Transcript Title Page and Section Divider

EconS 451: Lecture #4
U.S. Food Retail
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Be able to differentiate between different types of Food Retail outlets:
Supermarket, Convenience Store, Superette, Supercenter, Warehouse
Club.
Understand U.S. Food Retail sales trend and where growth has
occurred.
Be able to explain what has happened to the number of Supermarkets in
the U.S. relative to the amount of Supermarket floor space and the
number of unique items per store.
Explain where concentration in this industry is occurring and whether
consumers should be worried.
What have been the challenges to “On-Line Shopping”
Where has the U.S. Food Retail industry focused improving productivity
while lowering operational costs?
Source: U.S. Food Marketing System, 2002, ERS-USDA
Retail Definitions
Source: U.S. Food Marketing System, 2002, ERS-USDA
Distribution of U.S. Foodstore sales
Source: U.S. Food Marketing System, 2002, ERS-USDA
Foodstore Sales by Store Type
(Excludes Supercenter and Warehouse Clubs)
$600,000
Specialized
Small Grocery
Conveinence
Supermarkets
$400,000
$300,000
$200,000
$100,000
00
20
98
19
96
19
96
19
92
19
90
19
88
19
86
19
84
19
82
19
80
$0
19
$ million
$500,000
Year
Source: U.S. Food Marketing System, 2002, ERS-USDA
Super Market % of Grocery Store Sales
90
70
60
50
40
30
20
10
Year
Source: U.S. Food Marketing System, 2002, ERS-USDA
99
19
97
19
95
19
93
19
91
19
89
19
87
19
85
19
83
19
77
19
67
19
58
0
19
Percent
80
Number of Supermarkets and Sales
Source: U.S. Food Marketing System, 2002, ERS-USDA
Supermarket Definitions:
Source: U.S. Food Marketing System, 2002, ERS-USDA
Loss of Market Share
• Conventional supermarkets have lost significant market
share to Supercenters and Warehouse clubs. Their
strategy to compete is to:
• Focus on natural foods
• More pre-prepared foods
• Promote store/private labels
• Promote frequent shopper discounts
• On-line home shopping
• Self-Checkout
• More personalized
Source: U.S. Food Marketing System, 2002, ERS-USDA
Challenges to On-Line Shopping
• Meeting customers expectation on timely delivery
• Access to delivery locale in all weather conditions
• Spoilage for perishables like milk, ice cream, damaged
fruit, etc.
• Inflated delivery costs in low/density areas.
Primary reasons why success has been in high-density
cities.
Source: U.S. Food Marketing System, 2002, ERS-USDA
Retail Mergers / Divestures
Food Retail Mergers / Divestures
60
50
U.S. Acq.
Other Acq.
Total Divestures
30
20
10
0
19
84
19
85
19
86
19
87
19
88
19
89
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
#
40
Year
Source: U.S. Food Marketing System, 2002, ERS-USDA
Concentration in Food Retail
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National Concentration
has increased
substantially, local
market concentration
has only increased
slightly due to anti-trust
oversight and
monitoring.
•
Between 1992-1998 C4
ratio of national grocery
retailers increased
68.6% while the C4 ratio
among the largest 100
cities increased 5.4%.
Source: U.S. Food Marketing System, 2002, ERS-USDA
Sales of Top Grocery Wholesalers
Source: U.S. Food Marketing System, 2002, ERS-USDA
Food Retail World - Leading Retailers
Productivity and Average
Hourly Earnings
Source: U.S. Food Marketing System, 2002, ERS-USDA
Foreign Owned Food Retailers
Source: U.S. Food Marketing System, 2002, ERS-USDA
Summary!
• Retail food sales growth has been slow due to slow population
growth and growth of fast-food sales.
• The number of supermarkets has declined while average floor
space has increased, understand the benefits associated with this
market shift.
• Nontraditional supermarkets have focused on all natural specialty
products (Wild Oats, Whole Foods, Trader Joes).
• Implications for industry concentration related to upstream
purchasing power relative to ability to increase price to consumers.
• Understand food retail employment productivity changes relative to
average earnings per employee.
• Foreign investment in U.S. Food Retail still relatively small, but
investment of U.S. Food Retail from abroad is growing.
Source: U.S. Food Marketing System, 2002, ERS-USDA