Traditional Grocery Stores Can't Keep Up with Digital Shopping
Those who regularly shop at the grocery stores may have noticed a trend over the past few years: the prices are getting better and better. It's not an illusion — chain supermarkets have been lowering their rates to keep up with the competitive times.
USA Today reports the pricing scale is offering shoppers great bargains, but it's taking the axe to grocery store's profits. "It's created a price war among everybody," Phil Lempert, a supermarket analyst, tells USA Today. "This is great news for consumers, but bad news for businesses who sell food."
The fierce competition is coming from bargain shops like Walmart, online retailers, and wholesale stores. And, according to NPR, shoppers are choosing smaller markets, convenience stores, farmers markets, and even dollar stores over brick-and-mortar grocery stores.
To keep up, grocery chains are dropping prices and trying harder than ever to sell more volume to make up costs. According to the Agriculture Department's Economic Research Service, the cost of supermarket items dropped by 1.3 percent last year — the first decline since 1967.
Cost-cutting is being seen across the board. Wegmans slashed prices on bananas, peanut butter, beef, and dairy. Even wholesaler Costco dropped prices for eggs (18 extra-large eggs cost $3.61 last year, but now cost $1.79), pistachios, and liquid detergent.
Online grocery shopping is also a looming threat. According to the "The Digitally Engaged Food Shopper" report from the Food Marketing Institute, the market for shopping for food online has the potential to grow five-fold over the next 10 years. American consumers may be spending around $100 billion on online groceries by 2025, reports CNBC. Already a quarter of American households are purchasing some parts of their groceries online, and millennial shoppers surveyed by the Food Marketing Institute reported more willingness to shop online for groceries.
But the report doesn't have a bleak forecast for supermarkets. It predicts traditional grocery stores will have to "reconfigure" their strategy. "Only the retailers that first develop an understanding of their digitally engaged shoppers, build a strategy around that understanding, and cost-effectively integrate digital food retail into their banner and channel promise will be market leaders," the report states.