Foothills IGA Uses Location to its Advantage

10/12/2015

Being the only game in town doesn’t mean you can be lax, at least according to Jeff Downing in regard to his store, Foothills IGA, in Marble Hill, Ga., which is featured on the cover of the October edition of Progressive Grocer Independent. To be sure, Downing's IGA always strives to be a cut above, without gouging customers on price.

Foothills IGA’s biggest competitors are chain supermarkets and mass retailers, so Downing has to price accordingly. His target is to be lower than some and higher than others to remain in the ballpark for the area. As a small business with 25,000 SKUs, pricing is always a challenge.

“If you try to be the lowest price on everything, you’ll soon be bankrupt,” Downing says. “We try to reach an acceptable margin that allows us to make a profit and survive to the next year. When we opened this store in January 2002, I had people say they thought prices would be a lot higher, but they never were.”

Downing spent most of his career working his way up in management at several supermarket chains, but decided to go into business for himself in 1997 by opening his first independent store in Bryson City, N.C. His plan was to operate several stores in western North Carolina and eastern Georgia, and to that end, he built Foothills IGA, which opened in 2002. He sold the Bryson City store in 2006.

The location of Foothills IGA may have been daunting to some: It’s halfway between the two major roadways in north Georgia, a remote, rural location in the foothills of the Appalachian Mountains. (The former terminus of the Appalachian Trail, Mount Oglethorpe, can be seen from the store.) The closest residential community, Big Canoe, about 2 miles away, has 2,700 homes, and is about 80 miles from the Atlanta airport and 30 miles from the city’s northernmost suburbs.

“When I built this store, I knew the development would be on the major arteries,” Downing says, and that prediction has held true. Two Walmarts have subsequently opened in the area, but they’re located 15 to 20 miles away, and the same is true for the chain supermarkets. “The fact that I have chain competition surrounding the store precludes them putting one right here, at least for 50 years,” he predicts.

Demographic Swings

The area has a small tourist trade, but it’s more of a getaway community for urbanites. Only about half of the homes in Big Canoe have full-time residents. The rest are lived in part-time by people who come to play golf or participate in other outdoor activities. “When the weather’s good, they come. When the weather’s bad, they don’t come,” Downing says.

That makes for some swings in customer counts. In winter, the store’s business dips about 15 percent below its average, but in the summer, business is 15 percent to 30 percent above average. Downing handles the swings in business by relying largely on part-time help in the summer to add to the staff as needed. This strategy works, as many of the part-time employees — typically students — are only available to work in the summer.

The remote, part-time-living aspect of the community also means that Downing has had to position the store to appeal to as many of the area’s residents as possible.

“In order for this store to survive — and I did extensive research — I knew it had to have a high market share and it had to appeal to all demographics,” Downing says. “When we planned this store, it was never going to be the Big Canoe IGA. I needed more than Big Canoe. It also wasn’t going to be the Marble Hill IGA, because we had to have the support of Big Canoe. We had to appeal to the whole area; we had to have the support of people who had been here for generations.”

Product mix is very important when dealing with the wide range of demographics that Foothills IGA serves, from the mountain families to the part-timers escaping Atlanta. About 50 percent of sales come from residents of Big Canoe (where average home prices range from $500,000 to $1 million and up), another 40 percent are made up of those living outside of town, and 10 percent are considered impoverished.

Impressively Meaty

The store featured the first lobster tank in the county. Foothills IGA doesn’t sell that many lobsters, but Downing knew he had to provide amenities like these to compete with the chain stores not far away. But along with the high-end lobsters, the store offers staples like flour, sugar and meal.

The store sells Certified Angus Beef because, in Downing’s opinion, it’s the best, most consistent beef  available and his customers recognize that. The meat/seafood department doesn’t have much square footage — all products are cut in-house, but there’s no service meat case due to lack of space and volume. Products are displayed in upright cases instead of tub cases that stores with more space may feature. “People know they can get anything they want,” Downing explains. “I didn’t feel [a service counter] was the best use of our space back here. And I knew about what volume we would do when I built this store, and indeed that was the case.”

Downing is committed to keeping meat cutters on staff even as more stores are moving toward factory-cut meat. Buying from meat factories adds one to two days in transportation time, which means that preservatives and additives are needed to keep the meat looking fresh on the shelf. “I believe that’s an opportunity for us,” Downing says. “There’s nothing wrong with what they sell, but it’s an opportunity to set us apart, because from the get-go, that meat is probably going to be two days old when it gets to the store’s cases, as opposed to us, where it comes out here in a few minutes.”

