John Derderian, who recently stepped down as president of Allegiance Retail Services (ARS), the Iselin, NJ-based retail marketing cooperative, has long been an advocate for independent retailers in the New York Metro area. Before he transitioned to a new role as principal advisor for retail development and strategic business initiatives, Food Trade News asked him about Allegiance’s recent New York City growth and how retail theft has impacted independent retailers in the Big Apple.
Food Trade News: Can you give us a recap of ARS’ growth in New York City, particularly Manhattan, over the past five years? Why do you believe that ARS has been so successful in gaining net-new business and also seeing some of your current members expand their footprints in a very unique and competitive marketplace?
John Derderian: Manhattan has been a very fertile ground for Allegiance over the past five years. In June 2018, Gristedes joined the cooperative and in September 2022, Morton Williams also became members – combined, these two iconic retailers added 34 stores to our Manhattan store network. Today, including current D’Agostino’s and Foodtown banners, we have nearly 50 member stores in Manhattan! As you know, Manhattan is a unique marketplace which both offers great opportunity and presents ongoing challenges. I think the key to acquiring new members and incenting existing owners to grow in Manhattan the existence of a mutually-beneficial relationship between the owner-groups and the Allegiance professional staff – whereby the staff knows the market, but the iconic members live the market. So, everyday the professional staff fights to lower the cost of goods, but they are also acutely aware of when to cede activities and direction (marketing and merchandising) to the store-owners – so each constituency contributes their expertise and ‘stays in their lane’ to win in the market.
Food Trade News: We can’t mention retailing in NYC today without mentioning the large and growing retail theft issue. Can you summarize how bad the problem is (statistically and/or anecdotally) and explain what you believe are the major reasons the problem has currently gotten so out of control?
John Derderian: Retail theft is currently at unprecedented levels, with the most troubling aspect being that it is clearly under-reported. Many storeowners and store associates don’t even bother to call or report theft to the police, knowing that there will be no consequence to the perpetrator if they are apprehended by the police … and THAT is the problem. Local district attorneys have not shown an inclination to prosecute retail theft cases, which means the criminal element is left unchecked, and further providing a level of comfort to criminals that there is a new tolerance for non-violent crimes.
Food Trade News: Do you believe there is a legislative solution that would improve the situation?
John Derderian: Certainly, reverse the bail reform laws which have recently been neutered, and pressure the DAs to prosecute all crimes, inclusive of retail theft (which sometimes does lead to violent crime). One of the by-products of the progressive reforms we have seen implemented in New York (and other populated cities), is that criminals actually feel a sense of entitlement; ‘they have the right’ to take what they want … and given the reality of prosecution today – that’s not surprising. Even if laws were changed today, the psychology of entitlement will take some time to abate in our culture, which I think will be measured in years.
Food Trade News: Some retailers have told us that they have added facial recognition technology to help identify repeat offenders when they first enter a store. Currently there are two pending bills introduced by New York City Council members that would ban this technology. Do you have an opinion about this?
John Derderian: Those of our members who have deployed facial recognition technology have seen a material drop in the number of retail theft incidents in their stores. There is empirical data which shows this, and it is a meaningful drop. The New York City Council is being influenced by reports that users are selling surveillance information or precluding relatives or those associated with criminals from being allowed to enter a food store – which is pure nonsense. If passed, this would be another case of legislative intentions gone bad.
Food Trade News: What have been the current and what do you believe will be future ramifications to retailers who are impacted by increasing theft?
John Derderian: There will be a new normal of retail shrink, which will be passed to consumers in the form of higher prices. Additionally, retailers will be circumspect about carrying certain items for fear of becoming pilferage ‘favorites’ – big ticket and seasonal items, and items which carry high gross profit. Combine that with a current environment of locking up targets of thieves (Tide; HBC products), and stores will appear to be in sales prevention mode, which will invariably lead to less four-wall sales and increased online sales (which often results in a lower gross profit). The bottom line is – both the consumer and bricks-and-mortar stores lose.
Food Trade News: Although there is a “hands off” the perpetrators rule, many operators (who can afford it) opt to still employ off duty police and/or security details. Do you find that this is a measurable deterrent for theft/violence?
John Derderian: It often does prevent retail theft but at a cost (security detail). So, either way, the retailer is paying more for the progressive legislation which has been enacted over the last few years.
Food Trade News: Does the announcement of a new NYPD Police commissioner (Ed Caban) give any hope that some enforcement might come about, and the mayor and governor will listen?
John Derderian: Among my greatest fears regarding this issue is that the citizens of the city and local politicians will become numb to the issue of retail theft. Whether it is a new police chief or even a new city administration, at some point they will move onto another issue which is reflecting the brightest light … issues we may not even contemplate today. Heightened retail theft will melt into the subconscious and become one of the ‘realities’ of living in the city.
Food Trade News: Are you working with any of the advocacy groups that have been petitioning the state and city for help in this fight against crime?
John Derderian: Sure, we have two primary advocacy groups who are assisting in this effort – New York lobbyist, Geto & de Milly (engaged by Allegiance), and – through the auspices of the NSA – the CAPS (Collective Action to Protect Our Stores) Coalition. Geto & de Milly is focused more specifically on the New York City Council and the mayor’s office, with the goal of sensitizing the elected officials to the implications legislation has on hard-working, tax-paying entrepreneurs and rank-and-file workers, while the CAPS Coalition is more broad-based, seeking to amplify the issues through both public communication and meeting with city, county and state legislators to seek legislative change. Obviously, the New York Food Industry Alliance is our permanent advocate in Albany and has represented our industry well for many years.
Food Trade News: How has the crime wave affected your labor situation? Have you been able to retain/entice employees to remain/join your establishments?
John Derderian: Even without the specter of workplace crime, hiring has been wildly difficult. Whether a function of the continued government assistance during COVID, material competition for the same labor pool or a perception that retail in general, and food retail more specifically, is not an ideal or preferred place of employment, the industry has had an extremely difficult time hiring and maintaining a full workforce. Without question, the element of crime has affected our workforce. Not only have our associates in many instances witnessed crime and possibly violence in our stores, but many travel to work using public transportation, which has also seen a heightened level of crime (on trains and buses) – each contributes to a negative influence. And if the prospective part-time employee isn’t dissuaded by the uptick in crime, often their parents are, and they refuse to allow their young adult children (a cohort the industry relies on) to commute to work. All of this leads to staffing shortages and as a by-product, less service to our customers and ironically, fewer employee eyes in the store to deter pilferage.
Food Trade News: Statistically, the number of independent stores (and owners) in the U.S. has shrunk dramatically over the past decade and that trend continues today. What has ARS done to buck that course and what does ARS bring to the table that you would consider a differentiator from the other member-services companies that are competing for the same business?
John Derderian: This represents the easiest answer in this set of questions – it is our professional staff. As a true cooperative which distributes every penny of income generated back to our storeowners (members), our experienced staff is not focused on selling services to our members, but rather, singularly working to improve the sales and profitability of our member’s companies. Our mission is “…provide to our membership customized services that optimize their retail success…” that is how our staff approaches their role every day. In the New York metropolitan area, where demographics change by the block, customization is key, and providing the means for family businesses to succeed is our ultimate goal.
Food Trade News: Thank you.