Who are the grocery competitors that supermarkets operators fear most?
That's an annual question that SN asks its audience, and the latest responses reveal changing attitudes about the competitive landscape.
This question was part of SN's Center Store Outlook 2011, the most recent version of our annual survey. Once again retailers responded to the question, “During the past year, which alternative channel has posed the biggest threat to sales in supermarkets?”
Last year supermarkets showed declining concern about Wal-Mart, with 50% identifying that retailer as the biggest threat, down from 64% in 2009. Dollar stores came in second on the list last year as a growing share of retailers — 16.7% — pointed to this channel as the biggest threat. Limited-assortment stores took third place with 11.1%.
This year retailers showed even less concern about Wal-Mart, as only 45.3% pointed to the global giant as the biggest threat. Dollar stores solidified their No. 2 spot at 17%. Two other formats switched places in the roster, with club formats third at 15.1%, and limited-assortment discounters fourth at 3.8%.
Wal-Mart, of course, is still the No. 1 threat by far, but the declining fear factor represents continued fallout from the Project Impact initiative, which turned off shoppers by cutting SKUs and thus decreasing variety. One industry respondent said, “Wal-Mart is really not a threat so much anymore because of price increases and less variety.”
However, others said Wal-Mart still has low-price perception on its side, and “Center Store appears to still be a strength.”
The Wal-Mart falloff contrasted with growing respect for dollar stores as a competitor. One respondent compared the threat from each: “Wal-Mart has been a threat for more than two decades, but the last year saw much more activity in the dollar stores when it came to Center Store items. Dollar stores have added cereal, canned goods, dairy and other items traditionally purchased in grocery stores.”
We'll see if Wal-Mart's more recent moves to improve its price perception and broaden merchandise variety will change opinions going forward. Meanwhile, dollar stores continue to accelerate growth of food assortments in the face of positive customer response.
A bit harder to explain is the switch in this year's rankings between club stores and limited-assortment stores, with club growing in status as a feared competitor. The responses seem to indicate that clubs are particularly influential in Center Store categories and, as one respondent said, “Costco and clubs have communicated the savings effectively and we are seeing this in the data.”
Maybe just as telling is which formats remain at the bottom of the most-feared list: drug stores, natural food retailers, and convenience stores. Make no mistake, this is about value perception in a tough economy, which continues to get more challenging. Those formats won't budge until their value positioning changes or consumers see a silver lining in the economic cloud.