Large grocery stores will continue to exist for the foreseeable future, but their numbers will drop significantly
For decades, Canadian consumers have been accustomed to the traditional grocery store where you purchase most of your groceries under one roof once a week or every other week. That model, which emerged in the 1960s, is under serious threat now and may signal the end of the grocery store.
A few key metrics are telling us that the days of the typical grocery store are numbered. Take Loblaw for example. A good portion of Loblaw’s business, Canada’s current no.1 food retailer, is now related to non-food products. Of course, Loblaw rocked the food retailing world last year by purchasing Shoppers Drug Mart for over $12 billion. With this act of brilliance, Loblaw acquired cheap real estate and thereby allowed its major labels like President’s Choice to reach out to urbanites longing for convenience, healthy food choices, and loyalty points. At the same time, consumers will now find sushi and fresh nicoise salad next to medication and makeup. Loblaw is even exploring the idea of a drive-through shopping experience.
Loblaw has been quite active in reinventing itself for one reason: Walmart. Because of Walmart’s spectacular ascent in the food retailing world, everyone else must adjust. With its supercentres, the company now has close to 10 per cent of the Canadian market and is striving to become the No.1 food retailer not only in America – where it has held the top spot for years. And in all honesty, numbers are making it difficult to bet against Walmart’s odds these days.
Online shopping is also another legitimate menace to the traditional grocery store. The virtual world is a channel being exploited by some very important players, particularly south of the border. Amazon, which has tremendous clout in the e-commerce space, has a growing interest in food e-retailing. In fact, it is gaining market share in Los Angeles and San Francisco and may run more pilots in other countries, such as Canada. With our greying population, harsh winters, and increasingly demanding work schedules, online shopping is slowly making a case for itself.
Above all of this is the two-headed monster all food retailers will need to cope with in the future. On the one hand, boomers are slowly retiring with fixed income and depressed pensions. They will be looking for affordable prices as much as they can. On the other hand, millennials who are becoming increasingly influential link social values to food more than their predecessors do: organics, fair trade, local foods – all are important to them. Farmers markets, known for high price points, are breaking records in sales across the country despite rising food prices in stores. As a result, food demand is becoming more fragmented, which makes consumer behaviours more challenging to anticipate.
Food retailers will admit that not every grocery store is equal and most adapt to local needs. Since customization will become an important driver moving forward, specialty stores, once written off by many, may have a future after all.
Ethnicity and food trends are game changers as well. Many observers predict that 70 per cent of consumer spending growth will come from visible minorities over the next decade. Ethnic and gluten-free products are becoming better and tastier, pleasing growing segments of the market place. But what is trendy one day may not be tomorrow, making it challenging for the food industry to recognize which innovative features have currency.
For the foreseeable future, large grocery stores will continue to exist, but their numbers will drop significantly. Unlike the 1960s when one model dominated the market, we will soon see many successful strategies emerge to feed Canadians.
By Sylvain Charlebois
Sylvain Charlebois is a professor of food distribution and policy at the University of Guelph in Ontario.