With less disposable income to spend, consumers flocked to salvage stores for groceries
Los Angeles, CA (PRWEB) December 06, 2012
The Salvage Grocery Stores industry has grown quickly over the past five years. During the Great Recession, households began to pinch pennies due to decreases in disposable income and consumer sentiment. Furthermore, according to IBISWorld industry analyst Eben Jose, “the poverty rate increased considerably, forcing more Americans to start shopping at salvage grocery stores.” As a result, IBISWorld expects industry revenue to grow at an annualized rate of 5.1% to $4.4 billion in the five years to 2012. While this rate includes an additional 4.9% in 2012, external competition from supercenters and warehouse clubs has been slowly increasing as the economy improves, threatening this industry's growth.
Rapid growth over the period has encouraged new enterprises into the industry. In the five years to 2012, the number of companies in the Salvage Grocery Stores industry has increased strongly because the industry's low barriers to entry have made it easy for new entrants to open a store and source food products. “The number of industry establishments has increased at an even faster rate due to the success of companies like the Grocery Outlet,” says Jose. While most industry operators are independently owned and operate on a local basis, this particular chain was able to raise its revenue from an estimated $450.0 million in 2007 to $1.1 billion in 2012. Along the way, the company has been able to open numerous salvage grocery stores all across the West region of the United States. Strong demand has also allowed salvage stores to raise their prices over the past five years, causing industry profit margins to rise from an average of 2.0% in 2007 to an estimated 3.1% in 2012.
Meanwhile, the rise of the Salvage Grocery Stores industry has been mirrored by expansion of companies like Walmart and Costco. The size of these companies allows them to purchase large quantities of food products from food wholesalers and processors at very low prices, resulting in substantial discounts for consumers. Salvage grocery stores have been able to fend off these giants, maintaining their competitive prices due to their products' lack of quality. But with the economy improving, consumers will likely turn their attention back to quality products, and supercenters and warehouse clubs will have more success at drawing consumers away from this industry. With that, the industry's customer base is expected to plateau over the next five years, as consumer sentiment bounces back and the poverty rate drops. As a result, IBISWorld forecasts industry revenue will increase at a slower rate over the next five years. For more information, visit IBISWorld’s Salvage Grocery Stores in the US industry report page.
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IBISWorld industry Report Key Topics
Establishments in this industry are primarily engaged in retailing general lines of food products, including meats, poultry and seafood, canned and frozen foods, fruits and vegetables and various dairy products, that are either near or passed their expiration date or damaged in some way. This industry includes salvage, bargain and discount retailers, but excludes cut-rate supermarkets that produce their own lines of food.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalization & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
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