Retail Rap: The Grocery Evolution

March 16, 2015 Laura McDaniel

The grocery industry has shifted from the corner grocery to niche grocers like Whole Foods and Trader Joe's. Further evolution has occurred with big box retailers such as Wal-Mart and Target expanding their fresh grocery selection. How will it continue to change? Jeff Green from Chain Store Age takes a look:

There has been a lot of discussion in the last several years about the strength of the grocery sector. I think it’s clear that a big reason behind that success has been the evolution of different formats and the explosive growth of a new generation of grocery concepts that represent a significant departure from the traditional grocery model.

I’ve been thinking quite a bit about this lately — specifically about what it is that has worked for new grocery brands, and how grocery industry changes are affecting the traditional grocery chains: those traditional chains have typically maintained the highest market share in the business. These are the large store formats that offer strong mix of perishable items from meats, bakery and produce to non-perishable items such as canned foods, paper towels and frozen products: brands like Kroger, Weis Markets and Giant Food.

Remember, as recently as the 1980s, traditional grocery stores were all there really was in the grocery space. In the 1990s and 2000s, Walmart, Target, and even Kmart burst onto the scene, with new discount grocery options. While there are no more Super Ks, Target has a mix of stores that offer a full grocery selection, and Walmart is even more heavily invested: of the 4,177 Walmart locations today, 3,275 of those are Walmart Supercenters.

In the last decade or so we have seen the latest grocery concept added into the mix: the proliferation of specialty food stores and higher end market-style options. Some of those concepts established their own brands like Whole Foods, Trader Joe’s and The Fresh Market, but others are more farmer’s market oriented like Sprouts and Fresh Thyme.

That historical backdrop is all well and good, however, the big question is what does this mean for the grocery sector today — and what does it mean for the grocery sector tomorrow.

Frankly, these changes have resulted in a very fragmented industry today. And that’s not necessarily a bad thing. In fact, in many ways I think it’s clearly quite a good thing. It is, however, very different than what the industry looked like 30 years ago. As a result of this fragmentation and diversity, the customer picks and chooses much more so than at any time in recent history. Today, fewer shoppers go to just one store to satisfy all their grocery needs. It’s not uncommon for today’s grocery shopper to go to two stores, three stores or more each week. They may go to Walmart, Target or Costco for price and quantity, to a store like Trader Joes for a specific selection of products, and to a Whole Foods or The Fresh Market type of grocery for high-end perishable products or prepared foods. Sprouts or Fresh Thyme are increasingly popular destinations for fruits and vegetables as well as vitamins and supplements.

Consequently, there is an erosion of brand loyalty in the supermarket business. Consumers shopping different stores for different reasons and spreading their food dollars around at many different stores makes advertising tougher, and chains have a much harder time getting a handle on their customers’ preferences and priorities.

Read the entire article here

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