Everyone Getting Into the Grocery Business

Discussion
Aug 25, 2011
George Anderson

Channel blurring, specifically related to grocery sales, is not a new idea. Certainly there is plenty of evidence it’s taking place with dollar stores, drugstores, online grocers and many other non-traditional outlets.

For those rushing into the business, the question becomes how do they differentiate from those already selling groceries. What, for example, would make consumers choose to buy their Cheerios or private label equivalent from Dollar General rather than from Aldi, Amazon.com, Costco, Fresh & Easy, Schnucks, Target, 7-Eleven, Walgreens or Whole Foods?

Paul Simon, a spokesperson for Schnucks, told the St. Louis Post-Dispatch, “It’s nothing new to us. We’ve learned to compete against it for the last 20 years now.”

For many consumers today, the choice comes down to price. They shop where they expect to save the most money.

“When the economy went south, grocers had a bit of an uphill battle,” Susan Viamari, a consumer trends analyst with SymphonyIRI, told the Post-Dispatch. “They were perceived as more expensive than a supercenter or dollar store. So in the past couple of years, we’ve seen grocers really honing their value image.”

Another consideration, also related to price, is the tendencey for consumers to consolidate purchases at a single outlet rather than spend more on gas at current high prices.

Ms. Viamari said that more extensive food offerings have helped drugstores gain share in grocery categories.  

“Consumers are doing more shopping at drugstores, trying to streamline the amount they are driving because gas prices are so high,” she told the Post-Dispatch.

Discussion Questions: Who do you see as the near and longer term winners of the multi-channel battle for grocery share? What channels do you see gaining and losing share?

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20 Comments on "Everyone Getting Into the Grocery Business"


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David Livingston
Guest
9 years 8 months ago

For market share, I see stores that have the biggest variety at the lowest prices. Take a look at chains with the biggest market share leads. They will stay on top. The others will just play musical chairs. Walmart, Publix, HEB, Hy-Vee, Kroger, Wegmans, etc. Big stores, big variety, low prices, a touch of service. Sure everyone sells grocery, even Canadian Tire, Menards, and dollar stores. But that’s not where people who are serious about grocery shopping will go. Niche operators like Whole Foods, Trader Joe’s and Aldi will continue to be successful, but I don’t see them ever getting near the leaders in market share. The big losers will be chains publicly held or private-equity owned that cannot compete on price or service such as Safeway, Supervalu, Roundy’s, Winn-Dixie, Ahold, and Delhaize.

Herb Sorensen
Guest
9 years 8 months ago

The winner will be who has the most “stores” nearest the customers. That is Amazon, hands down, except for the immediacy of delivery issue. So the next best candidate is probably the drug stores.

David Biernbaum
Guest
9 years 8 months ago

The quote from Paul Simon is appropriate because here in the St. Louis market, Schnucks is a prime example of a company doing a good job to reflect, adjust, and re-adjust with changing moments in time. Schnucks has reclaimed itself as a retailer with low every day prices, however, at the same time Schuncks has become an even more pleasant and exciting place to shop with new stores, new fixtures, new technology, and plenty of innovation.

Consumers shop not only where they can find lower prices but also where they can find their favorite brands, new and exciting brands, and innovation. Price is part of the equation but it’s far from the tell-all. Consumers also look for convenience, friendliness, and helpful customer service. Yes they do! Even in times of recession.

Tony Orlando
Guest
9 years 8 months ago
As an expert on this topic, I have seen the devastating loss of grocery sales for over a decade in my store, and there are several reasons. I will not subsidize the major pop companies with their overcharging to me, in order to give much better deals to BIG-BOX retailers, and the Dollar stores. The Dollar store that shares my building right next door has hurt much of my center store sales, as they too get preferred treatment from national CPG manufacturers, and Sam’s plus Costco are less then 45 minutes from me on each side. The answer for me as I have said many times before is to work the regional wholesalers who are just as hungry for business as I am. The perimeter of my store is doing very well, as the Dollar chains, and Big-Box stores, can not do it like we can. Am I competitive??? Absolutely! Does the general public know this??? Some do, and those are the folks I fight to keep every day. The battle is fierce, but it… Read more »
Ben Ball
Guest
9 years 8 months ago

Near-term winners will be providers of convenience (primarily smaller boxes offering proximity) and retailers with a higher end offering such as the new Mariano’s stores Roundy’s is building in Chicago.

