Grocery Competitors That Supermarkets Fear Most

Sometimes the biggest competitive challenge is pinpointing exactly who your main rivals are.

Supermarkets are now reconsidering how formidable each of their grocery competitors are, and they've devised new battle plans against them.

Those are among findings from the latest version of SN's annual Center Store Survey. The revised opinions reflect changes in competitive activity since the height of the recession last year.

A year ago, when asked which alternate channel has posed the biggest threat to Center Store sales in supermarkets, some 64% of food retailers pointed to Wal-Mart, followed by the runner-up, dollar stores, which drew 13.2% of responses. While limited-assortment stores weren't listed as a survey choice, a number of retailers picked this format through write-ins.

This year, in contrast, only 50% named Wal-Mart as the biggest threat, while dollar stores still came in second but with a higher share of 16.7%. This time around, the survey included limited-assortment stores as a choice, and a noteworthy 11.1% of respondents picked it.

The drop in responses for Wal-Mart probably relates to challenges this retailer encountered last year after aggressively cutting SKUs as part of its Project Impact resets, a program it has since backtracked on to some extent. The jump in responses for dollar stores most likely pertains to their continued success in attracting consumers and adding food products.

One wholesaler respondent put it this way: “Wal-Mart will always be a challenge to Center Store, but due to the economic changes to consumers, the dollar formats have grown as a legitimate threat.”

Likewise, the increased recognition of limited-assortment stores as a powerful competitor underscores how well positioned they are in this value-oriented environment.

Even more interesting than supermarkets' changing opinions about competitors are their shifting views on how to respond to rivals.

A year ago, when asked how supermarkets can best fight competitors for Center Store sales, about 51% of retailers pointed to private label. That was far and away the lead response, followed by 21.8% who emphasized price and 18.2% focusing on value-added offerings (defined as clubs, loyalty cards, targeted offers, educational programs and nutrition programs).

Jump ahead to 2010, and the picture has changed. This time, private label attracted only 24.1% of responses, which was the same percentage given to value-added offerings. Meanwhile, a third of respondents pointed to price.

The lesson here appears to be that private label, while a crucial strategy, isn't seen anymore as a panacea. Instead, retailers need a more diversified arsenal of weapons that also includes price (which would presumably refer to national-brand pricing as well) and value-added offerings.

This survey's biggest insight for me is how quickly the competitive landscape is changing. In just one year the dynamics are quite different.

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