The Food Institute’s
FOOD
INDUSTRY
REVIEW
2014
Edition
The Ultimate
Reference Guide ... from Farm to Fork
The Food Institute’s
Food Industry Review
2014 Edition
The Food Institute
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Copyright 2014 by The American Institute of Food Distribution Inc.
Overview
By 2018, the market share for traditional grocery will decrease 1.2 percentage points to 44.8%;
while share for non-traditional grocery will increase to 40.1% and convenience stores share will
increase to 15.1%, according to Willard Bishop’s Future of Food Retailing 2014 report. Market share
will increase substantially for supercenters to 19.4% by 2018.
Food Shopping Channels Used Regularly
(Source: FMI Grocery Shopper Trends)
Supermarket
85%
46%
Supercenter
Discount store
29%
Warehouse clubstore
26%
Low-price, no frills grocery store
16%
Dollar store
15%
Drug store
15%
Natural or organic food store
11%
Ethnic grocery
5%
Convenience store
5%
Online
3%
Fresh Format stores are expected to continue their swift growth over the next five years at a rate
of 12.1% annually. Limited-assortment will also experience strong growth of 5.9% by 2018. Small
grocery will see a relatively low growth rate of 2.1%. Traditional supermarkets’ share is expected
to continue to decline from 39.1% in 2013 to 36.2% by 2018. E-Commerce food and consumable
sales will continue its substantial growth rate of 9.5% a year.
According to Progressive Grocer’s 81st Annual Report of the Grocery Industry, retailers are more
optimistic about 2014 than they have typically been about the coming year. Supermarket sales were
$620 billion in 2013, an increase of 2.9%.
Conventional supermarkets continue to hold the majority share of the industry at 65.8%, but also
experienced a slight dip in units and modest sales gains. Supercenters represent just more than 25%
of the industry but experienced increases of 4% in units and 4.7% in sales.
Eight of the nation’s 10 largest retailers drive a significant portion of store traffic with groceries,
according to STORES magazine. In all, 37 of the Top 100 retailers include groceries in their
merchandise mixes; more than 20 can be classified as supermarkets.
This is a good time to be a small-footprint or specialty grocery chain, whether national in scope or
one with stores clustered in regional markets, according to the National Retail Federation. The rise
of small and specialty grocery chains is enabled by the squeeze put on traditional supermarkets by
discounters, drug stores and online purveyors of food and other consumables The proliferation of
mergers and acquisitions in the supermarket industry indicate there are plenty of growth
opportunities for smaller, regional and specialty grocers.
Top Food Retailers
(Source: STORES)
Rank
1
2
3
4
6
7
9
10
11
15
16
17
Company
Walmart
Kroger
Target
Costco
Walgreen
CVS Caremark
Safeway
McDonald's
Amazon.com
Publix
SUPERVALU
Ahold USA/ Royal
Ahold
18
22
24
26
27
28
30
32
2012 U.S. Retail
Sales ($000)
$328,704,000
$92,165,000
$71,960,000
$71,042,000
$65,014,000
$63,688,000
$37,532,000
$35,593,000
$34,416,000
$27,485,000
$27,457,000
WW Retail
% Chg.
'12 v '11 Sales ($000)
4.0% $467,896,000
6.6% $92,165,000
5.1% $71,960,000
10.6% $97,062,000
-1.2% $66,977,000
6.7% $63,863,000
1.6% $42,237,000
4.2% $88,290,000
30.4% $61,093,000
1.9% $27,485,000
-6.3% $27,457,000
U.S. % of
WW Sales
70.3%
100.0%
100.0%
73.2%
97.1%
99.7%
88.9%
40.3%
56.3%
100.0%
100.0%
2012
Stores
4,570
3,538
1,778
435
7,821
7,472
1,418
14,146
--1,230
2,404
% Chg.
'12 v '11
3.3%
-1.0%
0.9%
2.4%
2.2%
1.7%
-2.4%
0.4%
na
2.7%
-3
$25,845,000
3.1%
$62,260,000
41.5%
772
2.1%
Rite Aid
$25,392,000
50.0%
$25,392,000
100.0%
4,623
-0.9%
Delhaize America
YUM! Brands
Dollar General
Meijer
Wakefern/ShopRite
BJ's Wholesale Club
Subway
$18,800,000
$17,964,000
$16,022,000
$15,814,000
$13,656,000
$12,465,000
$12,237,000
-2.2%
5.1%
8.2%
2.8%
6.4%
6.0%
9.2%
$29,212,000
$34,572,000
$16,022,000
$15,814,000
$13,656,000
$12,465,000
$18,417,000
64.4%
52.0%
100.0%
100.0%
100.0%
100.0%
66.4%
1,553
18,069
10,506
198
300
200
25,900
-5.9%
0.1%
5.7%
0.5%
3.1%
2.6%
3.5%
Retail Segment Definitions
(Source: Willard Bishop’s Future of Food Retailing Report)
Traditional Grocery
Traditional Supermarket – Stores offering a full line of groceries, meat, and produce with at least
$2 million in annual sales and up to 15% of their sales in General Merchandise/Health and Beauty
Care (GM/HBC). These stores typically carry anywhere from 15,000 to 60,000 SKUs (depending on
the size of the store), and may offer a service deli, a service bakery, and/or a pharmacy.
