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Source: U.S. Food Marketing System, 2002, ERS-USDA
U.S. Food RetailEconS 451: Lecture #4
• Be able to differentiate between different types of Food Retail outlets: Supermarket, Convenience Store, Superette, Supercenter, Warehouse Club.
• Understand U.S. Food Retail sales trend and where growth has occurred.
• Be able to explain what has happened to the number of Supermarkets in the U.S. relative to the amount of Supermarket floor space and the number of unique items per store.
• Explain where concentration in this industry is occurring and whether consumers should be worried.
• What have been the challenges to “On-Line Shopping”
• Where has the U.S. Food Retail industry focused improving productivity while lowering operational costs?
Source: U.S. Food Marketing System, 2002, ERS-USDA
Retail Definitions
Source: U.S. Food Marketing System, 2002, ERS-USDA
Distribution of U.S. Foodstore sales
Source: U.S. Food Marketing System, 2002, ERS-USDA
Foodstore Sales by Store Type(Excludes Supercenter and Warehouse Clubs)
$0
$100,000
$200,000
$300,000
$400,000
$500,000
$600,000
Year
$ m
illio
n
SpecializedSmall GroceryConveinenceSupermarkets
Source: U.S. Food Marketing System, 2002, ERS-USDA
Super Market % of Grocery Store Sales
0
10
20
30
40
50
60
70
80
90
Year
Per
cen
t
Source: U.S. Food Marketing System, 2002, ERS-USDA
Number of Supermarkets and Sales
Source: U.S. Food Marketing System, 2002, ERS-USDA
Supermarket Definitions:
Source: U.S. Food Marketing System, 2002, ERS-USDA
Loss of Market Share
• Conventional supermarkets have lost significant market share to Supercenters and Warehouse clubs. Their strategy to compete is to:
• Focus on natural foods
• More pre-prepared foods
• Promote store/private labels
• Promote frequent shopper discounts
• On-line home shopping
• Self-Checkout
• More personalized
Source: U.S. Food Marketing System, 2002, ERS-USDA
Challenges to On-Line Shopping
• Meeting customers expectation on timely delivery
• Access to delivery locale in all weather conditions
• Spoilage for perishables like milk, ice cream, damaged fruit, etc.
• Inflated delivery costs in low/density areas.
Primary reasons why success has been in high-density cities.
Source: U.S. Food Marketing System, 2002, ERS-USDA
Retail Mergers / Divestures
Food Retail Mergers / Divestures
0
10
20
30
40
50
60
Year
#
U.S. Acq.
Other Acq.
Total Divestures
Source: U.S. Food Marketing System, 2002, ERS-USDA
Concentration in Food Retail
• National Concentration has increased substantially, local market concentration has only increased slightly due to anti-trust oversight and monitoring.
• Between 1992-1998 C4 ratio of national grocery retailers increased 68.6% while the C4 ratio among the largest 100 cities increased 5.4%.
Source: U.S. Food Marketing System, 2002, ERS-USDA
Sales of Top Grocery Wholesalers
Food Retail World - Leading Retailers
Source: U.S. Food Marketing System, 2002, ERS-USDA
Productivity and AverageHourly Earnings
Source: U.S. Food Marketing System, 2002, ERS-USDA
Foreign Owned Food Retailers
Source: U.S. Food Marketing System, 2002, ERS-USDA
Summary!• Retail food sales growth has been slow due to slow population
growth and growth of fast-food sales.
• The number of supermarkets has declined while average floor space has increased, understand the benefits associated with this market shift.
• Nontraditional supermarkets have focused on all natural specialty products (Wild Oats, Whole Foods, Trader Joes).
• Implications for industry concentration related to upstream purchasing power relative to ability to increase price to consumers.
• Understand food retail employment productivity changes relative to average earnings per employee.
• Foreign investment in U.S. Food Retail still relatively small, but investment of U.S. Food Retail from abroad is growing.
