A new grocery industry study shows that local discounters and specialty grocers have steadily taken back market share from the large, national supermarket chains over the last five years (2005 Market Scope study by Trade Dimensions).
Industry analysts indicate that grocery chains nationwide are scrambling to shore up their positions as the market moves inexorably back to being more fragmented. And food retail consultant Bill Bishop finds that the traditional supermarket, whatever banner it has on it, is facing increasingly stiff competition from more specialized retailers. (Grocery store market growing more fragmented, Bakersfield Californian, 10/25/05).
For all the talk of building national chains on the back of purchasing power and lower prices to consumers, there is mounting evidence that the pendulum is finally swinging back in favor of value-added and consumer-driven retailing models. Hopefully this is a sign that the old-school grocers of yore are giving way to innovative thinkers and risk takers willing to bet that focusing intensely on delighting consumers is the best path to long-term market share gains and financial health. Compare the results of sinking ships like Safeway and Albertson's (the "low prices always wins" camp) to that of Whole Foods! Since it's 1982 IPO, Whole Foods has increased earnings at almost 20% per year and sales at a rate of 32%. It's now a company with $10+ billion in market value; and plans to reach $12 billion in sales by 2010.
How is Whole Foods accomplishing all this?
To listen to industry veterans, it must be through low prices and tired, frumpy, stores with shelves out of stock. Old industry executives, big consulting firms, and private equity firms all have a lot to learn from the Whole Foods team in Austin, Texas!
The company has built an exciting retail destination store not on the conventional wisdom of low prices, but with knowledgeable staff, innovative merchandise, a rigid reputation for quality, freshly prepared foods, wide variety, intersting selections, and all this at prices significantly higher than other grocers (hence the nickname "whole paycheck"). Yet it seems that when faced with the choice of orange-dye infused farmed salmon with an odd odor in a shrink wrapped three day old container in a dusty Safeway cooler or an iced-down wild caught fillet guaranteed to be super fresh and right off the boat from a sales clerk offering helpful cooking tips at Whole Foods, the consumer votes with their wallet.
My guess is that investors will continue to follow them!
Industry analysts indicate that grocery chains nationwide are scrambling to shore up their positions as the market moves inexorably back to being more fragmented. And food retail consultant Bill Bishop finds that the traditional supermarket, whatever banner it has on it, is facing increasingly stiff competition from more specialized retailers. (Grocery store market growing more fragmented, Bakersfield Californian, 10/25/05).
For all the talk of building national chains on the back of purchasing power and lower prices to consumers, there is mounting evidence that the pendulum is finally swinging back in favor of value-added and consumer-driven retailing models. Hopefully this is a sign that the old-school grocers of yore are giving way to innovative thinkers and risk takers willing to bet that focusing intensely on delighting consumers is the best path to long-term market share gains and financial health. Compare the results of sinking ships like Safeway and Albertson's (the "low prices always wins" camp) to that of Whole Foods! Since it's 1982 IPO, Whole Foods has increased earnings at almost 20% per year and sales at a rate of 32%. It's now a company with $10+ billion in market value; and plans to reach $12 billion in sales by 2010.
How is Whole Foods accomplishing all this?
To listen to industry veterans, it must be through low prices and tired, frumpy, stores with shelves out of stock. Old industry executives, big consulting firms, and private equity firms all have a lot to learn from the Whole Foods team in Austin, Texas!
The company has built an exciting retail destination store not on the conventional wisdom of low prices, but with knowledgeable staff, innovative merchandise, a rigid reputation for quality, freshly prepared foods, wide variety, intersting selections, and all this at prices significantly higher than other grocers (hence the nickname "whole paycheck"). Yet it seems that when faced with the choice of orange-dye infused farmed salmon with an odd odor in a shrink wrapped three day old container in a dusty Safeway cooler or an iced-down wild caught fillet guaranteed to be super fresh and right off the boat from a sales clerk offering helpful cooking tips at Whole Foods, the consumer votes with their wallet.
My guess is that investors will continue to follow them!
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