- Increasing competition from alternative formats and chains like Lidl, along with changing consumer dynamics, will result in more bankruptcies, consolidation and price reductions in the years ahead, according to Bloomberg.
- Lidl plans to build 100 stores by the summer of 2018, and could build as many as 630 locations during the next six years — competiting with established grocers such as Kroger. At the same time, Amazon is poised to grow its market share in grocery, while alternative formats such as dollar stores and drug stores are stocking more food to attract shoppers.
- Bloomberg also notes that more consumers are foregoing their weekly shop in favor of quick fill-in trips. This has opened the door for meal kits, restaurant delivery and convenience stores to meet shopper needs.
Bloomberg writes that “war is coming to the staid supermarket” as if disruption has never visited the $600 billion industry. In fact, grocers have confronted plenty of challenging market forces in the past from the rise of Wal-Mart and Whole Foods to the growth of fast-casual restaurants. Retailers are used to facing conflict and adapting.
But the pressures facing retailers now are unique in their size and number. It would be one thing if Amazon’s growth in grocery was the only threat supermarkets faced, or if Lidl’s American landfall and the rise of alternative formats like drug stores and dollar stores were their main worry. But supermarkets must face all of these threats at once.
At the same time, companies must address a changing consumer that is moving away from the profitable weekly shopping trips that so many stores were built to serve. These quick trips, as Bloomberg noted, have further fractured grocery spending as convenience stores, dollar stores and other formats step in with food offerings.
None of this is news to retailers. They’ve seen market dynamics shift, and have developed strategies to differentiate themselves in the marketplace. They’re building up their private label offerings, investing in data services, honing their loyalty programs, expanding their foodservice footprint and improving their in-store experiences.
These developments have delivered a better overall shopping experience for consumers. But some essential problems remain for retailers, like how to capitalize on quick trips and how to meet consumer demand for healthier, less processed foods. Grocers are adjusting to both of these trends, but the fact remains that many stores are really big and carry lots of packaged, processed foods.
What may be the industry’s biggest problem is not just that stores struggling to adapt to the times, but that there are too many of them. “We as an industry are over-stored,” Diana Sheehan, Kantar Retail’s Director of Retail Insights told Food Dive in a recent interview about Whole Foods, the troubled retailer that many analysts agree operates too many stores. As the competition continues to heat up, it will be interesting to see if the industry contracts, by how much and who is left standing.