Retailers go local for homegrown product mix

In IFC’s hit comedy series “Portlandia,” there’s a sketch in which the two main characters order chicken in a restaurant. But they don’t just order: They ask which farm the chicken came from to make sure it’s sufficiently local and whether the chicken was raised according to their exacting standards. The waiter quickly responds with a portfolio featuring the chicken’s pre-mortem photograph, biography and name (“Collin”).


The sketch was meant to parody the sometimes finicky ways of Pacific Northwest culture, particularly with regard to provenance of sustenance. But outside of TV land and around the country, going local isn’t just a punch line for an evening comedy show or even a peculiarity of the weekend farmers market. It’s an increasingly popular merchandising strategy for retail chains.


Chain retailers have often been accused of lacking character at best — and at worst, having a deleterious effect on local economies and putting traditional mom-and-pop stores out of business, spurring a number of buy-local movements around the country. In July 2009, the Retail Merchants Association launched a “Think. Shop. Buy. Local.” campaign designed to spur consumers to purchase from locally owned businesses, noting that for each dollar spent at a locally owned business, 45 cents is reinvested into the local economy, compared with 15 cents for each dollar spent at national chains.


But lately, a number of regional and national retailers have sought to emphasize their local identities as well. “They really do want to support the local economies, and customers are really buying into this,” said DeAnna Lucas, a managing consultant at Atlanta-based retail consulting firm Parker Avery Group. “The retailers are wanting to help the economy by carrying locally sourced products in their stores, and the customers are responding by buying.”


As far as drug, food and mass merchandise retailers are concerned, most of the product mix in going-local strategies has centered on consumables. Local sourcing of produce has long been a common practice among supermarkets — it makes sense economically and logistically — but many of the retailers going local have branched into prepared and packaged foods as well, while some have moved into nonconsumable categories.


In January, Walgreens opened its new flagship store in Chicago, featuring everything from fresh foods to fine wines to prepared foods from local producers. Baked goods included Lovely and Eli’s Original Cheesecake, not to mention chocolates from local candy producer Fannie May. The product mix is similar to that of New York-based Walgreens subsidiary Duane Reade, which features a “Restaurant Row” endcap laden with sauces and other food items from local New York restaurants and entrepreneurs, including Rao’s Homemade Pasta and Lidia pasta sauce.


Also in January, Midwestern mass merchandise chain Meijer unveiled a partnership with the Michigan State University Product Center for Agriculture and Natural Resources to launch the “Made in Michigan” initiative. Under the initiative, which the retailer billed as a way to help the state’s long-ailing economy, 33 Michigan stores will feature a special shelf with 49 food products made in the state, including marinara sauce, blueberry butter, gluten-free baking mixes and gourmet seasonings. While the initiative is still in its infancy, Meijer public relations manager David Peterson told DSN sthat the response thus far had been “very good.” “Some customers were not aware of some of the products on our Made in Michigan showcase, and others were pleased to find out that we now carry them,” Peterson said. “We have had great responses from our suppliers too, who are very happy to see their homegrown [and produced] products are getting great exposure in our stores.”


Meijer may not be alone in the positive reactions it has found. “Retailers just want to look like they’re giving back to the community and look like they’re fostering relationships with customers and suppliers,” Lucas said. “A lot of what I’ve seen is that sales of these products — even in the difficult economy — have increased.”


Meanwhile, Seattle-based Bartell Drugs has gone all out with the “Urban Market” in its new store format, which it announced in September 2011. In addition to locally made consumables like Tully’s Coffee and Washington wines and beers, the section also features soaps from Seattle-based Essenza, environmentally friendly fire logs from Tacoma Firelogs and localized mugs from Rosanna. “Bartell’s has really made a concerted effort to showcase locally made products whenever possible,” Bartell’s spokesman Barry Bartlett told DSN.


But going local can carry its own set of challenges as well, especially when it comes to distribution and marketing. “Often, advertising is done at national and regional levels, so that makes it difficult to advertise a product that might only be in a handful of stores,” Lucas said. “As a result, retailers have to get customers to notice the products when they come into the store, so mixing is what retailers want to stay away from. They want to differentiate these local products from others.”


Also, sourcing locally can require retailers to step outside their normal supply chains and distribution networks as they sell products in a concentrated region, and costs can go up due to local products not being produced in as cost-effective a way as those produced overseas or in other parts of the country, Lucas said.


Greg Tradup, category manager at McLane, agreed. “If you’ve got a guy with a bread truck running around, it’s going to cost more for him to go around and drop off a couple hundred dollars worth of bread,” Tradup told DSN. Fresh and perishable foods can create challenges in terms of management, as they require constant rotation at the store level, he said. “While there’s a cost savings with going through a broad-line distributor like ours, there’s an additional cost that can come from the management of the products at the store level.”


Challenges aside, as consumers become more conscious about issues like sustainability and the economic health of their communities, showcasing locally produced products could become an attractive strategy for retailers at the regional and national level. For all the jokes about preoccupation with provenance in “Portlandia,” going local is serious business.