Analyzing the Super Market Business Model

Topics: Grocery store, Wal-Mart, Retailing Pages: 6 (1718 words) Published: May 6, 2013
The concept of aself-servicegrocery store was developed byAmerican entrepreneur Clarence Saundersand hisPiggly Wigglystores. His first store opened inMemphis,Tennessee, in 1916. Saunders was awarded a number of patentsfor the ideas he incorporated into his stores. The stores were a financial success and Saunders beganto offer franchises.The Great Atlantic and Pacific Tea Company (A&P)was another successful early grocery store chain inCanadaand theUnited States, and became common in North Americancities in the 1920s. The general trend in retail since then has been tostock shelves at night so that customers, the following day, can obtain their own goods and bring them to thefront of the storeto pay for them. Although there is a higher risk of shoplifting, the costs of appropriate security measures ideally will be outweighed by theincreasedeconomies of scaleand reduced labor costs.

Early self-service grocery stores did not sell fresh meats or produce. Combination stores thatsold perishable items were developed in the 1920s.Other established American grocery chains in the 1930s, such asKroger andSafeway, at first resisted Cullen's idea, but eventually were forced to build their own supermarkets as theeconomy sank into theGreat Depressionand consumers became price-sensitive at a levelnever experienced before. Kroger took the idea one step further and pioneered the firstsupermarket surrounded on all four sides by a parking lot.Supermarkets proliferated across Canada and the United States with the growth of automobile ownership andsuburban developmentafter World War II.Most North American supermarkets are located in suburbanstrip mallsas an anchor store along with other, smaller retailers. They are generally regional rather than national in their company branding. Kroger is perhaps the most nationally oriented supermarket chain in the United States but it has preserved most of its regional brands, includingRalphs,City MarketandKing Soopers. Traditional supermarkets in many countries face intense competition fromdiscount retailerssuch asWal-Mart, Tesco in the UK, andZellersin Canada, which typically are non- unionand operate with better buying power. Other competition exists fromwarehouse clubssuch asCostcothat offer savings to customers buying in bulk quantities.Superstores, such as those operated by Wal-Mart and Asda, often offer a wide range of goods andservices in addition to foods. The proliferation of such warehouse and superstores hascontributed to the continuing disappearance of smaller, local grocery stores, increaseddependence on theautomobile, suburban sprawl because of the necessity for largefloorplates, and increased vehicular traffic and air pollution. Some critics consider thechains' common practice of sellingloss leadersto be anti-competitive. They are also wary of the negotiating power that large, oftenmultinational, retailers have with suppliers around theworld.There has been a rapid transformation of the food retail sector in developing countries in thelast fifteen years. This applies particularly to Latin America, South-East Asia, China andSouth Africa but growth is being witnessed in nearly all countries. With growth have comeconsiderable competition and some amount of consolidation. The growth has been driven byincreasing affluence and the rise of a middle class; the entry of women into the workforce;with a consequent incentive to seek out easy-to-prepare foods; the growth in the use of refrigerators, making it possible to shop weekly instead of daily; and the growth in car ownership, facilitating journeys to distant stores and purchases of large quantities. Theopportunities presented by this potential have encouraged several European companies toinvest in these markets (mainly in Asia) and American companies to invest in LatinAmerica. Local companies also entered the market. Initial development of supermarkets hasnow been followed byhypermarketgrowth. In addition there were investments...
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