three years, 1,210 businesses responded to our survey question about succession planning, and 38 percent reported having no succession plan in place."

New ownership might be an opportunity for communities to modernize the business plans used by local grocery stores. "There is a lot of conversation going on about successful business models for rural grocery stores," says Draeger. "Cooperatives and community ownership are models being tried. Others are considering an expanded view of the 'mom-and-pop store.'" Draeger and her team are designing a future study to examine various ownership models.

New owners will likely need to master many skills. Allen Dahmen and his wife, Jill, became owners of Pierz Foods in Central Minnesota in 2004. Prior to that, he managed a SUPERVALU in Isle, Minnesota. "It was a transition from managing 50 people and having huge sales to getting a third of those sales and wearing all the hats," says Dahmen. "I'm the bookkeeper. My wife and I do human resources. I'm the meat cutter and whatever else is needed. We have to strip the floors soon, and I'll do that with whatever help I can get from family. We'll get it done in 24 hours so that we can be open for business again."

More than groceries

Bruce Schwartau, Extension's Community Economics program leader, has studied how businesses can co-exist with Walmart. He warns that the new rural grocery store will need to specialize its product line. "You don't want to just sell the same things folks can find at Walmart, because you probably can't compete," says Schwartau.

That's why some small town grocers are capitalizing on the local foods trend. Almost 80 percent of grocery stores surveyed said that they use local farmers as either major or minor suppliers for fresh produce. Ryan Pesch, community economics educator, coaches local producers and grocery store owners to form partnerships and find ways to share profits. Pesch and his colleagues also teach small stores how to capitalize on customer demand for local food with clear signage and attractive presentations. Extension's food safety team gets in on the act, too, because keeping fresh produce safe is critical to the reputation of both producers and store owners.

Beyond local foods, new owners can focus on the experience of coming to the local grocery store. For example, the Dahmens hope to acquire more square footage so that they can add a deli where shoppers have a bite and socialize. Allen recently enjoyed being part of an RSDP-sponsored bus trip to Kansas State University, where a conference for small-town grocers discussed business options. Dahmen was impressed by a store owner who operates a successful grocery in a town with a population of 25. "The owner plays the guitar, they serve sandwiches, they incorporate art; and they are attracting customers throughout the region."

Dahmen predicts that the future rural grocery store could more intentionally integrate the social aspects that have made small-town groceries a mainstay through the years. "It's vital that communities have grocery stores," he says. "They are a social anchor for a community."

Maintaining "This Old Store"

Old survery

The RSDP survey results also pointed to the challenge of maintaining the physical structure of grocery store buildings, especially given their age. (See survey finding, right.) In fact, 96 percent of survey responders said that high operating costs for utilities, repair, maintenance, etc., are a challenge.

The Dahmens prioritize these expenses for a variety of reasons. "Your store has to be clean," says Dahmen. "The lighting has to be proper. If you run fluorescent tubes, they have to be changed every three years. You have to refresh and update your store – not just so that it's a nice place to be, but so that customers see that the money they spend in your store is being invested in their community."

Draeger and her colleagues are connecting local stores to resources that can make updates such as energy-efficient lighting and equipment more affordable, and can give ideas for energy conservation. "These, and other resources, can make storefronts ready for the next generation," she says.

How can communities – and community members – help?

  1. Decide that having a source for healthy food is important. While losing a grocery store doesn't have to be a death knell for your community, the importance of access to staples and healthy foods can't be overstated. When communities help businesses plan for the future, they can prevent their town from becoming a food desert.
  2. Plan an event. "A big part of the success of a small town retail store is working with the city and other businesses," says Dahmen. "We can hold events that promote the community together. Even if you don't get sales the day of the event, the event promotes your community so that people come back."
  3. Tell store owners what you want. Kathy Draeger suggests opening the channels of communication between store owners and customers. "Our survey showed that a majority of grocers are eager to meet customers' needs. So ask your local grocer for the products you'd like to see them stock. Then, be sure you go back in to buy those products."
  4. Don't assume stores are too expensive. Taking travel costs into account, rural grocery stores are not always more expensive, and Draeger says she always pays attention to "circulars" – lists of items on special – so that she can save. "Shopping off that circular is as inexpensive as shopping in big box stores," she says.
  5. Get to know your local grocer. If community connections are a reason to save rural grocery stores, then having a relationship with your local grocer makes sense. Kathy Draeger suggests that community members "shake the grocers' hand, introduce yourself, and say thank you. It's amazing what a difference that makes."

More resources

  • A host of educational materials and referral resources are available on RSDP's Rural Grocery Stores web site.
  • Extension educators can help communities examine their retail economy.
  • In our next issue… we will describe findings of a recently completed study on rural business succession for other types of businesses in Greater Minnesota.

* The Rural Grocery Store study was funded by the Minnesota Department of Agriculture, United FCS, Ag Country, Ag Star, and Agri-bank. The Kansas State University Rural Grocery Initiative is also a partner in the initiative.

Author: Joyce Hoelting

Reviewed in 2016

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