The Pace of Change Challenges Food Retailers

The Pace of Change Challenges Food Retailers

As we enter the last month of 2008 and look ahead to 2009, one thing that's consistent is the overused word: “change.”

Journalists quickly discover that the word “change” is unwelcome in news stories and headlines, since by definition news should reflect change. While “change” has been unavoidable as a campaign slogan that was used by both sides, recently it's the pace of change that has been unprecedented.

For example, as the economy and stock market tanked this fall, the Ronald Reagan line, “Are you better off than you were four years ago?” was adapted in quick succession to, “Are you better off than you were four months ago?” — or to, “Are you better off than you were four hours ago?”

Related to the economic downturn, gas prices have been volatile. Earlier this year, I wrote in this space about the $4-per-gallon gas prices. By the time the column was completed on a Thursday and the issue came out on a Monday, gas prices had begun to go down. At this writing, the national average is around $2 a gallon, but will it be the same when this issue of SN comes out? We'll see.

This also caught some retailers by surprise, as they planned promotions around the expensive gas. Fuel is always a promotable commodity, so little was lost, but the deals were a little less attractive when gas prices went down by half.

Pharmacy also took an unexpected hit as more people skipped medications they simply could not afford. Natural and organic products, and upscale items of all kinds, saw a sales decline, even among those who could still afford them.

This holiday season, sales of gift cards are expected to go down. The economy is part of this, but so is uncertainty over the future of retailers. A misleading email currently making the rounds about the pitfalls of buying gift cards from potentially bankrupt retailers doesn't help.

Looking ahead, perhaps the pace of change will slow, but the significance of the changes can be immense.

By this time next year, pharmacy may be preparing to benefit from more widely available health insurance coverage, or reeling as cost-containment measures shift more prescription purchases to mail order. Or, if the money isn't there, health care reform may be stalled.

Fuel prices will probably go up if the economy improves, and go down if it declines. If new taxes are added, all bets are off.

Meanwhile, spending on food will also follow the bigger trends, with private label and value brands benefiting from the downturn.

What can be done? Little, but fortunately, food stores are in a better place than most to ride out the storms. The oft-used refrain is still true: People have to eat.

The biggest opportunity to make an impact is on the health reform legislation already gaining momentum. Retailers and their representative organizations need to make sure that community pharmacy plays a role in any plan that goes forward. With some luck, the changes ahead will be good for business.