Fresh, Online Retailers Eat Away at Grocery
Annual Willard Bishop report shows fresh formats, e-commerce making great strides
BARRINGTON, Ill. -- It's a safe bet to say most retailers who are selling fresh foods or selling food online are doing pretty well for themselves.
Those are two of the main findings in Willard Bishop's 2014 edition of "The Future of Food Retailing," which benchmarks and analyzes the performance of 14 retail categories in 2013. It also predicts the performance rate of these formats by 2018.
As reported by NACS in its preliminary 2013 State of the Industry data, and echoed in the Willard Bishop report, in-store sales for convenience stores grew 2.4% to reach $169.9 billion in 2013. "The industry's emphasis on quick, easy and convenient access to food has been key to its success," the report said.
In traditional grocery concepts, fresh format--including retailers such as Whole Foods and Sprouts--hit the highest notes, growing 10.4% to $14.0 billion in 2013. And the sector wasn't hurt much by the crash and burn of a familiar name: "This format continues to perform well despite Fresh & Easy's poor performance," the report said.
Limited-assortment stores (such as Aldi) grew 4.1% to $31.1 billion. According to the report, Aldi plans to open as many as 650 stores in the United States over the next five years. Dollar stores--one of the convenience store industry's biggest headaches--continued what the report called "vast sales growth," increasing 8.9% in 2013 to $28.7 billion. Family Dollar added more than 400 food items to its selection last year.
And the Amazon in the room: E-commerce sales of food and consumables increased 13.7% to $21.1 billion in 2013. "Amazon continues to satisfy consumers' needs by offering food and consumables at reasonable prices via a quick and easy shopping experience," the report said.
Looking out five years, the report predicted that supercenters and convenience stores will increase their share of the food retailing pie (up 0.1 points to 15.1% and 1.1 points to 40.1%, respectively), and traditional grocery's slice will continue to shrink (from 46.0% to 44.8%). While those changes are small, they reflect a trend that is expected to continue.
The growth rate of food inflation should average 3% over the next five years, the report said. That's also the predicted compound annual growth rate for convenience stores with gasoline. (C-stores without gasoline are forecast to grow only 1.9%) The winners, compared to food inflation, are fresh format (12.1% compound annual growth rate), e-commerce (9.5%), limited assortment (5.9%), dollar (4.1%) and wholesale club (3.5%). Traditional supermarkets are predicted suffer, considering that the segment's compound annual growth rate is projected to be only 0.4% and consumers continue to look to other formats to fulfill their grocery needs.
Barrington, Ill.-based Willard Bishop has produced "The Future of Food Retailing" since 1983.