Faced with stiff competition, small profit margins, numerous food scandals, massive meat recalls, and health violations for unsafe practices the industry is reeling. The landscape of the American food shopping experience is changing and supermarkets chains are not changing fast enough to keep pace.
From the 1930’s through the 1980’s the American supermarket was the final link in our food supply, from farm to food processor to American consumer. The term supermarket is uniquely American. The first American self-service supermarket, Piggly-Wiggly, opened in 1916 in Memphis, Tennessee. But today, the supermarket as we know it is in serious decline.
In 1989, supermarkets commanded 89% of all grocery purchases. Today they hold less than 50% of the market and they continue to lose ground to mega retailers such as Wal-Mart, dollar stores, club stores, and convenience stores. The country is changing and with it there is a shift in how Americans purchase food.
We cook less. The need for staples – flour, sugar, spices, baking powder – has declined. Many families stock none of these at home. Some store little in their kitchens, purchasing more take-out or semi-prepared foods that can be heated and eaten. More disposable income, hectic family schedules, and nontraditional eating patterns favor fully-prepared, ready-to-eat foods. Though supermarkets have tried to compete with in-store take-out, restaurants still dominate this market.
We don’t even make coffee at home any longer. Starbucks, Dunkin’ Donuts and even McDonald’s are tempting us with away-from-home premium brews. Many large food companies are selling off their coffee divisions because supermarket coffee has lost a large percent of the market share.
Instead of the typical 2 trips per week to the supermarket, today’s consumer uses 5 to 7 different food outlets. Megastores, mass merchandisers, discount stores, club warehouses, drugstores and convenience stores – all of which stock food along with other products — have seriously cut into the profits of the traditional grocery store.
Globalization and concerns about the environment are also impacting food purchases. Celebrity chefs, travel, and the never-ending supply of cooking shows have turned every American into a gourmet eater. Specialty stores such as Whole Foods and Trader Joe’s have sprung up to supply unique foods and ingredients. These smaller retailers, along with the natural-organic-health food stores are meeting the increasing demand for organic, gluten-free, non-allergenic, and artisanal items the average grocery shopper now considers as weekly staples.
The new American consumer comes to the supermarket toting a reusable bag along with health, social and environmental concerns. The standard product mix will no longer satisfy this shopper’s needs. The specialty chains are pulling away the grocery shopper with the most disposable income while the megastores and mass merchandisers gobble up the price-conscious consumer. The traditional supermarket lies somewhere in between. They find it difficult to stock a wide variety of boutique and ethnic brands along with traditional products, all of which they must sell at a price higher than can be found at Wal-Mart-like megastores.
It is unlikely supermarkets will disappear completely, but they will need to adapt and change to survive. Consumers needs and purchases will be driving forces in that change.