Experts Offer Answers To Stem Grocery Market Share Losses

August 20, 2004

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Experts Offer Answers To Stem Grocery Market Share Losses

Given Choice, Consumers Shopping Elsewhere

A funny thing happened on the way to the grocery store. Consumers discovered they could find the very same items they planned to buy at the supermarket for sale at the local drugstore, convenience store, dollar store, discount store and e-tail Web site, saving themselves time and sometimes money.

The numbers bear it out. Given a choice, more and more consumers are shopping somewhere other than the supermarket to get their groceries.

According to the supermarket industry trade association, the Food Marketing Institute (FMI) in Washington, D.C., the number of consumers who said the supermarket was their primary outlet for buying groceries fell from 81 percent in 2002 to 72 percent last year. At the same time, the number of consumers who shop primarily in supercenters such as those operated by Wal-Mart and Target increased from 15 percent to 21 percent.

RetailWire (www.retailwire.com), the unique online news and analysis forum covering all things retail, recently opened the topic of consumer choice and migration to other shopping channels up for discussion by its BrainTrust of industry experts.

"Consumers no longer see channels defined by what is available in the store, but rather by how it is presented," said BrainTrust panelist, Ben Ball, a vice president with Dechert-Hampe & Company, a management consulting firm in Chicago. "My Jewel has an OSCO drug store and liquor department. The freestanding Walgreen's in the corner of the Jewel parking lot has dry grocery and a liquor department. One had twenty parking spaces, two checkouts and a drive-thru pharmacy. The other has two hundred parking spaces, ten checkouts and a walk-up pharmacy. And the difference is...."

Ryan Mathews, futurist and founder of Black Monk Consulting in Eastpointe, Mich., said those running supermarkets need look no further than their own customers for the answers they seek. "The consumer doesn't exist! People do. And, some people need that 20 percent price differential while others would be willing to pay a 40 percent price premium if they could save 10 minutes or have their egos stroked or both," he said. "Supermarkets have lost share because retail options have increased and lifestyles have changed. If we're ever going to understand what drives consumers, we have to quit thinking about them in the abstract and begin understanding them as individuals."

Russell Jones, president of Decisive Technology LLC echoed the opinions expressed by BrainTrust panelist Mathews. "Consumers' preferences are not constant, not even those of an individual, and not even from one day to the next. In fact, I will tell you that I hate department stores even while I spend thousands of dollars each year in one. Some days I will avoid Wal-Mart and other days I will be happy to visit. I'll go to Staples for a pen - or browse the stationary aisle at CVS. I'll buy books at Borders, Barnes & Noble and Amazon.com. And here's the painful truth for retailers - none of these retailers does such a great job that I would stop shopping at any of the others. And I'm not alone," he said.

"Grocers who view themselves as offering basic commodities will struggle as more channels offer those commodities. Grocers who recognize that they need to solve consumers' needs - for better nutrition; for interesting meals; for personal service while shopping - can continue to thrive," said Jones.

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The complete RetailWire.com discussion forum entitled "Grocery Options Galore" can be viewed at: http://www.retailwire.com/email/discussion.cfm?doc_ID=10064

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