Retailers Talk Challenges, Opportunities for Dietary Supplements in 2016

Dec 14, 2016

  • Dickens may have had the French Revolution in mind when he wrote, “It was the best of times, it was the worst of times.” But he just as easily could’ve been describing the state of play for 21st-century dietary-supplement retailers. For despite posting current value growth of 5%, per a recent Euromonitor International report, the supplement sector—and the retailers who undergird it—face challenges, whether from regulation, fickle consumers, or an increasingly complex and fragmented marketplace.

    Just ask Robert Craven, CEO, MegaFood (Manchester, NH). His company hosted its first ZingMojo summit in September, gathering retailers and thought leaders in the natural and health-and-wellness (H&W) communities for the express purpose of hashing out these and other issues, including “mass slippage,” online competition, price pressures, and transparency. And if the summit confirmed anything, Craven says, it’s that the accelerating pace of technological change creates an “incredible force that no one’s experienced before, but that’s affecting every retailer, and not just natural ones.”

    One manifestation of this force is what Craven calls the “ubiquitous shopper.” This nascent species “wants to buy whatever they want, wherever they are and with whatever tools are available,” he says. The upshot is that as the tools of technology increase shopping’s ubiquity—“I can tell my watch to order something for me now,” Craven notes—supplement retailers will face an existential question: “How do we compete in this environment?”

    They could take a cue from other retail sectors by emphasizing category management, doubling down on e-commerce, or making hay out of the data that accrue every time a consumer makes a purchase. But the natural and H&W communities being “very right-brain,” as Craven characterizes them, they may not…er, take naturally to such left-brain thinking. “They didn’t get into this business to make money or analyze data,” he notes. “They got into it to improve lives.”

    And they can keep doing just that, even as they wrestle with the challenges that attend operating in an uncharted shopping ecosystem. For navigating today’s H&W landscape needn’t require ditching the mission that brought retailers here in the first place. “It’s not about doing a pendulum swing from the right brain to the left,” Craven insists. “It’s about adding to those passions as a way to understand the retailer’s differentiation, and then really ringing that bell to play to that strength.”

    The flipside of every challenge is an opportunity, so we asked H&W retailing experts what the top challenges—and opportunities—they see facing the community today. Read on.


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  • Be Yourself
    As more H&W brands find a home in mass retail—and as more consumers grow comfortable buying their supplements online—H&W retailers need to dive headfirst into e-commerce, right? Not necessarily.

    “One of the biggest issues that natural retail faces is that they’re too outwardly focused on trying to do what others do instead of focusing in on what they do well,” says Robert Craven, CEO, MegaFood (Manchester, NH). After all, “ubiquitous shoppers” do still want to visit retail; they just need a “value-added incentive” to motivate them.

    That incentive might involve receiving one-on-one education, choosing from a curated product set, or engaging with the mission orientation of the sector itself—to name a few. “So what I’ve been trying to preach,” Craven says, “is, ‘How do we better understand why the ubiquitous shopper wants to shop at natural retail, and what advantages does natural retail have?’ Then we can beat that drum to create even more reasons for consumers to put down their phones and come shop.”

    Loren Masalski, natural products research associate at SPINS (Chicago), agrees. Retailers, she says, “need to keep distinguishing what sets them apart: the standards they uphold, why they’re the best with what they offer. It’s such a bear because if the consumer can’t perceive, feel, or know the difference, they’ll invariably go the less-expensive route.” Which leads us to our next challenge—and opportunity.

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  • Beware the Price Play
    “I see a ton of natural retailers getting in trouble by trying to compete on price,” Craven laments. And their price play doesn’t work “because it doesn’t fit the model very well, and it’s not the reason most people come to natural retail.”

    So how should an H&W retailer gain control over the game if price isn’t the strongest play in its book? Craven wagers that “the big revolution” in successful retailing to come will revolve around “monetizing our services beyond just product.” That could involve deploying subscription-based models, charging for education that staff previously shared for free—even offering ready-to-eat meals. (More on food in the next slide.)

