Are supermarkets obsolete?
Generations of Americans have grown up shopping for groceries in places other than traditional supermarkets. Will supermarkets become the subject of future Trivial Pursuit questions if operators don't quickly rethink a business model that is light on product differentiation and makes merchandising decisions based largely on the trade funds that brand suppliers pay to gain space on store shelves?
A recent Wall Street Journal article by Jinjoo Lee, who writes the paper's "Heard on the Street" column, points to statistical data from the U.S. Department of Agriculture (USDA) that shows supermarkets and smaller grocery stores saw their share of total food spending drop to around 25 percent in 2022, down from 37 percent in 1997.
USDA data for those 25 years shows that annual food spending increased 70 percent in real dollars. The only years where food spending fell was during the Great Recession (2008 and 2009) and the novel coronavirus pandemic (2020).
Total food spending set a record in 2022 after annual gains of 7.2 percent in 2021 and 4.5 percent in 2022. Businesses offer food away from home were the biggest beneciaryies of the yearly increases up 19 percent in 2021 and eight percent last year.
The Journal article points to center store categories as a major challenge for supermarkets as many of their competitors sell the same brands of cereal, laundry detergent and paper towels at lower prices.
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Stores have more strongly emphasized their own premium private labels to offer customers an alternative to higher price national brands. Even so, differentiation is hard to come by as most stores limit themselves to me-too versions of the most popular brand products in a given category rather than displaying unique items that stand out on crowded shelves.
Supermarkets are often stuck in place because of their dependence on trade funds from consumer packaged goods (CPG) brands to turn a profit. Matthew Hamory, partner at consulting firm AlixPartners, told the Journal that more than half of supermarkets' operating profits come from trade funds.
The rush to capture CPG trade dollars has only intensifed in recent years as grocers have rolled out retail media networks.
The Association of National Advertisers (ANA) surveyed members and found that 88 percent were pressured by retailers to buy ads on their media networks. Forty-four percent of respondents said there were under “a lot” or “complete” pressure to buy ads from retail media networks.
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1 年https://bbcfoxnew.com/real-estate-companies-vs-supermarkets/
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1 年Just because there may be fewer supermarkets does not mean there will be no supermarkets. In every retailing category, there are the mediocre operators and there are the superior operators.
Being a Texan, we're lucky to have HEB in our state. No grocer does a better job of differentiation with great store brands, plus cool offerings from local brands. HEB does so much for local communities, too; they're nearly always first on the scene when disasters strike. They're part of the communities they serve. Texans love their HEB - they'll never be obsolete.
SVP Cross-Industry/Cross-Border and Technology at Kantar Consulting
1 年Mentioning the WSJ and retail in the same sentence is always problematic since the writer normally has never left NYC, that hub of retail delight. It does feed into the general commentary of grocery dying of boredom or just not being H-E-B or Wegmans (both who run a large number of nice, boring and small everyday stores... and do close some https://www.wegmans.com/news-media/press-releases/wegmans-natick-store-to-close/). Experience is important but every single survey I have ever read starts with cleanliness and finding what they want, both which were disrupted by the pandemic. DeAnn Campbell has the right position in getting the basics right close to the shopper drives success.
Well, George, you got a lot of mileage out of this discussion...! Good for you!