Mount Evelyn IGA owner Tony Ingpen is no stranger to competition, navigating doing business in one of Australia’s most hotly contested industries for more than 40 years.
But as always in the world of retail, times are changing, and as consumers swap their local shopping strip for destination centres and e-commerce, small business is under the pump.
“We’ve been knocked around, the chains have had a bit of fight back, and the expansion of Aldi has had an impact … the pie is only so big, unfortunately,” Ingpen tells SmartCompany.
Australians have been visiting their local shops less in recent years, according to recent American Express research, which found the amount of consumers shopping small at least once a week has fallen from 82% in 2016 to 70% in 2018.
Declining footfall and high rents have plagued once iconic shopping strips such as Melbourne’s Chapel Street, which was found to have more than 40 empty shops earlier this year.
Ingpen says Mt Evelyn’s strip has held up reasonably but warns of a broader shift in the way consumers want to shop.
“People tend to have two places they want to shop, one that’s close to home and one that’s close to work,” he says.
“Strip shopping centres, where they are, tend to be more about necessities.
“[Whereas] shopping centres are becoming more glamorous … customers want that theatre.”
Ingpen explains independents can’t compete with chains like Coles and Woolies for spots in destination centres and are increasingly relying on the business of their local community members.
AMEX’s survey of 1,019 customers found 82% believe they could be doing more to support small businesses, although more than half (59%) also said they don’t think they’re shopping habits affect local businesses.
Meanwhile, the larger players like Coles and Woolworths are moving on smaller format grocery stores in a bid to muscle in on turf held by independents.
Coles launched a new concept called Coles Local in Surry Hills, NSW today, billed as a smaller format outlet with a highly curated range.
The supermarket chain hopes to open 120 similar stores across the country, mirroring the success Woolworths has had with its Metro stores in recent years.
Retail expert and Queensland University of Technology (QUT) professor Gary Mortimer says the smaller format outlets could hit independent grocers hard.
“One of the benefits of an IGA or Foodworks is the size, you can curate the range depending on your neighbourhood,” Mortimer tells SmartCompany.
“What shoppers are now looking for is greater value, and they know they can get supermarket pricing but in a smaller format.”
Ingpen says the smaller format Coles stores were concerning for independents, as shoppers looked towards value, range and experience.
“I’m concerned about the smaller footprint and if they can get that right it does eat into our area,” he says.
Despite challenges, local businesses are giving more
Forming local connections with customers and embedding business into the community will be the best bet to counter the corporate onslaught, Ingpen says.
On that front, AMEX’s research found small businesses are more active than ever, delivering 45 cents of every dollar they earn back into their local areas over the last 12 months.
In total, $50 billion has been handed back in the last year through salaries, payments to local suppliers, charities and schools, up from $38 billion last year.
Mortimer expects savvy small business owners to continue giving as a way to differentiate themselves from larger chains.
“One of the benefits IGAs have over big national players is their ability to adapt and engage in local community projects,” he says.