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May 7, 2002

USA: Grocery stores losing out to Supercentres

Consumers are shopping less frequently in traditional grocery stores, but increasing their trips to supercenters like Wal-Mart and dollar stores, according to a recent study. Accordingly, supercentres and dollar stores are showing gains both in the percentage of households who shop in those channels and in the number of trips consumers take to them each year.

Consumers are shopping less frequently in traditional grocery stores, but increasing their trips to supercenters like Wal-Mart and dollar stores, according to a recent study.

Accordingly, supercentres and dollar stores are showing gains both in the percentage of households who shop in those channels and in the number of trips consumers take to them each year.

Todd Hale, senior VP consumer insights of ACNielsen US, the company which compiled the “channel blurring” study, commented: “More than ever, grocery retailers have to create a unique reason for shoppers to choose them. The consumer has to associate the name on the store with something very positive and very different from the competition.

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“Retailers could be doing much more with their frequent shopper databases to segment their customers and to develop strategies around each segment to grow their overall business.”

As detailed below, all US households still shop in traditional grocery stores, but the annual number of trips households make to such stores is continuing to decline. At the same time, both supercentres and dollar stores have shown strong gains in household penetration and smaller gains in annual trips.

———————————————————————-
                Household Penetration (%)         Trips Per Year
———————————————————————-
Channel          1998  1999  2000  2001        1998  1999  2000  2001
————-    —-  —-  —-  —-        —-  —-  —-  —-
Grocery           100   100   100   100         85    83    78    75
Mass Merchandise   94    95    94    93         28    26    25    23
Drug               86    87    86    86         15    15    15    15
Supercentre        47    52    54    63         14    15    17    18
Dollar             47    52    55    59          9    10    10    11
Warehouse          49    50    49    50          9     9    10    10
Convenience/Gas    52    50    48    45         13    13    14    15
———————————————————————-
Source: ACNielsen Homescan 52 weeks ending 12/29/01

Among supercentres, Wal-Mart has been especially successful at converting grocery-store customers to Wal-Mart customers. An analysis of ACNielsen Wal-Mart Channel Service data shows much of the retailer’s supercenter sales growth coming from traditional grocery-store shoppers. While 7% of 2001 Wal-Mart Supercenter sales growth came from new shoppers and 21% came from existing shoppers who increased their Wal-Mart Supercenter spending, the majority – 72% – came from a direct shift of dollars that had previously gone to other channels. As the chart below shows, almost one-third of that “channel-shift” revenue growth came from the grocery channel.

———————————————————————-
        Source of 2001                        Percentage of 2001
     Wal-Mart Supercentre                    Wal-Mart Supercentre
 “Channel-Shift” Revenue Growth        “Channel-Shift” Revenue Growth
———————————————————————-
  All Other Channels                                 33
  Grocery Stores                                     32
  Wal-Mart Division 1 Stores                         22
  Other Mass Merchandisers                           13
———————————————————————-
Source: ACNielsen Wal-Mart Channel Service 52 weeks ending 12/29/01

Hale said it is important to note that the degree to which Wal-Mart is gaining at the expense of the grocery channel is actually somewhat less than would be expected. “When you exclude the supercenter channel, grocery stores generated 40% of all-outlet revenue in 2001. Therefore, of the channel-shift revenue growth experienced by supercentres, we would expect 40% to come from the grocery channel.

“The fact that it was 32% means grocers are having at least some measure of success defending their turf.”

 

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