The Evolution of the Grocery Store Industry: Newly Emerging Niche Market Opportunities

The Evolution of the Grocery Store Industry: Newly Emerging Niche Market Opportunities

Back in the 1800s, long before we had cars and refrigeration, food shopping was a much different task than it is now in the modern era. In order to gather all the food items needed, shoppers had to visit several different shopkeepers. Grocers at that time sold mostly canned goods and non-perishable staples (‘dry goods’), while greengrocers sold produce and butchers sold meat. These shopkeepers were separate entities, though they often clustered together for convenience.  Additionally, these shops were not self-serve as they are today. Employees worked behind the counter and filled customers’ orders. Many offered delivery services as well.

“The only constant is change”

And the grocery industry is no exception! After years of little change, the 1920s ushered in a new trend for grocery stores. Owners began establishing regional networks, or chains, of stores. The result was a newly realized economy of scale, offering lower prices for customers than the many small ‘mom and pop’ owned stores could provide. By the 1930s, these grocery store chains not only continued to expand their market areas, they also began to expand their stock.  This new supermarket concept encompassed selling a wider variety of food items beyond just dry goods, as well as offering health and beauty products and more, all under one roof.

The Great Depression further influenced the grocery industry with supermarkets focusing less on personal service and becoming more utilitarian in nature.  Store owners sold goods by placing the stock on shelves and leaving the work of selecting and handling prodcuts to the customer. In some stores the goods were simply left in the packing crate in a no-frills format. By the end of the decade the expanding grocery chains began consolidating their locations. Industry leaders, such as A&P, were replacing five or six smaller stores with one large super store wherever possible. This created even greater profit margins on an inverse scale – sales were increasing as the number of actual stores was decreasing.

By the 1950s, as the advent of the automobile contributed to the redistribution of the population from city centers to suburban communities, so too did it increase consumers’ choices. Competition among neighboring grocery stores made it necessary to increase advertising and introduce customer loyalty programs such as trading stamps, games and contests.  However, these programs increased overhead at a rate faster than gross margins and eventually most if not all of these programs were abandoned. In order to remain competitive and profitable in the following decades, supermarkets chains tried a new approach – discounting – by expanding their offerings with additional general merchandise and cutting prices.  Many chains accomplished this by either placing grocery and discount stores side by side or housing both under one roof. A new customer loyalty tactic, an evolution of price-cutting, was the introduction of savings card programs  which provide loyal shoppers with sales prices and reward points.

As we’ve entered a new millennium, the grocery industry continues to carve out creative strategies to maintain growth and profitability. These strategies include offering private label brands, larger store sizes, and specialty services such as delicatessens, ready-to-eat dishes, bakeries, pharmacies, etc.  Some grocery stores rent space to other businesses such as banks, barbershops and other consumer services.

“Everything old is new again”

As technology infiltrates our lives, many of us long for a simpler and more nostalgic way of life. There is a growing demand among consumers for local, community-oriented businesses. The grocery industry is responding. Small business owners are popping up in communities everywhere to fill niche markets including ethnic food, natural and organic foods and locally produced goods.  As with any business, location is important. Our GeoMetrx web-based mapping software is loaded with rich demographic data for retail site selection, consumer profiling and market analysis. For more information or a demo call us at 1.888.848.4436.

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