MUCH has been written about the hard-nosed approach to doing business with Coles and Woolworths, the country's two largest grocery retailers. But they are not the only vehicles for businesses that want direct access to consumers.
NQR is one alternative that has built a name as a grocery clearance retailer. The company began in 1987, selling Four'N Twenty pies that were over- or underweight and had been rejected by the major retailers.
In recent years it has tweaked its offering. Once known as a 'seconds' retailer that offered at greatly reduced prices canned goods, for example, with a small ding in them, the business now sees itself as a sales avenue for suppliers whose goods have been rejected by the majors.
It buys stock the big grocers don't want at greatly discounted prices, savings it can pass on to shoppers.
Unlike the majors, NQR doesn't offer rebates, seek compensation for shrinkage or charge for promotions.
NQR chief executive Aaron Fitzgerald says the business offers a service to suppliers. It will take pallets that don't fit Coles or Woolworths specifications, or goods manufactured for promotional purposes that have not sold before the end of their campaigns. Consumers mostly would not be able to tell the difference between a product bought at his store and one bought through Coles or Woolworths, he says.
He won't reveal numbers, but says the business has recorded double digit growth in the past four years
Although NQR stocks all the big brands across all product categories, Fitzgerald is reluctant to name his customers (although they include Coca-Cola and Goodman Fielder) for fear that Coles and Woolworths will go back to the suppliers and ask for the discounts that NQR receives.
It's an approach that has captured the attention of suppliers and consumers, with NQR opening seven new stores over the past few years. It now has 23 stores in Victoria, with ambitions to spread into regional areas in NSW and South Australia. Last month it opened a new store in Sale, Victoria.
“We plan to open four stores a year for the next five years," Fitzgerald says. "We hope to move into Wagga and Wollongong, depending on space and rental negotiations."
He won't reveal numbers, but says the business has recorded double digit growth in the past four years.
“We'll have [sales] growth of 12 per cent this year, and 5 per cent revenue growth,” he says, adding that performance will be affected by a recent $1 million investment in IT.
The performance will eclipse the industry average, however. An IBISWorld report published in June shows average revenue growth over the past five years was 2.4 per cent; the sector was worth $87 billion in the 2013-14 financial year.
NQR customers include young families, students and pensioners. Top selling products differ from area to area, depending on the demographics. For instance, the Ashburton store in Victoria sells many meal-preparation supplies such as tinned tomatoes and tomato paste. The store in Fountain Gate, an area dominated by young families, sells lunch-box fillers such as yoghurts and muesli bars.
Fitzgerald is pessimistic about the future for smaller retailers if the main grocers continue to place pressure on margins. “Large companies will survive, but they will have to find margin elsewhere, which usually happens by cutting labour costs. Small businesses will also have to cut jobs, and if they can't do that, that's where they fail.”
He says consumers will suffer from a smaller range of products on offer.
“But there are lots of opportunities for smaller retailers to make niche brands the heroes in their range," he says. "This should provide independent grocers with a platform for growth. It's also important not to always blame the majors. It's a great volume opportunity. But it's also vital to find alternatives so that your business is sustainable. If you build your business around the majors it makes negotiating with them tough because you're only negotiating on the fear of being delisted.”
One NQR supplier is Marsh Dairy Products. Managing director Robert Marsh manufactures a cheese sold exclusively through NQR and sells about four tonnes of Marsh's Jedda a month. He says both his business and NQR make a return from the arrangement and he likes the straightforward nature of the relationship.
Marsh also sells through the major grocers and says the best way to do business with them is to meet their expectations. “It's a good business partnership and our approach is to overservice our customers so we maintain good relationships with them.”