F.M.I.: Price competition impacts supermarket profits
November 10, 2010
ARLINGTON, VA. — Supermarket sales were essentially flat in 2009, and same-store sales decreased slightly, according to the Food Marketing Institute.
According to the F.M.I.’s “2010 Food Retailing Industry Speaks: Annual State of the Industry Review,” supermarket sales were up 0.12% in 2009 and same-store sales decreased by 0.82%.
“Shoppers’ overwhelming focus on price and value has led to fierce price competition among food retailers,” said Leslie G. Sarasin, president and chief executive officer of the F.M.I. “As a result, supermarkets are focused on trying to distinguish themselves from the competition by fine tuning their private label strategies, s.k.u. (stock-keeping unit) reduction and price differentiation in order to retain their current customers and attract new ones.”
Independent retailers were most likely to grow sales and profit during the recession with overall sales increasing by 1.39% and same-store sales up 1.62%.
“Our research shows that as shoppers altered their grocery shopping behavior, some formats benefited from this change and others have struggled to grow sales, same-store sales and profits,” Ms. Sarasin said.
In 2009 and 2010 retailers reported record-level anxiety about the impact of the local and national economy on their business with retailers rating their economic worries an 8.7 on a scale of 1 to 10. Competition was a big fear for retailers as more supercenters and full-service supermarkets in their areas are impacting business.
Overall, retailers are trying to distinguish themselves from the competition by focusing on quality produce, fruit, meat and poultry. Also, increased focus on private brands is another way retailers are using to differentiate themselves in the market.
Health and wellness concerns are on the rise again for retailers, the F.M.I. study noted. Before the recession, most retailers said health and wellness concerns’ impact on marketing and merchandising was profound. In 2010, 74.3% of retailers said it is one way they seek to differentiate themselves in the marketplace, up from 68.4% in 2009. Yet this number was down from 84.9% in 2008 suggesting retailers’ efforts in this area are subject to price and value in the marketplace.