From the Publisher: Surviving the Grocery Wars
Lower prices are a short-term solution to a long-term problem and can leave the retail battlefield in a state of chaos.
“A seismic shift in the grocery industry.”
That is what at least one retail pundit called the current situation at supermarkets. He said it in response to Kroger’s announcement last month that same-store sales fell by nearly 1 percent during the last quarter and the company does not expect things to improve in the immediate future.
Kroger said that lower food prices—on such commodities as meat, eggs and milk—are hampering growth at its stores as consumers seek alternatives to these products; and other retailers, especially Amazon, are making a dent on store visits. Kroger did say that sales would improve in the second half, but that could just be the corporate hyperbole necessary at any public company looking to keep its stock prices at respectable levels and keep the Wall Street wolves at bay.
This is Kroger we are talking about—the cream of the crop. The Cincinnati-based chain, with banners scattered throughout the country, is a very good operator. The decline in same-store sales reflects much more on the supermarket industry and consumer shopping habits than it does on this one chain, albeit a pretty big one. Price points are falling because of competitive issues brought on by Amazon and because consumers are being given alternatives to the tried and true.
I, for one, stopped drinking milk about two years ago, switching over to a combination of soy and almond milk for a bunch of reasons, including the fact these products do not go bad as quickly as milk does and they taste good. Other consumers are using egg substitutes instead of buying eggs. Some are foregoing meat, purchasing other high-protein alternatives. Let’s not even bring up what is going on in the cereal and beverage categories.
Not helping the situation is Amazon, which is forcing the major players in the industry to lower prices and fine tune their game to keep up. The best news the rest of the retail world has heard out of Amazon is that it plans to open brick-and-mortar convenience stores in the near future, meaning that the digital giant will soon be privy to the same headaches as everyone else in retail.
The bad news is that, left unchecked, the intentional and unintentional footballing of prices could be the start of a bitter war between retailers for consumers’ attention. Time and time again, we have seen that lower prices are a short-term solution to a long-term problem, and in the end, leave the retail battlefield in a state of chaos and ruin. In other words, not everyone is going to survive it and do not be so sure that the big boys will be the winners.
So, retailers are going to have to bring their “A” game into play. They will have to stay competitive on pricing with traditional and untraditional players while, at the same time, be aggressive with promotional efforts with their shoppers and make sure their stores remain relevant, convenient and clean for everyone.
A tough task during some very tough times. But think about the alternative.