Willard Bishop Sees No Rest for Grocers Ahead in Competitive Battle

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Willard Bishop Sees No Rest for Grocers Ahead in Competitive Battle

NEW YORK - The defensive tactics traditional supermarkets have been wielding against fierce competition from new formats are taking hold -- but more work will be required, including progress with convenience-oriented and fresh-focused concepts. That was the key takeaway of "The Future of Food Retailing," a Webinar hosted yesterday by consulting firm Willard Bishop and the Food Institute.

"The grocery game is changing ... again," said Jim Hertel, managing partner at Barrington, Ill.-based Willard Bishop. "Another round of format innovation is gathering momentum."

However, when participants were asked in a virtual poll, "Are traditional supermarkets turning the corner?", 81 percent agreed that "some are and some aren't."

While traditional retailers comprise the largest channel of food retailing, non-traditional retailers are a major force, Hertel noted. Traditional retailers brought in $427.6 billion in sales last year, a 2.6 percent increase from 2005, while non-traditional retailers earned $292.4 billion. Non-traditional retailers' sales growth is slowing, but their long-term market shares are projected to grow, he said.

Willard Bishop counts the following as "traditional retailers": traditional supermarket, fresh format, limited-assortment, super warehouse, and small grocery. "Nontraditional retailers" are comprised of: wholesale club, supercenters, dollar stores, drug stores, mass, and military.

By 2013, non-traditional retailers will equal traditional retailers in food and consumables sales, the consulting firm predicts.

Convenience stores (gas and non-gas), meanwhile, earned $138.9 billion - a 4 percent increase from 2005.

"This is very strong when compared to the industry's performance historically," noted Bill Bishop, chairman of the firm. "I see this as an important vital sign for the health of an industry that's defined itself with a focus on single servings and convenience."

Traditional supermarkets are being challenged on two fronts, observed Hertel. At one end of the spectrum is the supercenter, which aims for a lower price image. At the other end is the fresh format, which creates a higher price image. "A 'one-size-fits-all' approach has left many traditional supermarkets in unsustainable middle ground," he said.

Successful supermarkets have responded on both fronts, the consultants noted, drawing on several real-life examples. Pleasanton, Calif.-based Safeway, for one, is meeting fresh format competition head on with its more upscale Lifestyle stores and its successful "O" private label organics line, Hertel said.

Rochester, N.Y.-based Wegmans has created a strong pricing structure by using "hybrid EDLP," noted Bishop. Its mix of national brands and strong private brands has helped create this image, he said.

Lakeland, Fla.-based Publix Super Markets differentiates on customer service, Hertel said. Its new GreenWise stores will feature product specialists in every department, for instance.

The consultants also pointed to successful strategies at convenience-store operators such as Wawa, which is "becoming a kitchen for a number of households," according to Bishop.

As for the competition of the future, they mentioned Web grocers, which should be "officially recognized as head-on competition," according to Bishop; and Tesco, which will soon debut its Fresh & Easy Neighborhood Market concept to the West Coast.

"Won't it be ironic if it takes a U.K. retailer to bring a solution that meets these needs of U.S. consumers?" asked Bishop. He encouraged home-based grocers and suppliers to take a closer look at the consumer needs of convenience and quality.
-- Jenny McTaggart