Everyone’s a competitor
Not only has technology had a dramatic impact on the industry, but the competitive landscape for supermarket retailers has changed substantially since Armbuster entered the business.
Supermarkets have always dominated the grocery and perishable foods marketplace, but the times, they are a-changing. Once the hunters, taking chunks of business from hardware retailers, pharmacies, bakeries and virtually every specialty retailer on the block, they now find themselves on the defensive, facing competition at every turn. The Food Marketing Institute lists 14 distinct categories of grocery retailers.
One statistic that is perhaps the most telling of the supermarket industry’s plight is that, of the top 10 food retailers in the United States, three of them — Wal-Mart, Costco and Sam’s Club — are not traditional supermarket chains. Even Sears, Roebuck & Co., better known for appliances and power tools, is testing a new supercenter-type format, Sears Grand, and plans to sell convenience groceries, such as milk, bread and pet food, on its shelves.
Limited assortment stores, such as ALDI, lure customers that used to be attracted by "loss leader" merchandising strategies. A Japanese convenience store operator, FamilyMart, plans to open as many as 400 stores in cities on both U.S. coasts. Traditional drug stores like Walgreen’s, and Eckerd have expanded their offerings and adopted aggressive pricing and marketing tactics to lure customers and recapture the prescription business they lost to other retailers, including supermarkets.
So, unlike in the past, when supermarkets watched each other to fashion a competitive strategy, they now have to keep an eye on virtually every location that has a cash register.
"Everyone’s a competitor," says Armbuster. "The consumer wins when that happens, and it causes everyone to be better than they might have been."
If industry analysts are clear in their view of what the future holds, supermarket operators and retailers in general that expect to survive and prevail will have to be substantially better than they might otherwise have been. Retail Forward Inc., an industry research and consulting organization, predicts that a "handful" of retailers will dominate the global market by the end of the decade.
And supermarkets will have to scramble for their share in an increasingly tough competitive landscape. Retail Forward forecasts soft sales growth for the supermarket industry in 2003, with real sales increasing less than 1 percent.
