Supercenters: The Emerging Force in Food Retailing

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The distinctions between various types of retail firms, such as supermarkets, mass merchants, and discount drug stores are disappearing as part of the continuing evolution of retailing. With the overall US population growing slowly and the near saturation of good retailing locations in most market areas, retailers have increasingly sought to grow sales and profits by expanding their appeal to include a broader spectrum of consumer products. As various retailers expand their product offerings into the traditional domains of other retailers, competition for consumer spending reaches new heights while the distinctions between retail alternatives are greatly reduced. During the 1980's, supermarkets, seeking higher profit margins, aggressively expanded their product offerings to include general merchandise and other non-grocery products. With the dawn of the 1990's, traditional general merchandise retailers, seeking higher customer traffic, have aggressively added grocery items to their product offerings. The grocery retailing universe has expanded to include supercenters, mass merchants, wholesale membership clubs, drug stores, limited assortment stores and convenience stores as well as traditional supennarkets and grocery stores. At least initially, consumers appear to benefit as this frantic race results in lower prices and a myriad of shopping choices. However, in the longer run, intensified competition for sites and customers, results in some retailers gaining while others are forced to sell out due to unprofitable operations. As the strong become stronger and the weak weaker, mergers, acquisitions and consolidations result in fewer but larger competitors. The introduction of the supercenter concept presents a new competitive challenge to traditional supermarket operators. Drug stores of all types have also expanded merchandise lines so that these retailers now compete directly with both supermarkets and mass merchandisers. Each type of retail fonnat has certain competitive strengths that need to be understood and addressed in the strategic planning of all firms in this increasingly competitive retail sector. The states of New York and New Jersey have recently become focal points for expansion by some of these alternative grocery retailing formats and will soon see the physical presence of all these retail formats in a number of marketing areas. Understanding the dynamics and strategies of these alternate retail formats will be critical to establishing and maintaining a clear competitive advantage.

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A.E. Ext. 93-15


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Charles H. Dyson School of Applied Economics and Management, Cornell University



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