Risks to the Industry There are many external threats and risks facing the grocery industry. The biggest risk firms’ face is competition, both domestically and globally. Margins within the grocery industry are already very small, and intense competition only heightens the pressure to preserve profitability. Peterson (2014) states how “in the 1990s and the beginning years of this century, the greatest threat to supermarkets and grocery stores came from supersized ‘one stop shopping’ venues like supercenters and warehouse clubs.” Nowadays, grocery retailers have to worry about competing with all types of other retail channels, ranging from dollar stores to e-commerce. Often times, traditional retailers like Kroger are not able to match the strikingly …show more content…
The world of technology is changing rapidly and traditional grocers are feeling the pressure from emerging competitors like AmazonFresh who are taking great advantage of the technologically savvy. AmazonFresh, developed in 2007, is an online grocery service in which customers are able to have their groceries “left on their doorstep in a sealed, temperature-controlled tote or delivered in person” (Agnese, 2014, p. 5). With its enormous customer base, Amazon has the potential to steal away a significant portion of consumers who currently shop in traditional grocery stores. Increased demand for convenience paired with the newly emerging e-grocery concept has forced companies like Kroger and Wal-Mart to offer similar services. Through these services, customers are able to get online and select all of their items with the click of a button. Once the customer’s cart is full, he or she will submit their order, select a pick-up time, and pick up the bagged and ready-to-go order at the nearest location (Agnese, 2014). While 41% of consumers say they would use grocery delivery services, only 22% of grocery stores currently offer such a service (“Can Traditional Grocery Get it Right?,” …show more content…
Increased unionization, healthcare costs, and wages are all adversely affecting the cost of employees for grocery stores. Some of the factors attributing to these increased labor costs include “tight markets, increased overtime, government mandated increases in minimum wages and a higher proportion of full-time employees” (Kroger SWOT Analysis, 2014, p. 9). In 2014, the cost of employee healthcare was up 7% and is only expected to increase further. Increased unionization, while it is beneficial to employees, creates a burden of increased operating expenses for employers. Companies are combating this threat with amplified focus on labor management and employee efficiency. Like any business, companies will establish a standard level of expectations for each employee and measure performance based on that. If an employee for some reason is not performing up to standard, they might be terminated or demoted to a lower-paying position. Some companies have adopted technology within registers to assist in this practice which clocks the amount of time it takes an employee to complete each checkout (O’Connell,
Associated Wholesale Grocers (AWG) came into being more than eight decades ago when several independent retailers decided that the power of a cooperative far outweighed the influence of any one individual retail grocer. AWG provides distributor services to independent grocers in over 30 states with nine distribution centers throughout the South and Southeast regions of the country. In addition to their wholesale foods department, AWG offers a myriad of services from new store design, construction, marketing, product placement and “world class” logistical consultation (cite 11). AWG faces many of the same logistical challenges that other similar wholesalers face to include rising fuel costs, inclement weather, stringent timelines and an ever evolving need for stringent quality. One method to exploit a business’s positive and negative attributes is through the use of a Strength-Weakness-Opportunity-Threat analysis, or SWOT analysis (Cite 11). If used correctly, the analysis results can give insight into potential market areas of expansion and expose vulnerabilities to senior leadership so that they can be mitigated. AWG looks at its Supply Chain Management (SCM) as an integral part of its core business offering multiple services such as logistics to new co-op members. The team members of AWG are positioning themselves for sustainable success, now and in the future.
They anticipate competition between supermarket chains will be fierce this year as food prices continue to stay low. The Canadian grocers have been grappling with declining food prices, especially for meat, and Loblaw’s said “The notion of a shift into a steady inflationary environment is going to be offset by what we see as a continued level of competitive intensity”
The food market business is usually a difficult one, but online retailer Amazon's proceeding to purchase high-end chain Whole Foods changed the landscape. The new corporation is currently reducing prices, as well as Amazon is managing to reduce costs by taking its online expertise
The threat of rivalry is high because there are several firms in the industry such as Safeway, Sobeys, Atlantic and Pacific, Metro, convenience stores, and online grocery shopping. Moreover, with the addition of Wal-Mart in the mix this increases the threat among the rivalry which will cause an intense price rivalry. This is also caused by firms unable to different their products in the industry, in this case they are forced to compete on the basis of price which will result in price competition.
