Supermarket Industry Analysis

Topics: Supermarket, Retailing, Grocery store Pages: 9 (2761 words) Published: May 12, 2011
From the report of the Progressive Grocer, a monthly industry publication, we can know that in 2009, 35,612 supermarkets were in business in the United States, which accounted for 54.5% of food item sales by grocery stores including supercenters and warehouse outlets. Convenience stores had 31.9% of sales, and wholesale clubs had11.5% of sales. So, supermarkets overall account for more than half of all food sales.

Market definition
In general, we believe that a supermarket is a large comprehensive retail store that sells a wide variety of goods including food and alcohol, medicine, clothes, and other household products that are consumed regularly. Customers can use the most comfortable and free way to choose goods by themselves in the supermarket. It is the most popular way for retailer in developed countries. And, the Standard & Poor’s industry surveys define that the US supermarket industry includes a range of businesses, from small grocery shops and convenience stores to large supermarket chains, excluding restaurants and department stores that sell gourmet foods. Through the definition of supermarket, we can know that supermarket is not only a market; it covers many different industry areas. We want to analyze a single market, and, according to the North American Industry Classification System (NAICS), the supermarket industry is found in section 445110: Supermarkets and Other Grocery (except Convenience) Stores. NAICS states that “This industry comprises establishments generally known as supermarkets and grocery stores primarily engaged in retailing a general line of food, such as canned and frozen foods; fresh fruits and vegetables; and fresh and prepared meats, fish, and poultry. Included in this industry are delicatessen-type establishments primarily engaged in retailing a general line of food”. It means that supermarkets mainly sell food. So, I will choose the definition of supermarket industry in the NAICS and just focus on food retail.


How can I know the food retail is an own industry? There are two questions we must ask ourselves in order to answer this question. First, do the consumers view food and other items the same? Second, can the food retailer easily switch from selling one to others? For customers, I think it is easy to answer. When someone feels hungry, he/she just want to buy some food to eat; he/she can not choose some clothes to make him full. Even when the price of food increases, people can not buy medicine or other items to substitute it. They have no choice to satisfy their need except food. To sum up, customers see food as different from other items. For food retailer, they just have experience of food selling, so they just understand what kinds of food can attract consumers and where they can purchase the cheapest products, which means that they lack the knowledge and suppliers of other market. Further more, selling food and selling other products needs different facilities. For example, selling food needs refrigerators which is not required when selling cars. Moreover, transportation and distribution of selling food are separate from selling other types of products. Customers require food is fresh, so food retailers should buy from the closest place and use the fastest way to take foods into the supermarket. There are not these demands for other products. Thus, it is difficult for food retailers to switch from selling food to other products. All in all, I can conclude that food retail is its own industry.

Five Forces that Shape Industry Competition


Internal rivalry
The rivalry in the food retail industry is extremely high. First, a large number of various companies exist within this industry. In the United States, there are three kinds of main competitor sharing the supermarket industry: international supermarkets, like Wal-Mart; national supermarkets, like Costco; and regional supermarkets, like Roth in Independence. Because...
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