NEW YORK — A rapidly changing supermarket landscape — evidenced by the rise of e-commerce and a flurry of mergers and real-estate deals this year — presents tantalizing opportunities for food retailers to grow, but requires a disciplined, strategic approach, according to a panelists at an SN webinar on Wednesday.
“I never thought I’d say that grocery has become the most exciting sector out there but it truly has,” panelist Deborah Weinswig, an analyst covering retailing at Citi Research, said, reviewing an accelerated pace of change affecting the food retailing industry. “We don’t all know the direction it will go, but there is so much opportunity to improve operations and so much opportunity to improve the top line.”
These opportunities are emerging in otherwise difficult times for supermarkets, landlords and, especially, shoppers at the lower end of the economic spectrum, the panelists cautioned. Lower-end consumers are have cut back on basic necessity shopping and are less likely to benefit from the current recovery in home sales, Weinswig said.
The specter of House legislation that would eliminate SNAP benefits for 3.8 million lower-income shoppers next year is also a threat that could have far-reaching effects on a variety of retailers, she said.
And while consumer confidence has picked up overall, Weinswig called it a “fragile” recovery still below pre-recession levels, and marked by shoppers focusing limited discretionary dollars on cars, housing, appliances and home improvement projects at the expense of “smaller pleasures” like electronics, appall and soft home goods.
However, consumers are also spending more at e-commerce, providing hope for food retailers who can get their offering right, she said.
Panelist Bill Bishop, chief architect at Bricks Meet Clicks and a founder of Willard Bishop Consulting, Barrington, Ill., noted that online sales growth will pressure physical retailers to drop the breakeven levels at physical stores. And those who expect to benefit from the sales shift from physical to virtual shelves will need to reduce their fulfillment costs.
Bishop noted that 11% of shoppers regularly buy some grocery products online today. “That’s more than 1 in 10 shoppers. That puts a lot of pressure on the physical store,” he said.
From a real estate standpoint, the growth in e-commerce will likely accelerate the pace at which physical stores close, shifting leverage to property buyers who will then stick the struggling retailers with their own struggling sites, according to panelist Andrew Couch, managing director of DJM Real Estate, a division of Gordon Brothers Group.
“You’re going to see more surgical deals,” Couch predicted. “The days of buying 50 stores but only wanting 30 of them are over.”
Couch urged retailers to think strategically about “pruning” their store base, reviewing markets and stores to determine where to invest and where to exit.
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