Fresh Format – Different from traditional supermarkets and traditional natural food stores, fresh
stores emphasize perishables and offer center-store assortments that differ from those of
traditional retailers—especially in the areas of ethnic, natural, and organic, e.g., Whole Foods
Market, The Fresh Market, and some independents.
Limited-Assortment Store – A low-priced grocery store that offers a limited assortment of centerstore and perishable items (fewer than 2,000), e.g., Aldi, Trader Joe’s and Save-A-Lot.
Super Warehouse – A high-volume hybrid of a large traditional supermarket and a warehouse store.
Super Warehouse stores typically offer a full range of service departments, quality perishables, and
reduced prices, e.g. Cub Foods, Shoppers Food & Pharmacy, and Smart & Final.
Other (Small Grocery) – A small corner grocery store that carries a limited selection of staples and
other convenience goods. These stores generate less than $2 million in business annually.
Convenience Stores
Convenience Store (w/gas) – A small, higher-margin store that offers an edited selection of staple
groceries, non-foods, and other convenience food items, e.g., ready-to-heat and ready-to-eat foods.
The Convenience Store with Gas format includes only Convenience Stores that sell gasoline, e.g.,
ExxonMobil (On the Run), AM/PM, etc.
Convenience Store (w/o gas) – Small, higher-margin convenience stores that don’t sell gas and offer
an edited selection of staple groceries, non-foods, and other convenience food items, e.g., readyto-heat and ready-to-eat foods. Stores such as 7-Eleven without gasoline pumps are included.
Non-Traditional Grocery
Wholesale Club – A membership retail/wholesale hybrid with a varied selection and limited variety
of products presented in a warehouse-type environment. These ~120,000-sq. ft. stores have 60%
to 70% GM/HBC and a grocery line dedicated to large sizes and bulk sales. Memberships include
both business accounts and consumer groups, e.g., Sam’s Club, Costco and BJ’s.
Supercenters – A hybrid of a large Traditional Supermarket and a Mass Merchandiser. Supercenters
offer a wide variety of food, as well as non-food merchandise. These stores average more than
170,000-sq. ft. and typically devote as much as 40% of the space to grocery items, e.g., Walmart
Supercenter, Super Target, Meijer and Kroger Marketplace stores.
Dollar Stores – A small store format that traditionally sold staples and knickknacks, but now sells
food and consumable items at aggressive price points that account for at least 20%, and up to 66%,
of their volume, e.g., Dollar General, Dollar Tree and Family Dollar.
Drug – A prescription-based drug store that generates 20% or more of its total sales from
consumables, general merchandise and seasonal items. This channel includes major chain drug
stores such as Walgreens and CVS, but does not include stores/chains, e.g., The Medicine Shoppe,
that sell prescriptions almost exclusively.
Mass – A large store selling primarily hardlines, clothing, electronics, and sporting goods but also
carries grocery and non-edible grocery items. This channel includes traditional Walmart, Kmart,
and Target stores.
Military – A format that looks like a conventional grocery store carrying groceries and consumables,
but is restricted to use by active or retired military personnel. Civilians may not shop at these stores
(referred to as commissaries).
E-Commerce (food and consumables) – Food and consumable products ordered using the internet
via any device, regardless of the method of payment or fulfillment. This channel includes Amazon
and Peapod as well as the E-Commerce business generated by traditional brick & mortar retailers,
e.g., Coborns (Coborns Delivers) and ShopRite (ShopRite from Home and ShopRite Delivers). The
other non-traditional retail segments above include their E-Commerce business.
Supermarkets Shrink
Just a few years ago, grocery stores averaged sizes around 46,000 square feet, 10,000 square feet
larger than in the 1990s, reported TIME (June 2). Now in 2014, supermarkets have been shrinking
to fit the needs of today’s modern consumer. Not only are traditionally smaller stores such as Aldi
and Trader Joe’s thriving, both of which generally run under 20,000-sq. ft., but larger chains like
Walmart, Publix and Kroger are exploring small format options. Planet Retail, a marketing research
company, forecasts that the average store size across grocery formats is set to shrink from 25,500sq. ft. today to less than 24,000-sq. ft. by 2018.
Publix is among the traditional supermarket retailers looking to scale down. The company is
planning a prototype store for small urban communities and college campuses that will be 20,000
to 40,000 sq. ft. smaller than their typical stores, reported Orlando Business Journal (May 7). Stop
& Shop is also opening condensed stores, shifting from their normal 75,000-sq. ft. to stores as
small as 12,000 sq. ft. in New England, according to Boston Business Journal (June 4).
The list doesn’t stop there. Kroger opened three 7,500-sq. ft. stores in Ohio, while Hy-Vee opened
a 14,000-sq. ft. location called “Hy-Vee Mainstreet” in Iowa. Even Walmart, know for its gigantic
supercenters, coming in at 182,000 sq. ft., has increased its number of Neighborhood Markets,
38,000 sq. ft., and Walmart Expresses, 12,000 sq. ft., and plans to open up to 300 of those
concepts in 2014, reported The Dallas Morning News (June 5).
