Grocery Retail Market Analysis

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Grocery Retail Market Analysis

Grocery retailing in the US is a very mature, saturated market. Consumers will, however always need to buy food. The industry is generally a high volume/low margin market, which is made up of over 65,000 supermarkets, hypermarkets, and grocery stores combining for annual revenues of about $938 billion. The necessity of effective supply chain management, keeping costs low, has resulted in an extreme concentration of the market, where the top 20 competitors generate over 67% of the industry annual revenue. Wal-Mart, which is considered to be a hypermarket, leads in grocery retailing with 225.12 billion sales resulting in 24% value share during 2010. The second and third leading grocery retailers in the US are Kroger and Supervalu with 76.7 billion (7%) and 40.8 billion (4%) 2010 sales (value shares), respectively. (GMID - Global Market Information Database)

The industry is made up of four types of channels, consisting of supermarkets, hypermarkets, discounters, and convenience stores. Supermarkets are the largest channel and continue to appeal to shoppers because of the proximity to their homes and workplaces. Hypermarkets, which include Wal-Mart, are predicted to be the fastest growing channel and although are often less convenient for consumers than other grocery outlets, many believe it is worth the trip to save some money and are willing to drive a bit further to visit hypermarkets. Discounters offer a low-cost option for consumers by streamlining many operations. Finally, Convenience stores are known for quick shopping trips, but consumers typically do not think of convenience stores as a place to stock up on groceries.

Grocery retailing as a whole grew by 2% in 2010, however the discounters experienced the strongest growth of 6%. Retailers in the discounters channel generally hold smaller inventories and tend to carry only a single brand of each item to keep costs low. The uncharacteristically strong growth in 2010...
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