    And while ubiquitous shopping invariably applies downward pressure on prices, Craven advises against cutting inventory or staff hours—“the two most expensive things”—to maintain margins, as it erodes the very assets that draw consumers into stores in the first place. Going forward, he concludes, “Natural retailers will have to figure out how to make more margin from services than they currently do with product.”

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  • Food for Thought
    In the coming years, Karen Howard, CEO and executive director, Organic & Natural Health Association (Washington, DC), believes that “retailers seeking a unique value proposition—especially independent retailers—will be stocking shelves with food-based supplements.” In fact, she adds, industry “underestimates the impact of food trends on supplement sales.” And it does so at its peril.

    Look no further than the success of buzzy “superfoods” in reminding consumers that we really are what we eat—not what we swallow at the kitchen sink with a glass of water each morning. As Masalski says, “Consumers want to eat more ‘whole-food’ products, as opposed to taking a bunch of pills.” She predicts that a focus on consuming isolated nutrients will fade into the background “as consumers realize that many nutrients need to work together for optimal benefits.”

    Thus, she recommends that retailers “expand food supplement offerings, as well as protein offerings” to start. She’s already noticed “more gummies, chocolates, and liquids” on shelves, as well. “And consumers are starting to understand that they need quality over quantity.”

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  • Clean Up Our Acts
    Speaking of quality…When Howard considers the challenges facing H&W retailers, she sees three standouts: “Bad players, bad regulatory enforcement, bad press.” Their cumulative effect has dragged consumer confidence in supplements to “dangerously low levels,” which she says “is one more hurdle for independent retailers as they work to determine what defines quality in the marketplace.”

    Fortunately for them—and, ultimately, for consumers—they’ll get some help in determining, defining and monitoring that quality once new ANSI-approved dietary supplement GMP standards go live in early 2017.

    According to Casey Coy, program manager, NSF International (Ann Arbor, MI), “The Global Retailer and Manufacturer Alliance—GRMA—and its members have been working since 2014 to develop a single, industry-accepted standard and auditing program using the ANSI consensus-based standard-development process.” By combining regulatory GMP and retailer requirements into a single standard and auditing program for dietary supplements, she says, the move “will help ensure consistency and proper training of auditors while also reducing the number of audits and strengthening safety, quality, and trust throughout the supply chain.”

    Even so, Dr. Cheryl Luther, general manager of dietary supplements and functional beverages at NSF International, is quick to remind retailers that they “need to continue their vigilance in ensuring that Good Manufacturing Practices are in place, along with proper testing of ingredients to mitigate risks throughout the supply chain.”

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  • Come Together
    Tackling these challenges—and realizing the opportunities—is a heavy lift for any supplement retailer to attempt on their own. So it’s comforting to know they don’t have to.

    “A lot of natural retailers feel like they’re out on an island,” Craven says. But he encourages them to view themselves not as a group of competitors, but as “an ecosystem.” That may break with the status quo, in which natural retail remains “very fragmented versus mass,” he continues, “but I think there’s got to be some way to pull everybody together to share in the collective experience of growing best practices.”

    MegaFood’s ZingMojo summit was a first shot at doing just that, particularly in its attempt to identify “why shoppers choose the shopping platforms they do,” he says. And it likely won’t be the last.

    Also, Craven thinks that retailers need to “up their game” in working with the partner brands that fill their shelves. For example, his company has an IMAP (Internet minimum advertised pricing) policy that maintains “an even playing field from a pricing standpoint” for its brand at retail, so that a shopper can’t browse product in a store and then find it at 40% off on Amazon.

    “Teaching the natural retailer how to cultivate that product set and partner with those brands that recognize their place in the ecosystem is not necessarily how a lot of natural retailers think,” Craven says. But it should be.

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