The question is, what is causing this dramatic shift in store size? TIME states that part of the reason
is the need to cater to Millennials, who are migrating more towards urban living and find large
format stores to be overwhelming. It is also appealing to companies to have customers visit the
store many times in one week, as opposed to the usual large shopping trip, that will only bring a
customer in a few times a month.
Urban markets are an
important market for bigbox retailers such as
Target and Walmart,
reported Bloomberg (Jan.
9). Cities are growing
faster than suburbs for
the first time in decades,
and they’re generally
filled with younger, more
free-spending residents,
as
well
as
college
students and tourists.
Target, for example, has
opened eight CityTarget
stores that are smaller,
more urban and less
uniform than their usual
135,000-sq. ft. suburban
stores.
2013 Market Share
(Grocery & Consumables)
(Source: Willard Bishop)
Number of
Stores
Total Traditional Grocery
Traditional Supermarkets
Fresh Format
Limited-Assortment
Super Warehouse
Other (Small Grocery)
Total C-Stores
Convenience (w/gas)*
Convenience (w/o gas)*
Total Non-Traditional Grocery
Wholesale Club
Supercenter
Dollar Store
Drug
Mass
Military
Total All Formats
40,292
26,140
1,063
3,835
556
8,698
157,662
128,003
29,659
59,132
1,383
3,829
27,200
23,258
3,281
180
257,086
Dollar Share
46.0%
39.1%
1.2%
2.7%
1.8%
1.1%
15.0%
12.8%
2.2%
39.0%
8.7%
17.6%
2.5%
5.4%
4.3%
0.4%
100.0%
Annual Sales
(millions)
$ 522,826.80
$ 444,210.80
$
14,022.90
$
31,069.10
$
20,806.00
$
12,718.00
$ 169,905.50
$ 145,265.90
$
24,639.60
$ 442,072.00
$
98,520.80
$ 200,281.80
$
28,701.40
$
61,294.80
$
48,441.40
$
4,831.70
$1,134,804.30
Thirty-nine percent of
North American retail
*Does not include gasoline sales.
sales growth is coming
from stores that are 35,000 sq. ft. or smaller, and more than a third of small-store growth is coming
from stores that are 5,000 sq. ft. or smaller, according to RetailNet Group. “Small stores allow you
to get into deep urban markets,” Dan O’Connor from RetailNet said. These high-density urban
neighborhoods provide less flexibility for retail development so large retailers are using smaller
stores. The small box trend is the logical extension of retailers’ growth plans following the
consumer, reported CSNews Online (July 11).
Studies also suggest that consumers want to shop in a smaller store, and will purchase more in a
more manageable store format. An InContext Solutions study revealed that the quicker shoppers
are able to find their first product, the more likely they are to linger in the category and purchase
more. Additionally, every two extra minutes a shopper takes to make his or her first purchase in a
category reduces the final basket size by one product.
The study found that found the median time a shopper devotes to a single shopping mission is just
over four minutes and less than 15% of shopping missions last more than 10 minutes. Digital media
company, Catalina, also found that over the course of a year shoppers buy just 0.7% of all available
products in the grocery store. Even those who account for 80% of all store purchases buy just 1%
of all available products.
The Shopper Experience
Grocery shoppers are putting more weight on experience during their shopping trip. In a study
conducted by Retail Feedback Group, shoppers who don’t believe their store provides a fun
experience gave their store a satisfaction rating of only 3.95 out of 5. Only two out of 10 shoppers
indicated that their primary store “absolutely” provides a fun and exciting environment, but those
customers gave their store very high satisfaction marks of 4.78. Though supermarkets must focus
on creating a more enjoyable experience at the store, companies cannot abandon efforts to keep
prices affordable and transactions quick, as those are still the main factors in customer satisfaction
at the grocery store.
Omnico Group research found that more than 77% of Americans would be less likely to return to a
store if they experienced long checkout lines. After eight minutes, customers are likely to abandon
the checkout line and leave the store with no purchase and are likely to never return to that store
as a result of the negative experience. The top three technologies that Omnico found will improve
the average customer's in-store experience are self-checkout, free Wi-Fi and "click and collect"
technology.
2013 Format Characteristics
Many issues are
(Grocery & Consumables)
important
to
(Source: Willard Bishop)
shoppers
and
contribute to their
Total Store
Avg. Total
Avg. Weekly
% of Total
Area
SKUs
Store Sales
Store Sales
decision of where to
Total Traditional Grocery
$ 247,379
100%
shop. The National
Traditional
Supermarkets
53,500
45,000
$
324,171
100%
Grocers Association
Fresh
Format
34,000
21,000
$
253,180
100%
(NGA)
consumer
Limited-Assortment
12,600
2,900
$
152,144
100%
survey unveiled that
Super Warehouse
45,000
37,000 $ 702,950
100%
some of the most
Other
(Small
Grocery)
9,000
3,000
$
27,452
100%
critical attributes for
Total C-Stores
$
20,518
81%
costumers
are
Convenience (w/gas)*
2,800
3,100 $
21,607
81%
convenient location
Convenience (w/o gas)*
3,000
3,700 $
15,817
81%
and
access,
Total Non-Traditional Grocery
$ 143,852
navigable
layouts
Wholesale Club
132,400
4,900 $ 1,366,874
59%
and
checkout
Supercenter
179,600
100,000 $ 998,206
60%
processes that save
Dollar Store
8,100
9,400 $
19,594
66%
time, the use of
Drug
11,100
19,000 $
50,759
34%
technology to tailor
Mass
62,400
95,000 $ 275,885
23%
marketing messages
Military
29,400
15,000 $ 547,479
100%
and
promotional
*Does not include gasoline sales.
offers, and caring
about the customer. NGA President Peter J. Larkin stated, "The more personalized the shopping
experience at friendly, nimble regional supermarkets, the greater their edge over retailers less
connected to communities and less empowered to please people as personal situations arise."
