Competition with chains causes rural grocers to fear the future
ARTHUR, N.D.—Mary's Market has been a cornerstone of downtown Arthur for 34 years.
Tucked inside the mall on Main Street, the grocery store provides the town of about 360 people with fresh meat, produce, dairy, cleaning supplies and even Easter lilies for the churches.
Mary Beth Engelke has owned the shop for almost 12 years, but when you ask her about the next five, she's skeptical. Will the store even be open?
"I guess it's up to the customers, if they are willing to, you know, be there for us. It would sure be nice," she said this week. "But if there isn't that strong, consistent patronage on a regular basis, realistically, I don't know."
Engelke isn't the only rural grocer who feels this way. Plagued by competition from large chain stores and thinning profit margins, owners of rural groceries in North Dakota and Minnesota are worried about their futures, according to recent surveys.
One newly released study found that about a third of grocery store owners in Minnesota towns with fewer than 2,500 residents don't intend to own their stores longer than five more years, and nearly two-thirds intend to own their stores for 10 years or less. The vast majority of owners do not have a transition plan that would allow their stores to stay open.
The study was conducted from July to October by the University of Minnesota Regional Sustainable Development Partnerships and the Minnesota Center for Survey Research. Out of 254 eligible grocers, 175 responded.
Almost all of those grocers said high operating costs and narrow profit margins were challenges for their business, and 29 percent said their most significant challenge was competition with large chain grocers.
That's a problem Tony Laddusaw, owner of Tony's Supervalu in Hawley, Minn., can understand.
Unlike his peers, Laddusaw has seen business grow in recent years, thanks to the swelling population of Fargo-Moorhead about 20 miles west. But Hawley's nearness to the metro area also means potential patrons often bypass the local store in search of a better deal.
"We're losing probably 35 percent of the business to Fargo-Moorhead, and it's convenient for people because they work there," said Laddusaw, who bought the grocery store from his parents in 1999.
In 2005, Laddusaw moved the store to its current location on U.S. Highway 10, a new building with three times the space. That allowed for more variety, but he still struggles to keep prices as low as the big chains.
"We try to be as competitive as we can," he said. "In the grocery business, everybody wants cheap food, and you know, it's probably the worst business you could own for making serious money."
On a good year, profit margins hover around 3 percent, he said. "That's why there aren't that many grocery stores anymore, because people can't survive on that 3 percent net."
In North Dakota, more than 40 percent of rural grocers said narrow profit margins were a major challenge for their stores, according to a 2014 survey of 53 grocers conducted by the North Dakota Association of Rural Electric Cooperatives.
About two-thirds said they were challenged by the availability of satisfactory labor, and more than 80 percent said a major challenge was residents shopping out of town.
Engelke has noticed that young people, in particular, are willing to drive the 33 miles to Fargo for groceries and often shop locally only during blizzards.
"I think they don't recognize how important it is to provide that consistent patronage," she said. "If you don't have the consistent customers, then it's really hard to stock."
Owners say the loss of a rural grocery can harm a community's business sector and potentially create a food desert, or a region that lacks access to healthful whole foods.
"Grocery stores are the primary source of healthy food," Karen Lanthier, the RSDP assistant program director for sustainable local foods, said in a news release. "When they close, consumers face serious access challenges, and in some cases rely on less-healthy food as part of their diet."
Engelke worries about what would happen to her hometown of Arthur if she has to close. Without her store, who would deliver groceries to the elderly every week? Where would the residents gather in the morning to greet their neighbors?
"I'm sure I could walk away and make a living, and I could probably make a lot higher wage at this point," she said. "But is that fair to the community and is that fair to, you know, my care and concern for this community and wanting to have a good community to live in?"