What kind of store will be selling your products in the next decade?
Just 20 years ago, nearly 90 percent of Americans’ at-home food purchases were made in traditional grocery stores. Today, their share has dropped to 69 percent. The biggest food retailers in the country? Walmart’s No.1 and Costco Wholesale Corp. is No. 3 (“traditional” grocer Kroger remains in between), according to Supermarket News. 7-Eleven is No. 11 and Dollar General is No. 19. Target’s coming on strong.
Not only is Walmart No. 1 in food, but food is No. 1 in Walmart. Grocery is far and away the largest category for the giant retailer, accounting for 49 percent of revenue in 2008, up two percentage points from the previous year. That’s nearly four times the next closest category (entertainment at 13 percent). So Walmart is not giving up on food sales any time soon.
Nontraditional food stores have managed to grab market share by enticing consumers with a formula of one-stop shopping and lower prices. They’ve introduced a whole new lexicon into food retailing – words like supercenters, hypermarkets, club stores, dollar stores, limited-assortment stores. Consumers don’t seem to be confused; they know where to find what they need.
Overall, however, the grocery store remains king. Supermarkets are chosen by 44 percent of food shoppers “almost every time” and “fairly often” by another 31 percent, according to data from the Food Marketing Institute. Supercenters are a distant second, chosen “almost every time” by 18 percent and “fairly often” by 21 percent of shoppers.
“If the past has taught us anything, it’s that there will be no single store format for the future,” says Michael Sansolo, longtime senior vice president of the Food Marketing Institute and now a consultant and speaker on grocery retailing. “There is a place in the world for the big superstore, where one-stop shopping reigns. There’s also a place for upscale shopping. There’s a place for small and convenient. We’ll see more channel blurring from companies like Walgreen’s and CVS [two ‘drug store’ chains]. The key for retailers will be to find their key market niche and create the right focus. It’s not so much the format or the size of the store, but finding what their shoppers want and delivering that.”
The same goes for food processors. That retail emphasis on focus and targeting requires processors “to find the right product mix for this tremendous diversity at retail,” he continues. “I can see the same manufacturer presenting itself in different ways in different stores.”