In a survey by Market Force Information, shoppers indicated that they prefer stores like Trader Joe’s
and Publix because of their customer service and atmosphere. Trader Joe’s customers like its
unconventional grocery shopping experience with a neighborhood feel, along with a level of service
and customer satisfaction that exceeds expectations.
Courteous service, fast checkouts and inviting atmosphere are just as important to shoppers as
low prices and promotions, according to the survey. The respondents who reported having an
unpleasant shopping experience cited long checkout times, inability to find the products they want,
lacking produce quality, poor service by floor associates and poor service by cashier as the main
reasons for their dissatisfaction.
Many supermarkets are changing the types of amenities they offer, as well, to improve the customer
experience and keep shoppers lingering in the store. Hy-Vee added a 11,000-sq. ft. wing to its
Omaha, NE location with a full-service restaurant and bar with wait-staff, and a Shoprite in New
Jersey added an oyster bar, a wellness center with registered dietitians, a yoga studio and child-care
center. Publix opened a store with a 1,500-sq. ft. cooking school, including wine pairings and
classes on basic knife skills, condiments, French pastry and Italian cuisine, reported Orlando
Sentinel (Dec. 10, 2013).
Future of Grocery
While technology will be more important than ever for groceries, it is just one aspect in a variety of
considerations required to run a successful grocery store, according to PWC’s Front of the Line:
How Grocers can get Ahead for the Future. A survey of over 1,000 shoppers found four broad
categories, each with its own particular preference.
PwC found that most customers still prefer brick-and-mortar grocery stores to online shopping,
with only 1% of respondents primarily using online services despite 92% having access to them.
The most common concern was the inability to touch and check products before purchase. At the
same time there is room for improvement among traditional grocers, with the most common
customer complaints being long lines, crowded aisles and parking lots and unhelpful staff.
2013 Industry Consumer Experience Benchmarks - Supermarkets
(Source: ACSI Retail Report)
Convenience of Store Location and Hours
86
Ability to provide brand names
81
Availability of merchandise (inventory stocks)
81
Quality and freshness of meat and produce
81
Layout and cleanliness of store
80
Courtesy and helpfulness of staff
80
Variety and selection of merchandise
80
Quality of pharmacy services
80
Website satisfaction
79
Frequency of sales and promotions
79
Call center satisfaction
Speed of checkout process
77
73
Most shoppers cited traditional grocery stores as their primary source of food, with 83% putting
them in their top three shopping spots. While prices remained an important factor, researchers
found customers were willing to pay more for an improved in-store experience, including benefits
such as education and quality products.
An easy to navigate store with new merchandise displays, clear signage and knowledgeable staff
could make could take advantage of the desire for an improved shopping experience, leading to
additional visits and more purchases at each visit.
Personalization is Key
Eighty-five percent of consumers prefer personalized offers reflecting their past shopping behavior,
according to a survey by Synqera. Almost 90% of respondents said they would have purchased an
item that was similar in look and quality, but less expensive, than one that they were originally
looking for, if only they had been made aware of it.
Both brick-and-mortar and online retailers can learn from the targeted shopping experience of e-
commerce companies such as Amazon.com, who suggests items based on past purchases. Online
discounts and mobile apps are replacing print coupons, and many retailers, like Kroger and Metro,
are offering mobile apps that deliver weekly coupons sorted by relevance to each shopper.
About 45% of Safeway’s sales now come from shoppers who get special offers online or from mobile
apps, up from almost zero in 2011, when their program “Just for U” rolled out nationally, reported
Bloomberg (Nov. 14, 2013). Simon Hay, CEO of Dunnhumby, says that although fewer than 5% of
offers consumers receive today are individualized, that number should rise to more than 30% within
eight years. The mobile apps could eventually let supermarkets send personalized offers in real
time by tracking shoppers lists and location inside the store, with users consent.
Mobile and Online Shopping Experiences
It is increasingly important that retailers match their in-store shopping experience to their online
and mobile shopping experiences. Forty-eight percent of smartphone shoppers and 50% of tablet
shoppers will abandon a retail brand altogether if it has a poor mobile shopping experience,
according to research by Mobiquity.
The research found that Target is now the most-browsed mobile app and website, which takes WalMart's prior top position in previous studies. Some 50% of shoppers complained that shopping on
retailers' tablet apps involves too many steps, while 49% said they couldn't find the products they
were looking for on retailers' tablet sites. The study also found that 35% of consumers went on to
complete their purchase in-store.
