Competition from mass merchandisers is expected to intensify over the next five years.
New York, NY (PRWEB) August 25, 2014
The Supermarkets and Grocery Stores industry has grown over the past five years, benefiting from a strengthening domestic economy. As per capita disposable income continued to rise over this period, some consumers traded up to premium, organic and all-natural brands, helping lift industry revenue. On the other hand, inflationary food costs, as exhibited by the double-digit annualized growth of the agricultural price index, caused many consumers to continue purchasing private label brands even after the recession. “While a shift toward more generic goods curbs revenue growth, it helps operators maintain profit margins, as store brands are less costly to produce than national brands,” according to IBISWorld Industry Analyst Will McKitterick. Overall, industry revenue is expected to grow an annualized 1.5% to $574.1 billion over the five years to 2014, including a 0.9% increase in 2014.
Despite having achieved growth during this period, supermarkets and grocery stores faced intensifying competition from alternative retailers. Namely, consumers have increasingly turned to warehouse clubs and supercenters, such as Costco and Walmart, because of the cost savings and convenience of these retailers. Mass merchandisers are able to offer lower prices due to their scale of operations. Additionally, they offer consumers convenience, as they retail a variety of nonedible goods, including clothing and gardening tools. “Due to increased competition from a variety of retailers, many supermarket chains offered substantial discounts and promotions to drive foot traffic to their stores and strengthen consumer loyalty,” says McKitterick. As a result, industry profitability is expected to slightly decline during this period.
Over the next five years, the industry is anticipated to grow as a result of rising discretionary income, albeit at a more conservative rate than in the previous five-year period. As health concerns intensify, more consumers will seek all-natural and organic products, which are priced at a premium. Operators are also anticipated to benefit from steady commodity markets that will cause input costs to rise much more conservatively than in the past. However, industry profitability is anticipated to decline as competition from alternative retailers heats up, causing operators to offer discounts and promotions. Consequently, industry revenue is forecast to rise slowly in the five years to 2019.
For more information, visit IBISWorld’s Supermarkets and Grocery Stores in the US industry report page.
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