Metro Vancouver food chain thrives alongside Goliath

 

Choices Markets fends off much larger competition by focusing on customer service and local product

 

BY JENNY LEE, VANCOUVER SUN AUGUST 8, 2015 

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• PHOTOS ( 1 )

 

 

Store owners Salim Ahmed (left), Wayne Lockhart (centre) and Lloyd Lockhart at Choices Market store on King George Blvd. in Surrey.

Photograph by: Arlen Redekop , Vancouver Sun

VANCOUVER — Choices Markets’ produce manager spends days each month travelling B.C.’s backroads.

“He takes his motorcycle on a farm tour and he goes up and makes deals with farmers,” Choices regional store supervisor Steve Lockhart said. “We’re the only (chain) retailer in the Lower Mainland that had B.C. asparagus this year. That’s because David Wilson went to Armstrong and we buy direct from the farm.”

The locally owned, eight-store (soon to be 10-store) grocery chain has survived 25 years of tough competition, first from big box supermarkets, then from natural foods giants such as Whole Foods. But Choices isn’t the only small local company to faceoff against well-capitalized, big-name competition and live to tell the tale.

Locally owned furniture store Urban Barn has held its own against U.S. chains such as West Elm, Crate and Barrel, and Pottery Barn. Kerrisdale Lumber has stood up to multiple big box competitors, JJ Bean coexists with Starbucks, and family-owned pet store Tisol competes head-to-head with giants such as Pet Valu, Bosley’s and Petsmart.

As yet another Goliath, Nordstrom, prepares to set up shop in Vancouver with its 230,000-square-foot Pacific Centre store on Sept. 18, smaller local retailers will be watching closely to see how the giant’s entrance will affect their sales.

The famed premium retailer, celebrated for outstanding customer service, will be offering everything from shoe shines to personal stylists. Nordstrom is even promoting free in-store WiFi “because everyone needs to see those shoes you’re trying on,” according to the store website. No fears about smartphone price comparison shopping here.

When Whole Foods splashed onto the local grocery scene in 2007, Choices Market “needed to up our game, and we had to do it in customer service. We couldn’t do it in price,” Choices co-founder and Steve’s father Wayne Lockhart said. Lockhart, his brother Lloyd and their business partner Salim Ahmed fine-tuned inventory and “we kinda stayed the course.”

There’s no doubt there is benefit to size. Whole Foods had to grow, and so did Choices.

“You can’t build a one-off store here and supply it properly,” Wayne Lockhart said. But instead of immediately attempting corporate expansion, the little company started by finding a new, larger grocery supplier in Alberta that allowed them to lower their credit card charges, gave them access to more products, and provided the buying power of 90 stores instead of Choices’ seven.

The partners worked on being first to market with new products, picking up small orders on unique items right on the trade-show floor, while their larger competition had a much longer process.

Retailers “worried about Nordstrom having the opportunity to have the best styles can be first to have that (new) inventory,” Lockhart said.

The family worked hard and bore down on costs. “Find a cheaper window or floor cleaner,” he advised.

At the same time, Steve Lockhart, who led Choices stores to win the Canadian Federation of Independent Grocers’ top award three years in a row, worked to build energy and “theatre” in stores through product demos, food festivals and farmer/shopper interaction.

“People like to see life throughout the grocery store, so you put lemons in the meat department,” he said. “In my cereal aisle, I have fair-trade bananas. The No. 1 selling product in the produce department is bananas. I put them at the deli, the cash, the cereal, and produce department.”

“Unless we’re innovating and unless we’re changing our stores for the better, then Whole Foods would affect us,” he said.

Choices’ heavy focus on organic foods started with a mistake.

“I ordered five cases of rice cakes at the West Broadway store,” Wayne Lockhart said. “Somehow there was a mistake and 50 cases showed up. I had gone for lunch, and when I came back, the assistant manager had cut open all the cases. But within a week or 10 days, we’d sold all 50 cases. We were just blown away. Wait a minute, there’s a market for this.”

They immediately stacked organic foods on a 25-by-4-foot display right at the front of the store.

But customers weren’t interested.

