Future of Traditional Grocery Stores to Be Less Crowded

In just five years, more consumers will be shopping for food at fresh food markets like Whole Foods, general merchandise discount stores and even dollar stores instead of traditional supermarkets, reports an article in the Chicago Tribune.

“The Future of Food Retailing,” a new report by retail consultant Willard Bishop, predicts that the traditional grocery store is expected to account for only 44% of the food market by 2010 from 50 percent today. Non-traditional grocery outlets are forecast to account for 40 percent of the market in 2010, up from 33 percent today.

“The one size fits all approach that supermarkets represented for such a long time, it's really been shattered,” said Jim Hertel, senior vice president at Willard Bishop and one of the report's authors. “There are just so few households that can realistically shop the old way.”

Two decades ago, Americans bought 90 percent of their food and consumable products at grocery stores. But as more women entered the workforce and Wal-Mart Stores Inc. moved into the grocery business, conventional supermarkets got squeezed between the need for convenience and the demand for low prices.

“As the whole paradigm shattered, a lot of people are picking off segments of the food marketplace,” said Hertel, whose report forecasts that the market will become even more fractured in the next five years.

As for the pace of sales growth, Willard Bishop tracked 15 different food retail formats, comparing each to the estimated annual compound inflation rate of 2.6 percent. Conventional grocery stores, convenience stores and military outlets will all lag the inflation rate, the report forecast.

Sales at the two fastest-growing formats, “fresh format” stores, such as Whole Foods, and “limited assortment” stores, such as Aldi and Trader Joe's, are expected to increase at a compound annual rate of 16 percent.

According to the article, supercenters are projected to gain 13 percent, followed by dollar stores at 10 percent and wholesale clubs at 4.8 percent. Convenience stores with gas stations attached are expected to show a 3.4 percent annual growth rate, while so-called warehouse stores, drugstore chains and mass-market retailers are forecast to increase on par with inflation.