As independent grocery stores close, rural Iowa’s remaining stores pivot

When Fred and Evelyn Shelton took over Shelton Grocery in 1969, the Swisher store packed a punch for a small space.

Fred, a former meat packing plant worker, helped run the meat and deli counter under the sign marked as such — still hanging from the ceiling. Evelyn remembers three bread companies that stocked the shelves regularly, three wholesalers they purchased from, and even a few operational slot machines back in the day.

After buying the shop in their 30s from relatives, the couple expanded the space by happenstance when a few bricklayers in need of work walked in, drafting up a proposal in the early ‘70s.

But today, the shelves lining the wood-paneled walls are a little more bare than they used to be. The store’s three aisles have the basics and a few sundries. Over the counter medications and general merchandise stay neatly lined up near the front counter, with just one or two of most items stocked on the shelf.

The meat and deli case is now filled with mementos on display, like a letter from Gov. Reynolds congratulating Fred on his 90th birthday last year. Slot machines have been replaced by lottery offerings, now advertised by a neon sign that fills the store’s window. Credit and debit cards come across the counter far more often than in the days when cash was king.

Amid today’s compounding challenges for rural grocery stores, Evelyn said their model has shifted to that of a convenience store more than a grocery store. A 15-minute drive from Cedar Rapids, Swisher residents get most of their full-service grocery needs met while driving to other cities for work or other attractions. Pandemic fears in 2020 accelerated that habit, as the larger stores could offer contact-free grocery delivery.

“It’s been challenging to pivot with the times,” said their daughter, Julie Shelton, who visits regularly from California.

The store has survived multiple wholesalers going out of business, and the ones left today have order minimums larger than the small store can afford.

“They don’t want to fool around with the little ones any more,” Evelyn said.

But in the town of about 900 people, Swisher’s only grocery store still holds a place not so different from the role it played in decades past.

Before the prevalence of smartphones and internet access, Shelton Grocery’s phone line was the local Google, where residents would call to ask about anything from the best way to sooth a teething baby to updates on the latest news happening that day on the street.

Now, a group of longtime residents regularly meets for a morning coffee and social hour.

“It’s been a community,” Julie said — one that had bred the loyalty they credit with their ability to stay open for so long. “It’s been the center of a hub in town.”

With a substantial decline in independent grocers in recent decades, it’s one they don’t take for granted, either.

A changing business landscape

Stores like Shelton Grocery are part of a shrinking minority in a state dominated by Hy-Vee and Fareway. The Iowa Grocery Industry Association has 140 independent grocer members left — about one-tenth of their total membership base, and a total slightly fewer than the 156 Hy-Vee stores in the state.

More than 90 percent of the group’s independent grocers are in small, rural towns. In the last 10 years, they’ve seen a 15 percent decrease in independently-owned members.

“Independent retailers face declining rural populations, fierce competitive pressures and changing consumer shopping trends like online shopping,” said Michelle Hurd, president of the Iowa Grocery Industry Association.

The pressures aren’t new — they’ve been building for decades.

In rural Iowa, 43 percent of grocery stores in towns with less than 1,000 people closed from 1995 to 2005. In the same period, the number of grocery stores with employees was cut in half while the number of “supercenter” stores like Walmart and Target increased 175 percent, according to a 2010 report by the Center for Rural Affairs.

“It’s not just competition from the Walmart 50 miles away. It’s that (consumers) are already 50 miles away doing shopping, so they don’t make the extra stop at home,” said Wyatt Fraas, farm and community assistant director for the Center for Rural Affairs.

He said the independent ownership decline has been substantial across the Midwest and, absent population gains, is foreshadowed to continue.

How they’re surviving — and thriving

In towns with lots of commuters like Mount Vernon, grocers like Gary’s Foods feel the squeeze in a tight market.

“We feel like we’ve always competed with stores in Iowa City and Cedar Rapids,” said Pete Dietrich, who runs the store with his father, Denny Dietrich. “But people in Mount Vernon and Lisbon have been very loyal because of our service.”

Keeping a top-notch produce section and meat counter, plus free services like carrying groceries to cars, are what give Gary’s an edge. The store has outlived two Jack & Jill Super Market locations and the owners feel confident against the new Brothers Market up the road in Lisbon.

But it’s doing more than surviving.

“We’ve captured more of the market over the last 10 years or so,” Pete said. “I feel like we’re thriving.”

Using one of the few independent wholesalers available to them has been a big part of their ability to keep up. Many independent grocers have found success working through co-op models or through buying from wholesalers in large groups with other independent grocers to lower the volume barrier needed to maintain competitive prices, Fraas said.

Other grocers focus on working directly with smaller suppliers to source higher quality or unique products that the big chains can’t get.

“The consolidation and close of other independent (wholesalers), even in the 10 years I’ve been around, has been pretty bad,” Pete said.

When Garth Grafft opened Big G Foods in 1962, there were five grocery stores in Marengo. Grafft had started working in the grocery business in 1956, at the direction of an employment office after a bad hailstorm wreaked havoc on his family’s farm.

Now, Big G has outlived or bought out all of those stores. But what’s more is that the owner isn’t afraid of the Dollar General that moved in down the block recently — a brand that has struck fear in many rural grocery retailers.

“When you treat the customers right, the customers treat you good,” said Grafft, who still works nearly full-time alongside his sons at 87.

Deep community involvement, quality produce, better variety and memorable service have carried the store. With 40 employees, his store maintains an aggressive push toward staying modernized and remaining competitive in both price and service.

The store “may not make a killing,” he said, but it makes enough of a profit by relying on volume to manage well.

“We get along just fine,” said Grafft, who notes that the Dollar General is generally understaffed. “They try to lowball (prices), but they can’t do it.”

Even with good service, that remains key for rural residents who are often more sensitive to price, Fraas said.

What’s next on the horizon

Dollar Generals popping up in small towns either without a grocery store or with a faltering one has followed in the wake of the Walmart model, Fraas said.

When lower prices are served with the same-quality products, other factors like job creation and economic benefits of local ownership don’t often register in the minds of shoppers. If independent stores can’t compete on price in towns with small or dwindling populations, their models will need to find smarter ways to compete against the giants.

“The trends are such that they’re likely to continue the way they’re going,” Fraas said. “But the situation is far from bleak. There are strategies for them to continue and thrive, but they’re going to have to be creative about it and not just let the trends attack them.”

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