Retail Upheaval

Rather than trying to outrun online competitors, Martinez stresses that brick-and-mortar retailers should focus on rivals within their own markets, close underperforming stores, invest in locations that can be improved, and not put too much money into their best stores. She also suggests prices should be “within touching distance of value leaders without impacting the bottom line” and emphasizes the need to master the art of “fresh” foods. This is critically important since nearly three-quarters of consumers say the produce department is the key factor in deciding where to shop.

Some retailers are seeking new ground to get ahead of the storm. Whole Foods is launching a new lower-price chain appealing to younger customers; 365 by Whole Foods is named after the chain’s private label. Other brick-and-mortar stores are offering online services, and while the new offshoots may cannibalize some of their own store sales, “If you don’t cannibalize yourself, someone else will,” Steve Jobs often said.

Walmart is expanding its mid-size concept, Neighborhood Market, which is about the size of Lidl’s stores. “Walmart is big, smart, and a survivalist,” comments Grinstead, and is “willing to try things and walk away if it doesn’t work.” This was proven true in January when the retail giant announced the closure of all of its Express small-format stores. Though the failure of the Express concept is a ding to Walmart’s balance sheet, the company has plenty of irons in the fire. And as Grinstead succinctly points out, you can’t out-Walmart Walmart and “you can’t out-Aldi Aldi.”

As for Publix, Brous says the regional chain has no plans to be a deep discounter. The Hi-Lo retailer will continue to offer a mix of “value, quality, and variety.” And while staying on top of technology, Publix plans to maintain its focus on the customer experience. “The ability to see, touch, and smell still resonates with our customer.”

CONCLUSIONS
Certainly the forces at work today will put pressure on traditional grocers—and there will be winners and losers. With razor-sharp margins, a 5-percent drop in revenue can be enough to close a store.

Grinstead expects to see continued consolidation in the growing, distribution, and supply side of the industry over the next several years, while Martinez projects nearly a third of traditional brick- and-mortar stores will close in the next 10 years as online sales and ­high-tech tools (like Amazon’s Dash or Samsung’s touchscreen refrigerator) attract and hold on to more customers.

Nevertheless, the in-store experience is one most shoppers will still want, at least for some products. By offering a better experience—one imbued with sensory stimuli and plenty of food and beverage samplings—Grinstead believes the better supermarkets will hold their own: “Good companies are survivors.”

Image: ©iStock.com/Rasica/LiseGagne