Members of the food
Consumer Satisfaction Scores - Supermarkets
industry know that online
(Source: American Consumer Satisfaction Index)
purchases of food will
increase in the coming
Company
2012
2013
% Change
years, but we can never
Supermarkets
77
78
1.3%
know how much. According
Publix
86
86
0.0%
to a study by Deloitte, food
All Others
78
81
4.0%
business executives only
79
80
1.0%
Kroger
expect 35% growth of
Whole Foods
80
78
-3.0%
online CPG purchases in the
78
77
-1.0%
next year and 76% growth Winn-Dixie
Supervalu
76
77
-1.0%
in three years. In contrast,
Safeway
75
76
1.0%
consumers expect their
72
72
0.0%
online
purchases
to Wal-Mart
increase by 67% in the next
year and 158% in three years. Consumers prefer to use online retailers to purchase their food for a
variety of reasons, including free at-home delivery, pricing similar to or less than traditional physical
stores, and free in-store pickup.
Some retailers are responding to these results and improving their online experiences for shoppers.
Whole Foods Market adopted a “click and collect” program where customers can choose their
products online, and then go to their designated store and pick up the items that are there waiting
for them. Walmart has also tested online ordering options, delivering their grocery products directly
to consumers’ homes, for a small fee. H-E-B has also expressed plans to begin an online shopping
experience for customers, while Roche Brothers, Costco, and Fairway all currently offer online
ordering and home delivery in select areas.
Some retailers are not concerned about online retailing and are not focusing their attention on it.
For example, Kroger’s CEO, David Dillon stated that he believes shoppers like making a connection
with their community and neighbors by going to the grocery store, which is one reason why Kroger’s
digital strategy doesn’t focus on e-commerce, reported The Wall Street Journal (Oct. 30, 2013).
Studies show that consumers are making the switch to online shopping, though, provided retailers
make a few changes. Nineteen percent of shoppers said they are using “click and collect” more
often than in the previous year, according to a survey by Accenture.
The survey showed that the ability to check product availability online before traveling to a store is
the service that would most improve the shopping experience for 31% of U.S. shoppers, and the vast
majority of respondents said they would either travel to a store to make a purchase or buy online
if retailers offered real-time information on product availability. The study also found that shoppers
expect a retailer’s product offerings to be the same across different shopping channels, and more
than half also expect promotions and prices to be the same.
Percentage of U.S. Store Expansion in
the Top 20 Expansion Chains: 2013 vs. 2007
(Source: Nielsen )
Mass Merchandisers
5.0%
Grocery
6.9%
Dollar Stores
35.6%
Drug Stores
20.8%
C-Stores
31.7%
Intent among consumers to buy groceries online rose from 22% in 2011 to 27% in 2014, according
to Nielsen. This increase gets even higher in the Asia-Pacific region, especially in China and South
Korea, where purchase intentions exceed the global average by about 20% each. Also, eMarketer
forecasts that business-to-consumer e-commerce sales worldwide will rise 20% from 2013 to $1.5
trillion in 2014. John Burbank, president of strategic initiatives at Nielsen stated, "Finding the right
balance between meeting shopper needs for assortment and value, while also building trust and
overcoming negative perceptions, such as high costs and shipment fees, is vital for continued and
sustainable growth."
Amazon Moves Further into Food Industry
Amazon is always a frontrunner when it comes to e-commerce, and their grocery business is no
different. It unveiled Amazon Pantry in April, which looks to rival such warehouse clubs as Costco
and Sam’s Club. With Pantry, customers are able to load a box with household items and groceries
(non-perishable), and have it shipped directly to their home for a flat fee .
The company has also started a program called Prime Fresh, a same-day grocery delivery service in
California and Seattle. The service also includes a device called Amazon Dash, a remote-like wand
that can be used to scan products customers would like to order with Amazon Fresh, or users can
speak the name of a product into the device and it will be added to their shopping list.
Amazon’s founder and CEO, Jeff Bezos, shows no signs of slowing down the company’s grocery
business. He told shareholders, “We’ll continue our methodical approach – measuring and refining
AmazonFresh – with the goal of bringing this incredible service to more cities over time."
Amazon was placed at number nine on STORES magazine’s Top 100 Retailers list for 2014, after
not making the Top 100 at all last year. Amazon added nearly $10 billion in Internet retail sales last
year, which effectively matched Walmart’s total web sales.
Online Grocery Delivery
Grocery delivery services are poised to grow but have a lot to learn, according to Wells Fargo
Securities LLC and Fluid Inc.’s research Online Grocery: Is Anyone Doing It Right? The study focused
on how each service engaged and interacted with customers and found that there’s still room for
improvement, especially in user experience, online features and content, and making the services
more grocery centric.
Fresh Direct was found to have the best combination of grocery centered service with a digital
mindset, but lacked national products. Peapod, the digital extension of Stop & Shop and Giant, did
have the selection of national products, but lacked fresh produce availability.
Amazon Fresh and Google Shopping achieved what they are best known for: powerful mobile
websites, and detailed product information and search. Amazon Fresh’s delivery was not always
available for the same day, while Google Shopping was. Both services lacked the grocery-centric
features. Safeway.com and Walmart To Go have delivery services in some areas. Both companies
offered the same products and quality as its stores, but lagged in website layout and features.
Wells Fargo analysts believe that brick-and-mortar grocery retailers could lose market share as
grocery delivery continues to grow, especially conventional grocery stores. Natural and organic
grocers such as Whole Foods Market and Trader Joe’s could hold their market share.