No long-term winners have emerged in any major way yet, but they are coming. As the US population increasingly urbanizes and adopts a more European social structure, the butcher and baker and candlestick maker (i.e. specialty stores) will retake a significant share of wallet.

Charles P. Walsh
Guest
Charles P. Walsh
9 years 8 months ago

No question that mainline grocers such as Walmart, Kroger and their ilk will be affected by the growth of the “pantry” offerings developing in dollar stores and drug store chains.

There isn’t a chance in Hades that these chains will unseat the dominant grocers, but they will have an impact on their growth. We can see some of that impact in the recent decision by Walmart to expand their Neighborhood Market concept and test their newer small footprint stores.

This rapid expansion of grocery choices at retail could well have an impact on those regional chains already struggling to compete against the Walmarts and Krogers and could add to their woes.

Bill Bittner
Guest
Bill Bittner
9 years 8 months ago
OK, this answer is a little “out there” but I think if they really rethought their role, the US Postal Service could become the next big grocery distributor. The biggest challenge for a full line online “food” offering is maintenance of the special environmental requirements (i.e. The Cold Chain) for certain categories such as frozen, fresh, etc. This requires a way to ensure the consumer is home or there is local storage available. Another possibility would be a local location whose only purpose would be the distribution of goods. A facility that has freezers, coolers, and climate controlled environments where products purchased online can be held for pickup or distributed to the consumer by a fleet of short haul vehicles with appropriate refrigeration. The USPS has much of this infrastructure already in place. Just at a time when they are closing down local distribution centers and cutting jobs, the USPS should be rethinking their role. Obviously snail mail is a dying market but package and goods distribution is expanding. If the USPS focused on becoming… Read more »
Gene Hoffman
Guest
Gene Hoffman
9 years 8 months ago

Daring ideas in grocery retailing are like chessman moved forward; they may be beaten, but they also may start a winning game. And the winners of grocery share in the multi-channel battle will be those that can connect and then solidify with today’s diversified consumers with the most daring or comforting ideas.

All daring ideas won’t come just from successful niche operators – Whole Foods, Trader Joe’s, Sav-A-Lot, Aldi, dollar stores and convenience stores, etc., they will also pour forth from large-share chains such as Costco, Kroger, Walmart, HEB, Wegmans, etc. The winners will win with their better contemporary ideas.

Retailing of today’s daily-consumed items – groceries, food, gasoline, beverages, medical-related products – has become new components for a vastly increased number of retailers. So the next time you go to buy lumber, golf clubs, a razor or a blouse don’t forget to pick bread, milk, a bottle of wine and a prepared entree or sandwiches.

Cathy Hotka
Guest
9 years 8 months ago

DC requires retailers that sell food to charge 5 cents for each grocery bag, so it’s now easy to see who carries food — and it’s nearly every retailer. Specialty retailers, bookstores, gyms, department stores, all carry food, and why not? This creates a new urgency for grocers to use advanced analytics and experiential differentiators to retain market share.

Liz Crawford
Guest
9 years 8 months ago

“The most common number of purchases by a single shopper is just one.” (Sorensen, Inside the Mind of the Shopper).

If that’s true, is it any wonder that drug stores and c-stores are picking up some of the (one or two item) grocery business? So, for most trips, the local drugstore is closer and faster in-and-out than the grocery store. In my view it is convenience that is driving most “channel blurring.” Big Stock up trips and pantry replenishment missions are common for etailers, Club and Supercenters. So perhaps the “blurring” is really a slow, messy alignment of channel against mission.

Roy White
Guest
Roy White
9 years 8 months ago

This is really nothing new. Chain drug stores, specifically CVS, Walgreens and Rite Aid, have for years carried food items as a convenience for their customers, and have competed with grocery stores at least on some level. It’s true that at this point in time, the outlays in food in chain drug stores is more extensive than ever before, but I think the threat to grocery stores, from the drug channel anyway, will come when chain drug merchants figure out how to integrate their food offerings into their wellness and healthcare mantra they naturally have. Then, there will be a real reason for consumers to increase their food shopping in this channel. A vision of a combination of pharmacist/doctor or nurse practitioner/nutritionist offering a broad scope of wellness counseling in a store whose basis is healthcare could be very powerful.

