The retail category of food stores includes grocery stores; meat and fish (or seafood) markets; fruit and vegetable markets; candy, nut, and confectionery stores; dairy product stores; retail bakeries; and miscellaneous food stores (including coffee stores, health food stores, vitamin food stores).
Grocery stores account for about 95 percent of total food store sales and nearly 90 percent of all employment. Large chain-store companies operating supermarkets (full-line food stores with over $2 million in sales) dominate the grocery store category.
Changes in consumer tastes and lifestyles continue to erode sales of many traditional grocery items.
Shoppers increasingly stop at food markets searching for hot meals for take-out, freshly baked breads and pastries, and nonfood items such as health and beauty care products.
Consumer desires for "one-stop" shopping and convenience are driving growth in value-added product categories.
In response, new store formats (including increasing store size) continue to be constructed to target convenience-minded customers.
Large supermarkets now have in-store service counters (delis, snack shops, bakeries, flower shops, etc.) with separate check-out areas to speed up purchases of prepared take-out foods and other high value-added products and services.
Also, many grocery stores are offering home meal replacement programs to cater to customers who shop for convenience.
Stores with such programs offer gourmet and prepared foods, salad bars, and ready-to-heat meals with side dishes.
Stores are also focusing on programs to increase customer loyalty and restructuring their operations to reduce costs. One way supermarkets are generating customer loyalty is by offering private label brands.
These brands are generating good business for grocery stores, because the price is usually lower but the margin is typically two-three times as high as it is on national brands.
If customers enjoy a private label brand, it is likely that they will continue shopping at that same store due to convenience.
Supermarkets also compete by investing in new cost-saving technologies. Technology initiatives include inventory management and new merchandising techniques to reduce costs and raise productivity.
For many store operators, better management of the supply-chain and cost-cutting systems to improve accounting and better coordinated supplier deliveries are a clear focus.
Food retailing has traditionally been considered a consumer staple industry, in that many of the items purchased are deemed necessities.
The industry is characterized by high fixed costs; profit margins are notoriously thin requiring continued sales gains to keep profits up.
Weak sales growth for much of the 1990s have battered the financial statements of many retailers.
Chain grocery stores dominate the food store sector. Food retailing is highly competitive and large chains continue to wrestle market share from each other as well as from smaller independent grocery operators and other food stores (e.g., fruit and vegetable markets, meat and seafood markets).
Warehouse clubs (e.g., Costco) and "supercenters"—those that sell general merchandise and food—have been problematic for chain grocery stores.