Grocery Delivery Availability and Features
Company
Availability
Price
Minimum
Order
Delivery Time
Usually not until
next day
Fresh Direct
New York City area, New Jersey,
Connecticut, Philadelphia, Delaware
$5.99/one-time delivery,
$12.99/one month, $69/six months,
$119/year
$30
Google Shopping Express
Manhattan, San Jose, San Francisco, Los
Angeles
Free trial with membership
n/a
Amazon Fresh
S. California, San Francisco, Seattle
$299/year
n/a
Peapod
Chicago, Milwaukee, S.E. WI, Indianapolis,
S. NH, RI, CT, NY, NJ, MD, VA, DC,
Philadelphia, S.E. PA
Between $6.95 and $9.95
$60
Same-day
Safeway.com
AZ, CA, DC, MD, OR, VA, WA
Between $9.95 and $12.95, plus a
fuel surcharge
$49
8-12 hours after
ordering
Walmart To Go
San Jose, San Francisco, Denver
Free with $30 minimum order
n/a
Next day
Harris Teeter (only pickup)
160 Southeast locations
n/a
n/a
n/a
n/a
One-hour
delivery
Same-day for
evening
delivery
Same-day or
next-day
Whole Shopper (only pickupPylmouth Meeting, PA
$4.95/one-time delivery,
$16.95/moth
$5 for orders under $100
Munchery
San Francisco
$2.95
n/a
Instacart
Atlanta, Austin, Boston, Chicago, Denver,
Los Angeles, New York City, Philadelphia,
San Francisco, Seattle, DC
$3.99
n/a
1-2 hours
Postmates
San Francisco, Seattle, New York City, DC
$5 minimum and 9% added to
each item
n/a
Under an hour
Relay Foods
Nine VA towns; Williamsburg, Brooklyn, NY;
DC; Baltimore/Annapolis, MD
n/a
n/a
However, the playing field for grocery delivery is still uncluttered and the category is somewhat
underdeveloped. Existing grocery stores have the knowledge needed to improve grocery delivery.
They have the network of stores, the workforce and in some cases online loyalty programs that
could create a better model with working features, such as same-day delivery.
Some grocers are choosing to start with online ordering to then pick up in store or using delivery
companies like SHUTL to offset the delivery costs. Whole Foods is testing online ordering with Whole
Shopper in its Plymouth Meeting, PA store with benefits such as same prices online as in store and
wireless payment. Harris Teeter offers in-store pick up as well in 160 stores.
Online grocery delivery services need to engage consumers with the imagery, design and
information on their websites to continue its growth. The websites should be more user friendly with
features such as multi-item search, quick lists, and mobile apps. These mobile apps or websites
should also have its own features like easy list making for the shopper’s convenience.
Shoppers looking for convenience also want more communication with drivers, via text messages,
and a personalized experience, with ready-made meals, shoppable recipes, and product history.
Customers also look to each other for help with customer reviews or popular products lists.
There is also much to learn from start-ups, according to Wells Fargo. Munchery offers searchers by
diet restrictions on its website and communication with drivers via text. The company, which
services San Francisco, also promotes social sharing by giving discounts when friends sign up.
Instacart offers same-day delivery in 11 cities and plans to expand to 20 by the end of 2014.
Although this service is pricier, their delivery options are within an hour or two and it offers a shop
with a friend feature. Postmates delivers anything from food to electronics in under an hour.
Distance to Primary Store and Presence of Closer Alternatives
(Source: FMI Grocery Shopper Trends)
89%
80%
74%
65%
60%
50%
Total
Supermarket
69%
71% 73%
52%
Club Store
Supercenter
Others
Primary store located within five miles
Other stores are located closer to home than Primary store
Relay Foods, which services some East Coast markets, delivers items from local farms, stores and
restaurants. The user has options to save recurring orders and to either pick up at a location or have
the products delivered. Relay Foods has plans to go national.
According to Fluid, if the startups were put against the larger companies, they would be strong
contenders, due to the better features and online experience. They are making online grocery
services fun, like Whole Foods and Trader Joe’s did with grocery shopping. The goal is to make the
consumer not think of it as a chore, but as an enjoyable experience.
Costco Continues Growth
Costco is not the only warehouse club on the market, but it continues to see comparable store
sales rising, keeping its edge over similar chains. Within the first seven months of 2014, samestore sales saw an average growth of approximately 4.7%, reported Zack’s Investment Research.
A differentiated product range enables Costco to provide an upscale shopping experience to its
members, resulting in market share gains and higher sales per square foot. The company also
continues to maintain a healthy membership renewal rate and is committed to opening new clubs
in domestic and international markets. Costco’s CEO stated that it plans to open 30 stores a year,
which will double its business in about 15 years.
The company has also seen a positive response to its organic offerings, which provides higher
margins, and also attracts younger customers, reported Bloomberg Businessweek (March 6). Costco
specifically mentions its “giant bags of kale” as a popular product that has been bringing in a new
customer base.
The Growth of the Dollar Store
The possibility of a large dollar store merger is bringing up questions of why dollar stores are in
such high demand. At the time of publication, Dollar Tree is speeding up its acquisition of Family
Dollar Stores, amid increasing bids from Dollar General.
