Much like their retail counterparts, grocery stores across America are suffering and losing share to shifts in how the public consumes.
The grocery problem, however, goes beyond Amazon – though that is certainly an influence and may grow to become a serious threat with its expansion into the grocery market and addition of Whole Foods to its roster.
How Many Groceries Can a Country Consume?
According to reporting by the Wall Street Journal, there has never been more retail square footage devoted solely to food sales.
Last year, retail food space per capita hit a high of 4.15 square feet per person, almost 30 times greater than the grocery floor space available in 1950. For a while, expansion was an effective way to increase spending after the recession in 2008, but in 2016 same-store sales were flat and are projected to remain unmoved this year.
Not only are traditional markets creating a growth problem that’s literally damaging their own businesses, club chains, dollar stores, pharmacies and gas stations are expanding their fresh food offerings in order to increase foot traffic. Larger grocery retailers are responding by slowing new store openings. Kroger has dropped its projection for new store openings to 55 from 100; Walmart is doing the same and only intends to build 55 new Supercenters and Neighborhood Markets, as opposed to the 132 it built last year.
Changing Customer Habits
Unchecked growth aside, a large portion of the problem for grocers is a change in how consumers consume.
Not only is population growth in the U.S. slowing, but neither the Millennials nor the Baby Boomers are at their food-buying peaks. Additionally, consumers are moving toward cheaper and more convenient food options. Only about 37 percent of sales of consumable items like food and beverages still take place at a traditional grocery store, representing a six percent drop from 2015.
Sales at convenience stores are way up, though. Last year, they sold $73 billion worth of prepared foods, beverages and other food service, a 72 percent increase over 2010 numbers. Dollar stores are also getting a big piece of the pie, with food, beverages and other consumables making up 66 percent of their income. As Amazon siphons off an increasing number of customers looking for the best deal on food prices (often with same-day delivery thrown in), traditional supermarkets will have to make some major changes to remain relevant.