BOCA RATON, Fla. -- Large-scale retailers, notably Wal-Mart Stores, are destined to define retailing in upcoming years, to a great extent, but a parallel development toward deconsolidation and niche retailing will present an increasingly powerful countervailing force.
That's the opinion of Carl Steidtmann, chief economist, Deloitte Research, New York, who presented a session on the changing food-retailing environment at the Food Marketing Institute Midwinter Executive Conference here last week.
Steidtmann pointed out that traditional supermarkets have been losing market share at the rate of just under 1% per year for the past dozen years or so, and to a great extent that loss has gone to Wal-Mart Stores. But that doesn't mean that large-scale retailing is the key to the future. To the contrary, there is ample evidence offered by Wal-Mart itself and others that smaller-scale retailing and deconsolidation will happen.
"There has been a steady downward slide in traditional food retailing, and a lot of share has gone to Wal-Mart," he said. At the same time, though, Wal-Mart's revenue growth is starting to flatten to the extent that "those who view Wal-Mart as an unstoppable juggernaut just don't understand the challenges that are in front of that company."
Here are a few of those challenges:
Everyday-low-price selling is very difficult to sustain because shoppers expect to see promotional activity. The sluggish sales experienced by Wal-Mart during the recent holiday selling season that were corrected only by aggressive promotional activity illustrate that fact.
Many organized groups are forming to stop the advance of Wal-Mart and in a few instances have been successful in denying the company access to real estate it wanted to occupy. Some of these efforts are being abetted by labor unions.
There is a growing backlash against Wal-Mart's use of China as the source for much of its product mix.
Much of Wal-Mart's institutional energy is dissipated by the huge number of lawsuits it attracts. They accumulate at the rate of about 15 per day, Steidtmann said. Many are minor, but some are huge class-action affairs.
In sum, these factors argue against the advisability of companies growing to the vast size Wal-Mart has attained, and that many companies that achieved large mass in recent years through consolidation will now look to deconsolidation. That's particularly the case in view of the fact that in virtually every other aspect of society, polarization is occurring. That's made manifest in various ways, such as:
Widely divergent voting blocs in the nation.
The divergence of lifestyles between married and single people.
Geographical choices, such as the tendency to leave suburbs for cities, on one hand, and suburbs for exurbs on the other.
The growing distinction between the affluent and the impoverished.
The increasing separation of young from old.
The increasing separation of ethnic groups one from the other, and from the mainstream.
And, the increasing fragmentation of information-delivery means.
"We are now at a tipping point in the marketplace [concerning divergence] that has not yet been recognized," Steidtmann asserted.
What it all means is that the real growth and profitability in the future will be in retailing styles that can be narrowly focused on a niche market, not on a mass market. In food marketing, that implies that retailers that deliver ethnic and speciality offerings will be successful. The least successful will be stores that look alike, regardless of location, and that have undifferentiated product offerings regardless of location.
"There is now a lack of differentiation at the same time the marketplace is getting increasingly diverse," Steidtmann said. "The shift in where value is produced is toward small retailers. In the future, stores will be closer to customers, unique to their area, be run with fewer workers and be able to generate new demand, not be designed to take market share from commodity competitors."