Grocery Stores’ Competitive Pressures Intensify

Executive Summary

In our first report on the United States' retail sector, we analyzed potential pricing pressures coming down the pipeline for the retail trade and food services retail channels.1 In this report, we take a deeper look at some of these distribution channels and assess aggregate level response to some of these channels to inter-channel competition. To do this we ran several econometric regression equations to try to find out what type of intra-channel competitive pressures exist between these sectors. For this report we concentrated on the grocery stores (GS) and the other general merchandise stores distribution (OGMS) channels, which includes warehouse stores, supercenters and superstores.

Our analysis indicates that competitive pressures between these two sectors of retail have intensified since the recovery from the Great Recession. Although the GC sector's price sensibility to sales has remained strong over the past several decades, now the sector has to deal with a relatively strong cross-price sensibility with the OGMS distribution channel. However, this new competitive environment for the GS sector has actually improved the sector's growth prospects since the end of the Great Recession. That is, after a period of flat sales during the 1990s and the first decade of this century, the sector has started to grow at a relatively strong pace.

Grocery Stores versus Other General Merchandise Stores

Following up on a report we wrote last year, "Are Grocery Store Sales Making a Comeback?," which is available upon request, in this report we will try to measure the competitive pressures that have existed between the GS and OGMS retail sales channels over the last several years and look at the differences, if any exists, in this this relationship when comparing the period before and after the Great Recession. That is, we will analyze the entire period for which data are available and then we will compare the period before the Great Recession, without including the Great Recession and the period after the Great Recession. In last year's report we indicated that the grocery store sector of retail had started to look a little bit better vis-a-vis the large supercenters and warehouse stores as growth in that sector had started to improve slightly after the Great Recession and that the tremendous expansion in the warehouses and supercenters was somewhat faltering or slowing down.

Download The Full Special Report