If all your market knowledge came from the general media, you’d already have concluded supermarkets are goners. There’s a growing drumbeat of stories about supermarket decline.
“The Grocery Store May Be on Its Death Bed,” blared one headline from Time.com in a story about the rise of click-and-collect ordering.
“Say Goodbye to Your Supermarket,” read a Fortune story headline about how the industry is caught in the middle between more specialized competitors.
Death proclamations over the past year have been wildly exaggerated and in some ways evoke sensational reports from earlier eras, such as when Walmart Supercenters were a newly feared rival. Nevertheless, this latest crop of stories stems from real developments that are pounding supermarkets and need to be addressed.
These include the rise of online grocery and the resulting need for fewer and smaller stores, and other dramatic changes in how consumers are shopping.
Consider the impact of online grocery. It will cause faster changes than disruptors from earlier eras (like Walmart Supercenters) because it can build momentum faster than a physical store rival, said Joel Rampoldt, North American retail practice co-leader, Oliver Wyman. However, this consultancy recently produced a report that relayed how the best grocers can play this to their advantage. Here’s an excerpt:
“[Online grocery] does not spell the end for bricks-and-mortar stores and, in fact, the stores that survive are likely to be more profitable than the average store today. Being one of the bricks-and-mortar grocers that survives will not be about beating online formats (although that can of course help). Instead, it will be about each store winning local competitive battles to be the last store standing in a given area. In other words, you don’t have to out run the bear — you just have to outrun the person standing next to you.”
Other dramatic changes are disrupting supermarkets. Grocers are considered to be caught in a shrinking middle between upscale and value rivals and more focused on building scale than meeting shopper needs, according to critics. That may be true of some retailers, but a number of really good food retailers are striving to get even more in tune with shoppers, as spotlighted by SN in recent weeks.
The Fresh Market, for example, is moving to step up its game, building more customer-centric assortments and increasing in-store service.
Lowes Foods is moving to create “something different and unique in the grocery experience overall,” including with “retail-tainment” or unique, in-store experiences.
Retailers including Schnuck Markets, Kroger and Meijer are in-tune with digitally focused customers by embracing “flash” sales, or limited offers through means such as digital coupons, social media and mobile apps.
The main point is that pressures are building, but they aren’t going to render supermarkets irrelevant.
The old British phrase after a monarch dies is, “The King is Dead, Long Live the King.” It’s meant to emphasize continuity.
The same can be said here. Old supermarket operating models (and some operators) may die, but the best players are already embracing new directions that will evolve and sustain supermarkets as a retail segment.
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