After the Great Recession in the early 2000s, consumers were looking for ways to stretch their
dollars, and one way to do that was with the dollar store. Now that shoppers are returning to prerecession cash flows, dollar stores have retained their following by changing their image to a place
that can offer high quality foods and products that rival supermarkets and drug stores, reported
TIME (Aug 18). These discount retailers aim to become a one-stop shop for customers that is more
manageable and smaller than traditional mass retailers.
Since customer finances
are improving and dollar
stores are selling higher
quality items, they need
to find ways to cut prices
further, reported The
New York Times (Aug
18). One way is to merge
with the competition,
which is what Dollar
Tree and Dollar General
aim to do. The fight over
Family Dollar “confirms
that small-box retailing
is the fastest-growing
segment of an otherwise
slow-growth/no-growth
retail
store
environment,”
stated
Craig Johnson, president
of the consulting firm
Customer Growth Partners.
2014 Top Alternative Formats
(Source: Supermarket News)
Rank
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
Company
Wal-Mart Stores
Costco Wholesale Corp.
Target Corp.
7-Eleven
Dollar General Corp.
Meijer Inc.
Whole Foods Market
BJ's Wholesale Club
Trader Joe's Co.
Family Dollar Stores
Aldi
Smart & Final
Sprouts Farmers Market
99 Cents Only Stores
The Fresh Market
Corporate/ Franchise Stores
5,166
539
1,921
8,285
11,100
204
367
201
415
7,915
1,227
240
167
350
149
Sales in $
Billions
Top 75
Ranking
374.4e
90.5a
73.6e
25.3e
17.8e
15.0e
12.9a
11.8e
11.3e
10.4a
8.0e
2.4e
2.4e
1.8e
1.5e
1
3
4
9
15
17
19
20
21
23
26
49
50
57
65
e: estimated sales
a: actual sales
Dollar Stores Expand Food Offerings
Dollar stores are increasingly adding to their food offerings, becoming more like a small grocery
store. Family Dollar added 400 food items to its stores in 2014, including national brands such as
Hellman’s and Ragu. Dollar stores aim to appeal to the smaller family consumer, one who is not
looking to buy in bulk. These may be single or older consumers who are shopping for only one or
two people.
Companies have begun to design products specifically for this purpose, such as General Mills, who
created their FiberOne bars in smaller packages to sell specifically in dollar outlets, reported
Bloomberg Businessweek (July 15). Dollar Tree installed more freezers and coolers in their stores,
offering frozen and refrigerated product in 3,115 stores. One of their top performing categories in
the third quarter of 2013 was frozen and refrigerated products.
Dollar stores are also rivaling convenience stores, becoming another quick food option that does
not involve a long trip to the grocery store. According to studies by Nielsen, more consumers are
going food shopping in dollar stores for immediate needs, not to stock up on items.
The large amount of dollar stores in the U.S. makes them a more convenient alternative to
traditional supermarkets. Dollar General opened their 11,000th store in 2013, and spans 40 states.
Additionally, Nielsen found that not just families with smaller incomes shop at dollar stores for
food, but 20% of their sales come from households making over $70,000.
Drug Stores Aim to Offer Fresher, Healthier Options
Drug stores are attempting to improve their customer experience, adding more food options and
creating an inviting feel. Rite Aid updated its store concepts to include a café that serves coffee, tea,
baked goods and ice cream, as well as offering more packaged gluten-free and organic items.
Top 10 Drug Chains by Dollar Volume
(Source: Racher Press research, Chain Drug Review)
Rank
1
2
3
4
5
6
7
8
9
10
Company
Walgreens
CVS Caremark*
Rite Aid
Shoppers Drug Mart
Health Mart
Jean Coutu Group
London Drugs
Rexall Pharma Plus
McKesson Canada
Medicine Shoppe
*Retail Sales only
Sales (in billions)
$72.22
$65.62
$25.53
$10.08
$7.40
$3.68
$2.19
$2.16
$2.14
$1.90
Walgreens also updated some of its
stores with fresher options and
healthier fare. Its Manhattan flagship
store features fresh sushi, sandwiches,
wraps and ready-to-eat cut fruits and
vegetables. It also carries a wider range
of frozen foods and entrees as well as
expanded deli dairy items for a more
complete range of options. Additionally,
the chain opened a new flagship in
Chicago that boasts even more offerings
such as: made-to-order juice, a
smoothie and milkshake bar; sushi and
sashimi; produce; on-the-go meal
options
such
as
wraps,
soup,
sandwiches and salads; and a self-serve
frozen yogurt and Icee station. The
store also features a walk-in cooler with
craft beers and wines, with an
assortment of cheese and crackers.
CVS/pharmacy launched Gold Emblem Abound, a new brand of snack products which includes more
than 40 items that are free from artificial flavors and preservatives. The chain also began an in-store
tagging program called Fit Choices, which makes it easier for customer to find healthy food options.
The new Fit Choices tags are focused around four categories: "Heart Healthy," "Sugar Free," "Gluten
Free" and "Organic."
