From Wal-Mart to Dollar Stores, Changing Perceptions About The Most-Feared Retail Competitors


We all know alternative retail channels are the arch-enemies of supermarket Center Store sales, right? But which of these types of retailers are the most dangerous competitors?

We’ve asked that question of retailers annually as part of our Center Store Outlook survey, and the new version was just released. The results point to the acceleration of a multi-year trend in which Wal-Mart is declining as a feared competitor, while dollar stores are advancing. This reflects the shifting perceptions of retailers and the ongoing impact of the challenging economy.

Once again food retailers taking the survey were asked, “During the past year, which alternative channel has posed the biggest threat to Center Store sales in supermarkets?”

In 2009, 64% put Wal-Mart as the No. 1 threat. That percentage fell to 50% in 2010, and further to 45.3% last year.

In the latest survey, Wal-Mart’s total plunged again, this time to 34%, a remarkable fall.

Meanwhile, dollar stores advanced as feared competitors, although they aren’t yet at Wal-Mart’s level. In the two prior surveys, some 17% of retailers said dollar stores were the biggest threat. This year that figure jumped to 22.6%, so while this channel still ranked No. 2, it moved closer to striking range of Wal-Mart.

What’s going on here? First, it’s clear that in tough economic times value- oriented retailers like Wal-Mart and dollar stores are seen as most threatening, especially when you consider that two other value-oriented formats, club stores and limited assortment discounters, came in third and fourth.

Wal-Mart’s sharp decline is surprising when you consider recent price investments being made by that company. However, the slide over a period of years indicates supermarket retailers feel they have increasingly identified Wal-Mart’s vulnerabilities, including with pricing and variety. In contrast, supermarkets are still trying to figure out how to battle some other value players, including dollar stores and limited assortment formats.

Retailer respondents pointed to private label and price as the top strategies to battle alternate formats.

Most retailers will probably pursue individual competitive strategies based on local markets, and one survey respondent in particular gets the prize for honesty. Asked to list other ways to battle these competitors, this person said: “I don’t know, that’s where I need help.”

Discuss this Blog Entry 4

Anonymous (not verified)
on Jun 12, 2012

WalMart is becoming less feared because they have abandoned their commitment to low pricing. Dollar store presents much better value and the consumer will move to better value. But isn't is ironic that the better supermarket retailers continue to thrive in spite of WalMart and Dollar stores and others continually use competition as an excuse for failure.

Oscar L. Nunez, M.A.S. Grocery Busi (not verified)
on Jun 12, 2012

When I suggested In our Boardroom that Wal Mart would fail to be the ongoing threat of little guys as they entered the "supermarket" arena, I was laughed at.
I only meant that customer loyalty is key to the survival of anyone of us.
So, attracting, surviving, & keeping our customers was definitely going to be the key factor. Meaning that just feeling shelf space was in a Super Center was not going to be good enough. That's still true.
However, now with the new Wal Mart approach to customer loyalty of opening Neighborhood Markets, that's a whole new ballgame & Wal Mart will be very successful with this new strategy. It's sound. And, it makes all the business sense in the world. Meaning = After getting max out of their regional reach, now, they are going into the neighborhoods to get the maximum bang for their buck. They will succeed. I believe.
As far as Specialty Stores are concerned ( such as dollar discount stores, there should be enough business for those folks, too.
Good competition is good for our communities & the folks we serve.
My best to all.

Oscar Nunez, C.P.A. 626-213-9068.
Residing in Hialeah / Miami, Florida
Management Advisory Services - Grocery Business Advisor
I spent 21 Years with the wonderful family over at Northgate Gonzalez Markets - 2012 - Top 50 Small Chains & Independents. Hispanic ( Mexican ) Grocery Business.

Brock (not verified)
on Jun 13, 2012

Wow, one more reason that shows how clueless traditional supermarkets have become. If I was at Walmart, I'd love this news. It's like convincing yourself over time that a rattlesnake isn't really dangerous anymore. You let down your guard and then it bites.

Oscar L. Nunez, M.A.S. Grocery Busi (not verified)
on Jun 15, 2012

Sam Walton is and was as American as anyone else that has entered our business world in the U.S. And, he was from right here in the U.S.
Now, add to that: that every company needs a visionary at the top. And, not every company has one. These visionaries add and take away new visions, they fill "niches" left open by others, and they maintain an organized team focused on the needs of the communities they serve.
Enter Price Club / Costco - they filled a "niche" that had been left wide open. So, we joined, we belonged, and they earned our respect and "customer loyalty" the day they opened. And, they hold it to this day.
Enter the gimmicks, the copycats, and non-visionaries to attempt to recapture the "customer loyalty" that got away.
Enter the Aldi Group with their fantastic "Trader Joe's" ( German Origin ).
Enter "Fresh & Easy" / Tesco - English Origin.
Did we just wake up a whole bunch of "happy with what we do" non-visionaries?
Do you think it will stop there?
Do you realize how easily it would be for "Trader Joe's" to do what "Fresh & Easy" does, and for "Fresh & Easy" to do what "Trader Joe's" does?
It's a whole evolution of our industry. And, in the end, we are better for it!
So, get off your couches, & "fight, fight, fight". Just do it better.
Here comes Wal Mart to our Neighborhoods. They are already here in my neighborhood (for 2 months, now). And, other big boys will probably follow. They all want your retail dollar.
Recently we read in SN that "the Russians are coming" to Miami to open 400 small stores, 4200-7500 sq. ft. What a nice "niche"! As banks close & video rentals close - how convenient - to have almost perfect sq. ft. available for smaller, get everything you need, stores!

Thank God for our country and for "visionaries" / entrepreneurs that keep injecting new blood to our communities.

Oscar Nunez 626-213-9068.
Management Advisory Services - Grocery Business
Mainstream & Hispanic ( Mexican & Cuban ). Hialeah/Miami Resident.
I spent 21 years ( 3/86 - 6/30/2007 ) with Northgate Gonzalez Markets in Anaheim, CA alongside it's "Co - Founder" Mr. Miguel Gonzalez & his wonderful family from Jalostotitlan, Jalisco, Mexico.

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