American supermarket retailers are not an international lot at the moment. For the most part, Americans correctly regard this nation as a big place that still affords plenty of opportunity for growth.
But, for various reasons, that situation is likely to change in upcoming years and American food retailers will have to figure out how to cast their nets abroad in a bid to achieve continued growth, just as their European counterparts have been doing for a generation or more.
So, with an eye toward the future of food retailing that's likely to become increasingly international, SN periodically publishes an issue that puts a special spotlight on global retailing. This is such a week. As you'll see by looking at Page 1, and the first batch of pages, this week's issue contains numerous news articles and features about global retailing that are presented in addition to the usual mix of domestic information.
What drives retailers to seek expansion abroad? The day that any retailing entity starts to look abroad for further growth is the same day that barriers to domestic expansion start to go up. Such barriers generally take the form of governmental restraints to expansion, or market saturation. Most likely, it's the latter factor that will propel American retailers toward opportunities abroad.
One factor that virtually guarantees the achievement of market saturation, at least in certain substantial regions of this country, has to do with demographics. As the population ages, population growth slows and less food is purchased.
Another factor is the absence of food-price inflation in the economy. That situation promotes the appearance that food retailing is a slow-growth enterprise, an outlook that saps the energy to expand.
But perhaps the largest factor that will speed the day when large regions achieve market saturation is that of retail consolidation. That phenomenon, while already quite dynamic, remains in its nascent stages.
Forces that are sure to press more and more consolidation upon food retailers include the maturing of family-owned chains, the lack of governmental restraint of business combinations, the attractiveness to investors of the copious cash flow food retailing spawns and the high cost of technology. The last factor is significant because as modestly sized companies realize they can't afford the technology required to move into the future, they are impelled to sell out. (A number of these factors and others were mentioned in a Page 1 news article in last week's SN.)
It's instructive to observe that there are two major companies in the United States, both of which are close to food retailing, that have already bumped up against market saturation and so have looked abroad for expansion. They are Wal-Mart Stores and Costco Cos. They won't be the last: "It's as certain that globalization will continue in food retailing as it is that day follows night. There's no reason for it to stop. It's a long-term trend that's just beginning." That's the opinion of a retail expert quoted in this week's Page 1 news feature about global retailing.
Unquestionably, as time goes on, American food retailers will join their cousins from abroad who have already expanded far beyond their own borders, operators such as Ahold of the Netherlands, Carrefour of France and Delhaize "Le Lion" of Belgium.
As you'll see by reading this issue, not all ventures outside domestic boarders are uniformly successful, but all such endeavors provide a chance to grow after market saturation says "stop growing."