Can 'self serve' save the small town grocery?
When Alex and Caileen Ostenson moved from the Twin Cities to Evansville five years ago to be closer to family, the local grocery store had recently closed after more than seven decades in business.
So in early 2020, the couple started brainstorming ideas that would allow them to operate a store in the town of 600, about 20 minutes northwest of Alexandria.
"We had just been hearing a lot from people, 'it would be nice if we had a grocery store back in town. That's something we really miss,’” recalled Caileen. “That is a staple. It's a cornerstone part of a community."
The couple grew up in west-central Minnesota before leaving for school and jobs in the Twin Cities.
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"I don't come from a background in grocery, I don't come in a background of business either. So we just did as much research as we could and that's what we went off of,” said Alex.
Alex is a diesel mechanic by training and a problem solver by nature. He turned to technology as a way to make running a grocery store feasible.
"We have traditional hours, three days a week. So we're here Tuesdays, Thursdays and Saturdays, outside of that is our membership hours,” he said. “Outside of the three days it really kind of just runs by itself.”
“We get our stock order in on Wednesday mornings. So we will come in and check in the order and stock the shelves, but outside of our normal days, it's been great because we're able to have a good work-life balance,” Alex said.
Anyone can shop on days the store is open, but people who buy a $75 annual membership have access to the store anytime they choose. There are also six-month and three-month memberships.
Those members can use a phone app to open the door, scan grocery items and pay. There's also a key fob option and a scanner on a counter for those who aren't comfortable using their phone.
"Being able to find a cost effective solution that works, with grocery being fairly low margin, that was kind of key,” explained Alex. “Once we found that it kind of sealed the deal that we were going to give it a try."
The technology logs everyone who comes to the store, and tracks their purchases. The store also has security cameras, and theft has not been an issue, said Alex.
Main Street Market opened a year ago, and Alex says the finances are sustainable, although the couple is not taking a salary.
Late last year, Alex was awarded a two year fellowship through the West Central Initiative Foundation, and the accompanying $30,000 annual stipend allowed him to quit his full time job to focus on developing and expanding the self serve grocery model.
Alex said he's aware of one other small Minnesota grocery, the Farmhouse Market in New Prague, that uses a similar model to sell local and organic foods.
Some large urban grocery stores are trying variations of the same concept and Amazon has opened a handful of contactless grocery stores around the country.
Rural grocery stores have been disappearing for decades. Profit margins are thin and many store owners surveyed by the University of Minnesota Regional Sustainable Development Partnerships said high operating costs are a challenge.
In rural communities, the self-serve concept could mean the difference between local groceries or driving miles to a regional center.
“I'm really hopeful that we will learn something and can see if this is a model that could be replicated in other communities throughout the state,” said Kathy Draeger, Statewide Director for the University of Minnesota Regional Sustainable Development Partnerships.
The survey of rural Minnesota grocers the U of M published in 2020 showed 80 percent of store owners have no transition plan for future ownership, and nearly half were concerned their store would be out of business in five years.
“I think there's still some issues with who's going to be our next generation of grocers and how we continue to make this business model work in small towns,” said Draeger. “And that's why having an innovation like we're seeing in Evansville, and being able to test and pilot an innovation like this might be a way that we can continue to transfer ownership of these stores as some grocers seek to retire, and other entrepreneurs seek to get into this line of business.”
The goal was to sign up 50 memberships in the first year at Main Street Market in Evansville, but Alex Ostenson said they hit that target in the first week and are now approaching 100. That community support has been essential.
"The boost of memberships right off the bat, that is what partially funded our first inventory. So it helped us greatly right at the beginning," he said.
Karen Howell and her husband were among the first to buy a Main Street Market membership. She doesn't mind paying the $75 annual fee, because the local store saves a lot of 40 mile round trips to Alexandria for groceries.
"We don't do all of our shopping here because they aren't able to carry everything that I might want to buy,” said Howell. “But we try to support them any way that we can because we're so proud to have them here."
Howell is president of the Evansville Art Center, just down the street, and she thinks a grocery store is a must have for a vibrant main street.
Brandon Borgstrom agrees. He's the administrator at the local nursing home, and part of a local community development team.
Borgstrom and his wife use their membership regularly.
"It's nice to go grab milk, eggs, bread, or it's Sunday afternoon and you're sitting down for dinner and you realize you don't have cream of mushroom soup for the green bean casserole you're going to make, just those little things that add up,” said Borgstrom.
On a few occasions when supply chain issues left the nursing home short of needed food items, Borgstrom said the nutritionist has filled a cart at Main Street Market.
The Ostensons recognize they need to overcome perceptions that a small grocery will be expensive, with limited choices, so they've worked hard to keep prices low.
"A lot of people who are first time at the store, they realize ‘wow these prices are a lot less than what I expected,’” said Caileen. “We try to make sure to stock the basics. And then just grow and go from there."
Customers can suggest new items on a chalkboard near the checkout counter. The store sells locally roasted coffee, locally produced honey and butter from a nearby creamery. They also sell locally grown seasonal produce and plan to expand future offerings of locally produced food.
Alex has a vision for this concept. By next year he intends to be ready to open a second store in a nearby town, and he wants to create a way to share what he's learned, convincing others this idea can help a small town save or replace the local grocery store.
The U of M’s Kathy Draeger is watching what’s happening in Evansville with interest. She thinks this idea holds promise as a way to keep local groceries operating across the rural landscape.
“It builds resilience overall into our food system when we have a diversity of grocery store types, regional chains, small town grocers, other types of food access points are important,” she said. “And we need to maintain resilience in our food system. If COVID showed us nothing else, it's that we really need to think about our resilient food systems.”