Viewpoints

Retail Sales: Supermarkets Gain, but Hold the Champagne

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There's some cause for celebration in the latest sales data from Information Resources Inc., which is the centerpiece of this week's special issue of SN (see coverage beginning on Page 24). But like many things in life, the good news is tempered by looming threats.

On the positive side, supermarkets are innovating and it shows. The channel posted a 1.8% sales gain for the 52-week period ending June 17, 2007, and came close to maintaining its overall channel share of 57%, not an easy feat given the fierce competition from other retail formats. Powering this achievement was a focus on products with healthy attributes and convenience, everything from energy drinks to restaurant-style frozen entrees. Pharmacy, meanwhile, ignited a sharp boost in sales as retailers integrated that department into the overall store.

The health and wellness trend is reaching into all corners of the supermarket. Categories and products not imagined just a couple of years ago are riding the momentum.

The IRI data even point to future opportunities. Given the success of health and convenience, why not create more offerings that incorporate both features? This is already under way in grocery, as evidenced by a wider range of health-oriented, on-the-go foods. The newest opportunity may be to build perishables categories around health and convenience.

Enough for the upbeat news, now to the concerns. Despite positive signs for categories such as gift cards and fuel, supermarkets are still unable to fully crack the nonfoods code, as reflected by the flat-to-down trends in the IRI data. Shoppers continue to seek out other store formats for much of these needs despite years of efforts by supermarkets. This is a frustrating development that indicates the need for retailers to keep rethinking how they go to market in this segment. It's notable that the health trend is an avenue to success in nonfoods as well, given the gains for categories such as anti-smoking tablets and sleep tablets.

The IRI sales figures also show supermarkets need to pay more attention to drug stores, a longtime rival showing new life. That channel posted impressive gains, albeit with a far smaller market-share base than supermarkets. Drug stores are reinventing themselves as kings of convenience by saturating market areas. They are also becoming known for their stellar marketing on the health and beauty care side.

While this week's SN reports on some 300 categories, it homes in on 50 for more extensive profiles. Each of these 50 met one of three requirements: It was either among the largest categories or showed some of the biggest gains or declines.

Supermarkets can be pleased with their overall showing in the sales data, which reflect a surge in new retail formats and merchandising strategies. But the macro picture can't be viewed without an understanding of what's happening at the category level. Increasingly the supermarket is housing both have and have-not categories, and in this environment you absolutely don't want to be a have not. Categories that have maintained a place on shelves for years are being put on notice. Retailers will become even bolder in editing assortments to reflect today's consumer lifestyles.

Contributors

Julie Gallagher

Julie Gallagher’s delicious foray into coverage of the food industry was purely accidental. With a background in technology, she joined Supermarket News as associate editor of its Technology...

Mark Hamstra

Mark Hamstra is the editor of the Retail/Financial section of Supermarket News covering mergers and acquisitions, quarterly earnings reports, executive changes and other significant events and trends...
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In their Viewpoints columns, SN editors give their perspectives on current industry issues.

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