Forecast for Supermarkets – Sunny Outlook or Clouds on the Retail Horizon?
“Progressive Grocer” recently cited some trends, which appear to indicate what direction the retail grocery and supermarket sector is heading. The retail grocery market in the U.S. grew about 14% between 2007 and 2011, making it a $645 billion industry. The hitch is that about 90% of that growth was due to inflation.
Supermarket sales of food and groceries grew a little over 11% in the same four- year period, which reflects a below-average growth rate. This also resulted in a slight dip in total grocery market share where supermarkets are concerned.
The silver lining is that the rate of decline is slowing and that performance as a whole is improving, brought on by what the industry calls “growth format” stores or smaller stores that have a particular focus, like Trader Joe’s, Whole Foods, Fresh Market, etc. vs. the larger traditional one-stop-shopping stores like Kroger, Safeway, Publix. These “growth format” stores are occupying more of the grocery budget share that used to belong to the more traditional stores.
Additionally, the Walmarts, Targets, discount chains, club stores, regional chains, convenience stores and independent grocers of the world also are cutting into the pie, taking away market share from mainstream markets, but presenting more growth opportunity overall in the industry. In response to this competition, supermarket retailers are becoming more savvy about retaining customer share.
Traditional markets have been emphasizing their fresh and perishable items as a way to stand out from the supercenter/club store pack and thus draw out and keep a customer base. But the supercenter format attracts the budget-conscious, which can be a formidable segment.
Regardless, though supermarket management remains cautious, there has been a gradual hiring increase in the past year. The U.S. Bureau of Labor Statistics noted that supermarkets as part of the “food and beverage” store industry added 57,000 jobs since January 2011 compared to cutting 8,000 jobs in 2008 and 43,000 in 2009.
Shannon Blagg, who is the public relations director at a supermarket company, says “Retailers have to make decisions according to the needs of their particular market. If they don’t, they’ll either go under – or be gobbled up by a larger chain."
Anthony Spiteri who works for another grocery chain in media and marketing, echoed that supermarket retailers need to be aware that there are regional differences in what a particular population segment wants and expects from their local supermarkets.
"Even chains that are doing business in multiple [areas] might have a different product mix, depending on if they're an inner city store or a suburb store and depending on the socio-economic environment that surrounds it," he says.
Many analysts believe that there’s a stable job market in the industry despite closings and consolidation. While hiring hasn’t reached a euphoric state, still these trends reflect an ever-growing and changing dynamic where retailers need to take stock of the economy, distribution channels and consumer preferences to gain an edge in this very complex and competitive industry.