Focus on Fresh Produce

Produce is one of the highest-margin departments in the store, with 12 percent of store sales, and the focus is on fresh — about 350 to 400 varieties are available on a daily basis. Of those products, about 15 percent are organic, depending on the time of year.

In 2008, Downing enlarged the store by 4,000 square feet to its current 25,000 square feet. Some of the added space was devoted to a fruit-/vegetable-processing room to provide cut products prepared in a sanitary and refrigerated manner. “We sell a tremendous amount of fresh-cut fruit,” Downing says. “Others do, too, but not everybody does, and that’s one of the things we do that not every independent can do.”

He also tries to buy local whenever possible for the department. A local hydroponic farmer sells bagged lettuce in the store, which has proved highly popular. The lettuce is slightly higher priced than traditional bagged lettuce, but the company’s processing and growing techniques allow it to stay fresh for two weeks, compared with the typical one week for traditional bagged lettuce.

Local products aren’t restricted to produce. About a year ago, Foothills IGA began carrying products from a nearby gristmill that produces stone-ground flour and steel-cut grits. The store calls in the order, and the mill ships the products via UPS for delivery within a day or two. “It’s a unique product, but it’s darn good,” Downing says. “It’s three times the price of grits on the shelf over there, but it’s better than the other stuff, and people will pay for quality.”

Foothills IGA also offers its own branded spices and dried mushrooms. “We have just a little of our own brand, but it’s something that sets us apart, and they have pretty good prices,” he adds.

Gangbuster Bakery/Deli

The bakery/deli also contributes a high ratio for the size of the store, with more than 1,000 SKUs and 9 percent of the store’s sales. It also benefited from the recent expansion by growing to 2.5 times the size it was when the store first opened. The expansion allowed the department to install large ovens for products to be baked on-site, and the recent addition of a mixer will allow more bakery products to be produced from scratch in the department.

Among the best-selling products in the department are rotisserie and fried chickens. For the fried chicken, the store brings in whole birds and prepares them in the meat department as a nine-piece cut, rather than the eight-piece cut that’s more typical in the industry.

“You wind up with more equal distribution of meat, with three breast pieces versus two,” Downing points out. In the eight-piece cut, the breast is separated from the rest of the chicken on a saw, which creates breast pieces that are disproportionately large compared with the other pieces of chicken.

“People would complain. They would say, ‘The chicken is great, but the breast is just too big. Can you chop it in half?” Downing says. So he made the switch to whole chickens and in-house cutting. “Labor is required to do it, but we invest in that to set us apart from others. That’s the kind of thing we do.”

The deli also features an extensive array of 16 salads made fresh every day. A caterer in the area comes into the store a couple of times a week to prepare her locally famous chicken salad. “We sell enormous amounts of just that one item. Customers can’t get it anywhere else; they can only get it here,” Downing notes.

Extensive Wine Selection

Foothills IGA also is known for its extensive wine department, which features more than 1,800 varieties ranging in price from a few bucks to $100. “We sell a lot of wine you wouldn’t normally find in a supermarket,” Downing says. “We’ve kind of become the place to come for wine.” The department has seen double-digit growth every year.

The typical supermarket carries about 580 SKUs of wine, according to Downing, and at triple that amount, Foothills IGA has to carefully curate what’s available. The store also has triple the industry standard of sales for the department, which Downing quotes as 3.1 percent. If a wine doesn’t sell, the store puts it on sale to sell out the stock and make room for a variety that will sell. The store enlargement also benefited the wine department; before the expansion, the department carried only about 700 to 800 SKUs.

“We don’t have a wine steward; I do that,” Downing says. “I enjoy doing it, and I kind of make this department mine. I like wine and I like finding out about wine.”

Another way Foothills IGA sets itself apart is that it has a drug store; the store leases space to a family-owned, independently-run pharmacy. It was something the area needed, but Downing didn’t want to get into running a pharmacy himself. “I wanted to try to eliminate people having to leave this community to get the drugs they need,” he says. Having pharmacy services at Foothills IGA means that customers have less reason to go to other communities — and their supermarkets.

With about 6,000 to 7,000 customers a week, Downing reports that his sales are above industry average. “When you consider that pharmacy is not a part of our sales, and we don’t sell things like furniture and jewelry — we’re basically food — our average is very good,” he adds. “That’s an indicator of how well you’re servicing your customer. It tells you that the people who are shopping here are buying most of their food from you, not using you as a convenience store.”

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