Why a fast nickel is better than a slow dime, every time

The word grocer is derived from the Medieval Latin grossarius. Defined as one who sells in large quantities.

Hence the progression to gross-er, or grocer. Just as the term supermarket derived from the super-market portmanteau formed in the 1930s, which began as the marketing concept of offering dry groceries, bakeries, meat shops, delis and, of course, produce markets all under one roof.
The principle was simple but effective: Offer convenience, service and low pricing, but make up for thin margins with gross sales volume.

Somewhere along the line, many grocers have lost their way.

To this produce scribe, it was always ingrained to us in our lion’s share, market-leader chain with this tried-and-true grocery edict: “A fast nickel is better than a slow dime.”

What does that mean? To both newbies and senior movers and shakers out there, it means that to reach your sales goals, your gross profit goals, your shrink goals and all the other related goals, you must strive to be intensely competitive.

I know what it’s like to think otherwise, and the pressure is always on from senior management to meet or beat the prior year sales. Pressure also comes from owners and stockholders (or stakeholders) that your company shows gains on all those weekly, quarterly and yearly graphs. Corporate lingo such as ROI and EBITD or a dozen other acronyms all stress grocers to do one thing: reduce costs.

Since that buffalo nickel has been squeezed to no end, what’s left? Raise prices.

That’s where a grocer gets into hot water.

Your customers are a savvy lot. They notice when the packaging is less, but prices remain the same — known as shrinkflation, another relatively new but negative word. And shoppers certainly notice rising prices.

When a grocer raises prices regularly for long enough, it’s a given that those levels reach a point in the overall cycle that it invites in new competition willing to undercut that pricing. That’s competition willing to operate on, say, a 2% net margin versus your 4 cents or 6 cents that you have come to enjoy on each sales dollar.

What about those loyal customers you’ve earned over the years? They absolutely will vote with their feet, as the saying goes, and will shop elsewhere if given the opportunity. In a heartbeat.

And all because you gave into the pressure to raise prices willy-nilly — because that’s the easy thing to do, the only action that comes to mind. It’s the first line of defense to keep sales at a rate, all which seems so important in the moment.

But you must consider where that money is generated from in the first place: your customers. Alternatively, try to keep your customers satisfied without sacrificing quality.

I’ll always remember this one time sitting in a produce price meeting. Sure, we took some pricing “ups,” as we called them, but my director held firm in keeping certain categories such as carrots, onions and potatoes at especially low margins.

“Those are staples that generate extra-high volume and helps keep lower-income people fed,” he said.

It's difficult to ingrain this in today’s mindset, but grocers must remember the very premise that built the business to begin with: A fast nickel is better than a slow dime.

The phrase may seem redundant, but it merits repetition.

You will sell more groceries, more meat, more bread and more fresh produce if you aggressively price your goods to move volume. Consider, the more volume you move, the more nickels. The more nickels, the higher your sales, which generates more gross profit dollars.

It’s not necessarily a higher profit percentage to strive for, as I used to preach to our produce managers, so much as how many dollars are deposited into the bank. It’s a simple business, really, but the premise needs nurturing.

“Pile it high and watch it fly” is only one part of our mantra. Add “price it low, your business will grow.”
Armand Lobato works for the Idaho Potato Commission. His 40 years of experience in the produce business span a range of foodservice and retail positions.