Craig Sundstrom
Guest
9 years 8 months ago

Did David just lump Safeway in with Supervalu and Winn-Dixie, his two sad sacks – pun semi-intended – of the grocery industry? (I think I can hear the cries of anguish from Pleasanton without even going outside). Anyway, I’m not sure who the winner of this battle will be, but put together drugstores (with a limited assortment) and large chains (pushing house labels) and I think one sees a clear loser: second tier brands.

Mark Burr
Guest
9 years 8 months ago
The near-term winner is very obvious in Costco. Practically no one is or has been turning in the comp sales and growth sales as they have been for a significant period of time. I see no reason for that not to continue. The interesting thing about their gains is that it isn’t just price driving their growth. It’s about service, experience, and perceived value. Others from almost every channel imaginable have eaten away and will continue to munch on portions of the grocery channel in every category. The near-term and long-term loser is also obvious. It’s the conventional, middle of the road, supermarket. They’ve been the loser for decades and it will continue. They’ve avoided all the predictions of complete death over the same time period. However, in sheer numbers the path is one towards eventual extinction, or niche. That may be a very long time from now, but it’s the direction with no evidence of turnabout whatsoever in view. Sadly, many don’t even consider these others, especially even Costco, as a competitor. Instead, their… Read more »
Armen Najarian
Guest
Armen Najarian
9 years 8 months ago

Price, Convenience, Service. Inevitably, few retailers can consistently deliver on all three attributes…forcing consumers to make trade off decisions every time they shop.

Whoever can nail all three attributes, and do so consistently, will win. Amazon has a chance to step up, as do traditional retailers with an integrated multi-channel presence.

M. Jericho Banks PhD
Guest
M. Jericho Banks PhD
9 years 8 months ago

When I hear of non-grocery retailers beginning to offer food products, I have a few questions. First, are they ready to reduce shelf space for their (usually) more profitable items which also have longer shelf lives than food? Second, will they be able to purchase sufficient volumes of food products to qualify for the best quantity discounts? And third, how will they change their instore practices and install sufficient staff training to clerks who are not used to handling food products? Retailers that can answer these questions in a positive way will enjoy significantly more success in food sales than those who can’t.

David Livingston
Guest
9 years 8 months ago

Yes I did lump Safeway in with Supervalu and Winn-Dixie. Primary reason is Dominick’s, Randalls, Tom Thumb, and other chains they bought that are getting murdered by Walmart and HEB, etc. They might be doing well in California but their sales per square foot drops big time outside of California.

Ed Dennis
Guest
Ed Dennis
9 years 8 months ago

Can’t speak of near term but long term, it could return to like it was in my childhood. My grandparents lived “in town,” but they had a garden and chickens, as did most of their neighbors. They bought flour, salt and pepper, but much of what they consumed came from the garden and the chickens. Their garden didn’t cover 1/10th of an acre, but supplied a lot of stuff. My grandmother canned, and made jelly, but they always seemed to have plenty without having to make many trips to the store. When money isn’t worth anything, it’s senseless to go to the store anyway. A loaf of bread was 89 cents this time last year.

Herb Sorensen
Guest
9 years 8 months ago

On further thought, I think C-stores have the greatest potential – but of course they are already selling groceries.

Kai Clarke
Guest
9 years 8 months ago

Any retailer who can offer competitive pricing and sufficient selection to keep a grocery shopper coming back will be a winner in multi-channel growth. It is not the category channel that determines the success of grocery, but price and selection, combined with customer service. If the retailer offers all 3 of these, success is certainly to follow.

Christopher P. Ramey
Guest
9 years 8 months ago

It’s all about the customer. The smartest merchants are leveraging and serving their clients with products that might not be considered traditional.

If your business has traffic, why not sell products that might be bought for convenience? For example, a dance studio with a couple hundred young girls visiting every week could sell fresh local milk or fresh cut flowers as a service to their moms who are anxiously waiting for their class to end.

The question for every retailer should be “what is my customer buying before and after they visit me, and what can I do to make their life easier?”

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