Al Zupancich’s grandfather opened a grocery store in Ely in the early 1900s. Now, three, four and five generations later, the family is still in the grocery business, running six neighborhood grocery markets across the Iron Range.
There was a time when residents had a choice of up to four or five groceries and a co-op in every town, he said - each store catering to a different religious or ethnic culture and taste.
Now that choice is gone, and the remaining neighborhood groceries are facing a new threat to survival: corporate America.
Larger markets offer groceries in corporate big box retail stores. But now a similar business model has come to small town rural America. It’s called the dollar store. And it has come suddenly.
“I’ve seen a lot of changes through the years,” said Mike Kocian, who followed his father in the grocery business in Bigfork. “But I’ve never seen things change as fast as they have in recent years.”
One rapidly growing presence on the Range is Dollar General, a $22 billion company based in Tennessee. It has about 14,000 stores nationwide, making it the largest “small box” discount retailer in the country. Today it has 17 stores within 100 miles of Virginia, including smaller markets like Aurora, Hoyt Lakes, Floodwood and Ely. And more are in the planning stages.
The relatively small 9,000 sq. ft. stores carry many of the same items as the small grocery, being especially competitive with pop, chips, soap, paper products and milk, according to Scott Magoon of Blackduck Family Foods.
Just entering its first summer market with a Dollar General store in town that opened last October, Blackduck grocery sales have already trended lower by 5-10 percent, Magoon said, and that number is similar for Zup’s, with stores in Ely, Babbitt, Tower, Silver Bay and Cook. Zup’s in Aurora closed when two nearby Dollar General stores were built.
Renee Johnson, owner of The Grocery Store in Floodwood, said her loss in annual sales was $143,000 after the Dollar General store was built there in 2016. She also owned a hardware store in town, but closed that and combined inventory with the grocery as a result of the new competition.
In most small markets there is a limited economic pie. When a new store is built, it takes a sizable piece of that market share. “Anything purchased from a dollar store is one less item you’re going to sell, be it pop, bacon or whatever,” explained Jim Zupancich, Jr. of the Ely Zup’s grocery.
So how can small groceries be sure they have enough of the pie to survive?
Many small groceries have a secret weapon along the outside walls of the store: meat, deli and fresh produce. The dollar store may affect sales in the center of the store; the Charmin and the Miracle Whip, said Al Zupancich, who owns Eveleth Country Foods. Neighborhood grocers, however, often have a meat cutter on staff, offer homemade and/or ethnic specialties, and even grind their own beef. Those specialties are significant. In Eveleth, for instance, the meat and deli departments are responsible for 60 percent of the store’s volume.
How to face the challenge of the dollar store model is not just a local issue. Concentrating on what separates the small grocery from a dollar store and then marketing that advantage is advice that the Rural Grocery Initiative in Manhattan, Kan., shares with its small groceries. That includes a message that full service groceries have more fresh fruits, fresh meat and dairy products, and more healthy foods, said David Procter, director of the Center for Engagement and Community Involvement at Kansas State University, which houses the grocery initiative.
Other distinctions can be promoted through customer service, since the dollar store operates on a very lean labor model, and keeping the store clean and bright, because discount stores can appear a little chaotic. Procter urges carryout and even delivery if possible.
The ultimate goal is to be the store that the customer chooses to walk into. One way to influence that choice is to become part of the fabric of the community.
The neighborhood store can integrate into its community by doing a variety of things like sponsoring a softball team or donating paper plates and cups for a baseball tourney, Procter said. Independent stores can be flexible in terms of amount and type of donations, while corporate stores are limited by company policy.
“We give to every nonprofit whenever we can,” said Jim Zupancich.
It can be a balancing act. Kocian’s Family Market looks for ways to lower prices, said Mike Kocian. He and his employees have been researching ways to meet the challenge of a Dollar General anticipated to be built across the street in Bigfork later this year.
The store negotiates with its suppliers and offers a loyalty program to customers for discounts on selected items. There are also new ways of packaging that haven’t been available to groceries before, said Kocian, like bulk items and larger bags, as well as “cheater sizes,” smaller amounts in a package that is then priced lower.
“But we also want to be here to support the community,” he points out. “There’s a steady stream of people who need funds to grow their organizations … This is our community and we want to continue serving it.”
Almost all profits from a locally owned business stay and work in the community, said Procter, and this is the story that needs to be told.
Jim Zupancich agreed: “The local guy who helps your community is the guy you want to stay true to.”