Alternative Formats for Food Steal More Market Share

Supermarkets are losing out to discounters, drugstores and dollar stores when it comes to food and household items.

January 06, 2016

CHICAGO – As grocery stores keep consolidating, food and consumable sales at drugstores, dollar stores and discounters continue to eat into their market share, Supermarket News reports. Four of the top 10 companies on SN’s yearly roundup of the Top 75 retailers and wholesalers in North America are not supermarkets: two drugstores join Walmart and Target in the top 10 list.

Dollar stores and drugstores have been siphoning off grocery store sales for years, said Neil Stern, senior partner at McMillanDoolittle. “While it’s a big amount when you look at it in total, most supermarkets see it on an individual-store basis and have been slow to react.”

The alternative formats “are taking business based on convenience, and supermarkets are going to have to find ways to offer goods more conveniently—possibly by doing what they do in the U.K., where they set aside areas of 1,000 square feet or so at the front of the stores and sell milk and eggs and other basics,” Stern said.

Analysts predict sales of grocery items outside of grocery stores will continue to accelerate, despite improvement to the economy. “While operators like Kroger and Costco are seeing people trading up, it’s not unusual to think those retailers and others might lose a handful of items to an alternate format. Even with the economy improving, not every purchase will be bundled together with a trip to the supermarket,” said Chuck Cerankosky, a Northcoast Research analyst.

For more, including how convenience stores can capitalize on this trend, read “Filling a Need” in the December 2015 issues of NACS Magazine.

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