Competition from big-box stores is expected to intensify over the next five years
New York, NY (PRWEB) January 22, 2014
The Supermarkets and Grocery Stores industry has suffered from declines in the quantity and quality of purchases over the past five years. According to IBISWorld Industry Analyst Jeffrey Cohen, “During the recession, high unemployment and low household disposable income drove consumers to reduce spending on premium-brand products.” Instead, they increased spending on generic brands and discounted items, harming supermarkets and grocery store sales. As the economy began to recover and household disposable income slightly increased, consumers slowly returned to prerecession habits, treating themselves to more expensive restaurant meals and decreasing the number of grocery shopping trips. Consequently, revenue declined in 2011 and 2012. Overall, industry revenue fell at an annualized rate of 0.4% to $522.5 billion, including a 1.7% decrease in 2014.
Competition from supercenters and warehouse clubs, especially Walmart and Costco, increased throughout the five years to 2014 because of their low prices and extensive product ranges. Profit margins steadily declined over the past five years due to the low mark-up prices attached to groceries in supermarkets. While economic recovery provided grocery stores with the ability to raise prices, high operating costs continued to shrink profit margins. As a result of shrinking profit margins and increasing competition from supercenters, the number of enterprises fell at an annualized rate of 1.1% to 35,761 during the five years to 2014.
Throughout the next five years, IBISWorld expects demand to slightly increase, generating a steady stream of revenue for grocery stores and supermarkets. “As the economy recovers and household disposable income further expands, consumers will increase purchases of premium brands and private-label brands, increasing the average transaction sizes for grocery stores,” says Cohen. Also, competition from big-box retailers like Walmart is anticipated to intensify over the next five years as these stores increase their grocery product offerings and lure customers away from traditional grocery stores. Consequently, IBISWorld forecasts that industry growth will slightly increase during the five years to 2019.
The Supermarkets and Grocery Stores industry has a low level of concentration. The top players in the industry are The Kroger Co. and Safeway Inc. The remaining share of the market is mainly composed of small to medium-size players that cater to local demand. IBISWorld estimates that more than 35,000 companies will actively compete for the remaining market share in 2014.
For more information, visit IBISWorld’s Supermarkets and Grocery Stores Industry in the US industry report page.
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IBISWorld industry Report Key Topics
The Supermarkets and Grocery Stores industry makes up the largest food retail channel in the United States. Establishments in this industry retail general lines of food products, including fresh and prepared meats, poultry and seafood, canned and frozen foods, fresh fruits and vegetables and various dairy products. Delicatessens primarily retailing food are also included.
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