Drug Stores Face New Challenges, Competition
Amid new competition from convenience and dollar stores, drug stores need to differentiate
themselves to stand out, according to Chain Drug Review’s State of the Industry report. Drug stores
that focus on health and wellness can gain an edge over dollar stores that do not offer those
services. Smaller stores that do not have the same presence as chains need to rely on customer
service and special offerings to keep from
losing customers.
CVS led the sector by adding 202 stores in
2013, followed by Health Mart at 169 and
Walgreens with 144 stores. Rite Aid
continued to close underperforming stores
and locations coming off lease, while also
pushing ahead with conversions to its
"wellness store" format. More than a quarter
of Rite Aid's store base now has the wellness
concept, and plans call for 450 more
locations to adopt the format in the retailer's
current fiscal year, reported Chain Drug
Review (May 1).
Top 10 Drug Chains by Store Count
(Source: Chain Drug Review)
Rank
1
2
3
4
5
6
7
8
9
10
Company
Walgreens
CVS Caremark
Rite Aid
Health Mart
McKesson Canada
Shoppers Drug Mart
Medicine Shoppe
Pharmasave
Rexall Pharma Plus
Jean Coutu Group
Stores
8,221
7,660
4,587
3,246
1,650
1,309
570*
500
454
407
*U.S. stores only
Convenience Stores Growing
The U.S. convenience store count increased to 151,282 stores as of December 31, 2013, a 1.4%
increase from the year prior, according to the 2014 NACS/Nielsen Convenience Industry Store
Count. Convenience stores account for 34.3% of all retail outlets in the U.S., according to Nielsen,
which is significantly higher than the U.S. total of other retail channels including drug stores,
supermarket/supercenter and dollar stores.
NACS Chairman Brad Call attributes the change to the need for convenience in today’s world, with
customers strapped for time and looking for a quick way to access food, fuel and beverages.
More retail companies are picking up on this trend and entering into the convenience store arena.
Walmart built its first convenience store in 2014 and Big Y partnered with F.L. Roberts & Co. Inc. to
open its first c-store in December 2013.
Convenience Stores Appeal to Urban Millennials
Convenience store operators are finding that in order to appeal to urban consumers and Millennials,
they must adapt their offerings. Almost three-quarters of Millennials shop at a convenience store
at least once a week, according to Convenience Store News' 2014 Realities of the Aisle study. More
Millennials also indicated they shop at c-stores almost every day, 15% vs. 11% for total respondents.
Millennials tend to shop at traditional supermarkets less, and convenience store and supercenters
more, possibly representing their need to multitask and purchase many types of products at once.
Foodservice is a growing category in c-stores, with more retailers adding fresh and prepared foods
to their locations to cater to younger, urban consumers. In its New York City stores, 7-Eleven began
experimenting with healthier food options and more unique choices such as craft beers, fresh
salads and specialty coffee drinks that are employee-served, reported Crain’s New York Business
(Jan. 27).
QuikTrip also added more foodservice options, creating a new concept called QT Kitchens. The
company added a series of made-to-order food counters to their stores serving flatbreads, toasted
sandwiches, pizza, breakfast sandwiches, smoothies and specialty coffee drinks, reported Arizona
Daily Star (Apr. 7).
Eighty one percent of c-store operators predict an increase in their foodservice sales, according to
Convenience Store News’ 2014 Foodservice Study. Additionally, 63.5% of all respondents anticipate
that their foodservice profits will grow in 2014 compared to 2013. Two thirds of participants said
that lunch is still the most popular time for foodservice sales at 30.3%, but breakfast is quickly
catching up at 26.4%.
2014 Top 20 C-Store Chains by Total Growth
(Source: Convenience Store News)
Rank
1
2
3
4
5
6
7
Company Name
1
7-Eleven Inc.
Military
Tesoro Corp.
Alimentation Couche-Tard
Inc.
Fikes Wholesale Inc.
QuikTrip Corp.
Casey's General Stores
Inc.
8
Valero Corner Store
9
10
Murphy Oil Corp.3
Sunoco Inc.
2
RaceTrac Petroleum Inc.
Pilot Flying J
Sheetz Inc.
Susser Holdings Corp.
Maverik Inc.
Shell Oil Co.
Hy-Vee Inc.
Victory Marketing LLC
Wawa Inc.
Western Refining Inc.
Love's Travel Stops &
20 (tie) Country Stores
11
12 (tie)
12 (tie)
14
15 (tie)
15 (tie)
17 (tie)
17 (tie)
17 (tie)
20 (tie)
Total Store Total Store
Count Jan. Count Dec.
2013
2013
Stores Added
Increase
6,680
503
225
7,641
636
345
961
133
120
14.39%
26.44%
53.33%
3,585
194
587
3,659
255
641
74
61
54
2.06%
31.44%
9.20%
1,686
1,728
42
2.49%
996
1,030
34
3.41%
124
1,978
152
2,004
28
26
22.58%
1.31%
633
513
411
541
234
4,933
97
70
596
210
650
536
434
559
249
4,948
110
83
609
222
25
23
23
18
15
15
13
13
13
12
3.95%
4.48%
5.60%
3.33%
6.41%
0.30%
13.40%
18.57%
2.18%
5.71%
287
299
12
4.18%
1) 7-Eleven's numbers include U.S. stores only. 2) Valero's numbers include corporate stores only. 3)
Murphy's numbers include Murphy Express locations only.