The retail grocery industry consists of the following strategic groups: grocery chains, small and large discount grocery (e.g. Dollar Stores and Walmart), wholesalers, and fresh-focused and specialty markets. Trader Joe’s could be categorized as a specialty fresh-focused store and it is often compared to Whole Foods, another organic store, defining it as its key competitor. Yet, it still competes with the large grocery retailers and now, Amazon grocery services.
Wal-Mart’s competitive environment is quite unique. Although Wal-Mart’s primary competition comes from general merchandise retailers, warehouse clubs and supermarket retailers also present competitive pressure. The discount retail industry is substantial in size and is constantly experiencing growth and change. The top competitors compete both nationally and internationally. There is extensive competition on pricing, location, store size, layout and environment, merchandise mix, technology and innovation, and overall image. The market is definitely characterized by economies of scale. Top retailers vertically integrate many functions, such as purchasing, manufacturing, advertising, and shipping. Large scale functions such as these give the top competitors a significant cost advantage over small-scale competition.
The competitive pressures that Oliver’s Market must be prepared to deal with are the pressure associated with the market maneuvering and jockeying for buyer patronage that goes on among rival sellers in the industry and the pressure associated with the threat of new entrants into the market. They must be prepared to face with the rival stores, Trader Joe’s, Costco, and Whole Foods who had recently entered in the sales territory with brand new stores and so far Wal-Mart and Target also had announced plans to develop regional supercenter, that is, large –format discount center into their territory.
Super Markets are few and far between in the south. There are plenty of different variations within a very small region that when one becomes your favorite it’s usually because if convenience. However throughout the local community of Jacksonville and most of Florida, Publix Super Markets have made a very valuable impression on its current consumers. Founded by George W. Jenkins on the idea of what makes a company successful is how they takes care of their customers but also their employees. Publix being one of the top eight privately traded companies in this industry as labeled by Forbes America’s Largest Private Companies List leaves those asking what makes Publix so different.
Overall, Whole Foods Market is financially strong even though gross margins may fall in the future. According to Bradley Seth McNew, Whole Foods Market is in the best cash position of any of its competitors. With almost zero debt, Whole Foods' operating cash flow could cover its long-term debt more than 246 times. Compare that to just 0.62 times for Sprouts Farmers Market, which has over $400 million in debt with only $180 million in operating cash flow (McNew, 2015).
Clearly, “Amazon is poised to integrate itself in Americans ' lives in ways that no other company is capable” (Matthews, 2012, para. 1). Notably, Amazon has been heavily ingrained in technology, innovation, and retail for years; they developed and expanded their business based on getting the products from the person who wants to sell to the person who wants to buy (Matthews, 2012). Comparatively, Amazon is the 56th largest company in America, the 15th biggest retailer in America by revenue, and by far the largest Internet retailer (Matthews, 2012). In 2014, their revenue topped at $89 million (Amazon.com, 2015). Technological factors and environmental scanning are evident and thriving at Amazon.
Challenges in Today's U.S. Supermarket Industry. 2014. Challenges in Today's U.S. Supermarket Industry. [ONLINE] Available at:http://msdn.microsoft.com/en-us/library/aa479076.aspx. [Accessed 31 March 2014].
The food and staples retailing is an increasingly competitive industry. The market giants (competitors) are Coles (owned by Wesfarmers) which has 741 stores across Australia and plans to add 70 m...
Imlay, T. (2006). Challenges in today’s u.s. supermarket industry. Microsoft Retail and Hospitality, Retrieved from http://msdn.microsoft.com/en-us/library/aa479076.aspx
Online retail and shopping sales has been growing consistently every year, not just in the US but worldwide. Not only does online shopping give customers more convenience, more variety, and more discreetness but it also gives customers better prices. While it is quite true that Wal-Mart has product variety and cheap prices – things customers want – the physical stores do not really give the convenience and discreteness that online retail and shopping does.
The concept of grocery stores and supermarkets industry is an idea that has been created in order to make easier human`s life. According to the study “The Evolution of the Supermarket Industry From A&P to Wal-Mart” by Ellickson, who explains that a century ago people had to jump from one store to another store in order to get different products such as milk, meat, bread and other products. In addition, in the article “Understanding Groceries Industry” by The Reinvestment Fund, they state that back in a day the concept of grocery stores was created based on the owner`s store needs. Later on, as the development of the society and the standards of customer needs increased, the owners of the grocery stores started to be more focused on their customer needs. Also, the study of “Understanding Groceries Industry” shows that the supermarket and grocery stores industry is in their mature stage as they have developed an extensive and solid customer service.