Are traditional supermarkets dying?
Groceries are losing business to big-box chains and dollar stores. There's little room for strategy in a business with razor-thin margins.
The grocery business has scattered. People can buy groceries from all kinds of places now, leaving supermarkets in the dust.
Wal-Mart (WMT) may be the biggest threat. The discount retailer has pushed hard on grocery offerings over the past decade, adding organic produce and matching or undercutting competitors' prices. Groceries now make up about 55% of Wal-Mart's U.S. sales, the Journal reports, up from 41% four years ago.
Target (TGT) is moving in quickly as well, revamping its stores to add freezer aisles, produce, meats and bakery sections. Its Super Target stores have the most grocery items, but 75% of stores have fresh and expanded frozen food sections, the Journal reports.
Dollar stores have also risen to meet demand. Stores like 99 Cents Only, which was taken private last year in a buyout, offer a decent array of produce and dairy items along with canned goods. At the other end of the spectrum is Whole Foods Market (WFM), a niche player that has seen unexpected success even in the economic downturn. Shares of Whole Foods have risen 320% in the past three years.
Some supermarkets are now targeting male shoppers, as the following video shows.
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The impact on traditional grocery stores has been dramatic. Shares of Supervalu (SVU) are now just $2.37, down more than 80% in three years. "In this economy, it's simply not acceptable anymore to have prices as far out of line as ours have been," CEO Craig Herkert told the Journal.
Shares of Safeway (SWY) haven't suffered as much, falling 20% in three years. Still, the stock is very cheap, trading at just 9.2 times earnings. Kroger (KR) has held up better, trading at about 20 times earnings.
Shoppers' habits have changed, and the supermarket is no longer the twice-a-week destination for groceries, diapers and garbage bags. They'll go to Costco (COST) for some household basics, then dollar stores for others. They'll pick up items at Wal-Mart. They'll even buy items from Amazon (AMZN), which offers packaged groceries in bulk at competitive prices.
It's little surprise, then, that the grocery business is in tumult. Winn-Dixie was bought out in December. The owner of A&P came out of bankruptcy this year but isn't publicly traded.
But where can grocery stores go from here? It's tough to cut further, with margins already razor thin. Supervalu's margins are about 4.9%, the Journal reports. There isn't much room to attempt huge changes in strategy at those levels.
As improbable as it may seem, traditional grocery stores are headed to niche status. There are too many choices and too many deals for smart shoppers, and in this economy shoppers have become very wise.
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We avoid Walmart at all costs. This company is hurting the economy and the execs are filling their pockets with our cash. Click the link and watch the free video "Wal-Mart: The High Cost of Low Price" ((copy/paste that in Google its a FREE video)) and decide for yourselves.
As far as the person saying that grocery store workers are making over $20 an hour I'd like to know where.... Wife works at Hy-Vee over 10 years now and makes a WHOPPING $10.50 an hour.
We will pay a little more and avoid Walmart their meat and produce are crap I wouldn't feed my dog.
Clothes are crap and most everything made in China....
Does anyone remember Walmart's slogan "We buy American so you can to" VERY little is American made thats sold at Walmart. Pay a little more and support AMERICAN workers instead!
Walmart is loosing grocery shoppers in my area. Some of it is due to not keeping the shelves stocked & some to the fact that we can get things cheaper when our regular stores run specials.
Walmart also continues to discontinue items that we want.
Farmers markets are opening up with better produce.
More people are growing their own to avoid GMO'd products & chemical residue on/in things.
I think retailers need to wake up to what the shoppers want more of...at affordable prices!
America is allowing itself to kill itself.
I sometimes buy our groceries at WalMart, but I never seem to learn my lesson. The produce spoils in half the time it should, and the milk routinely begins to sour at least 4 days before the use by date. And my biggest complaint; having cashiers at 3 or 4 stations. Other than the Thanksgiving period, it's routine to see 80% of the registers empty, and then have to wait at least 10 min to start ringing out.
I go to my local mom and pop store. Family business owned by the same family for almost 100 years. Great butcher counter excellent quality, has the fresh fruits and vegetables that make the stuff in the supermarkets and Walmart look sad. The prices are in most cases equal to the big chains and the service is far far better. This store has recently hired more people to run the butcher shop, the deli, the registers while Shoprite and Walmart are laying off and the A&P banged up shop and moved out. The store is always clean and neat and wonderful, and you know everyone so shopping there is not LIKE shopping with friends, it IS shopping with friends.
If you go to a big supermarket and especially Walmart, you deserve everhting that you will get.
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The solid report comes a month after the retailer closed all of its Canadian operations.
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