“We were very upset. As soon as we brought in organic pinto beans and organic rice and put it all together in the front of the store, it didn’t sell.

“In our process of trying to get rid of it, we integrated the natural foods with the conventional foods, and darn if it didn’t start to sell, and that’s how our stores are stocked today.”

Wayne and Lloyd had both worked in grocery stores since high school, then started buying Super Valu franchises in 1978, eventually owning four.

“At one point, we had 16 family members working,” Wayne said.

But everything changed abruptly in May 1990, when all their leases came due within 18 months. The franchisor wanted some stores back, so the brothers found themselves starting again.

They took on an abandoned IGA only a few blocks from their original Super Valu store on West Broadway. Lloyd and Wayne each mortgaged their homes for $50,000 each, and the bank lent them $50,000. Wayne’s mother-in-law came up with the name Choices as they planned to provide a choice of conventional, natural and organic food.

“We were the first to do that,” Wayne said. “We almost gave up on organic produce in the early days because the quality was poor. The prices were high and the sales were actually terrible. When we opened Choices Markets in 1990, we were determined and we stuck with it for three years. At the end of three years, we were throwing out more produce than we were selling.”

They gave it another couple of months. “That was a major turning point for us. We kept with the faith and within the three months we allotted, things started to sell. Part of it was Choices was two or three years ahead of its time.”

Choices’ supermarket-style format “brought a conventionality to natural foods. It didn’t scare people away. They didn’t walk into a shop and see a fellow with a long beard and Grateful Dead t-shirt,” Wayne said.

“We would advertise conventional groceries at a cheap price so the customers would come into the store and they would start buying organic products.”

They also applied conventional advertising programs to natural foods, something new to Vancouver. They focused on marketing specific natural foods products such as one-gallon apple juices.

“I started ordering three or four skids at a time. Single-handedly, Choices Markets has the highest sales in all of Canada for particular products because of the way we marketed them.

“We became known for paying very quickly, often to people with small lots of things. If a small independent company was short on cash flow, they would make an offer to us.

“We sold conventional (groceries) at the same price as Safeway. We just took a smaller margin. At one point, we were at one per cent (margin).”

Their wholesale supplier gave them “not the best price, but if we could compete with 97 Safeway stores, that was good enough.”

Eight years later, they opened a second store. Eighteen months after that, they opened a third.

Most Choices stores are 5,000 to 20,000 square feet, compared to conventional supermarkets at about 30,000 square feet. Chain-wide, the ratio of its products is roughly 70 per cent organic to 30 per cent conventional.

Choices has wisely picked locations well away from Whole Foods and other competitors, said retail analyst David Ian Gray of DIG360 Consulting.

“We’ve wanted to be on the North Shore for about 15 years,” Wayne said. “At least three leases were signed and fell apart.”

The 25-year-old company opened a South Burnaby store this year and later in the year will open stores on Commercial Drive in Vancouver and Abbotsford.

The partners plan to open a new store every year until they have 15 stores.

“When you’re six stores only, in a world of natural and organics, you’re not really noticed,” Wayne said. “When you’re 15 stores, you’re buying two million (dollars) of inventory. That’s a big deal.”

Furniture store Urban Barn took the same approach. It now has 40 stores across the country, having beat its competitors to the punch on expansion and created an economy of scale for technology costs, Gray said.

Kerrisdale Lumber survived by expanding to include higher-end BBQs and furnishings appropriate for its local Kerrisdale demographic, said David Lam, a Deloitte partner in corporate finance.

Like Choices, Tisol has benefited from being ahead of the curve.

“They were the first in Vancouver to focus on premium pet food — they started over 40 years ago, so they had first-mover advantage and built the brand from the ground up,” Lam said.

“Choices is competing with Whole Foods by focusing on being a great neighbourhood grocery store.”

Most importantly, Choices and Tisol have a level of community engagement that is hard for the big national or multinational chains to compete with, Lam said.

“We’re still the little guy,” Steve Lockhart said. “We don’t even show up on the radar of Jimmy Pattison (owner of Save-On-Foods, Overwaitea, Urban Fare and PriceSmart). We can be successful in little niche areas and little communities that like to support community business.”