Guest post from our friends at Spots 'n Dots
Running a supermarket has always been a low-margin business. Chains made money through volume more than pricing. But now the dollar store is becoming a real threat
to both the traffic and the margin, says a new survey from Perception Research Services International (PRS).
Make no mistake, supermarkets still sell the majority of groceries in the U.S. The PRS survey finds that 91% of shoppers bought groceries in a supermarket in the last three months--about the same as last year’s 92% in a similar survey. And mass merchandisers like Walmart and Target, are still the supermarkets’ biggest competitors, with 73% of survey participants shopping for groceries there in the last three months (down from 76% in 2011).
But the number of persons who bought groceries at a dollar store has risen to 35% this year, up from the already surprising 32% in 2011.Levels of grocery shopping at drug stores (46% compared to last year’s 47%) and convenience stores (23%/24%) have held relatively steady since last year.
While grocery stores still are preferred for perishables and food stuffs, dollar stores are favored for things like cleaning supplies and personal care items. According to the PRS survey, during 2012, more shoppers utilized sales/coupons (83%) and quantity/size
control (70%) to save money than in 2011. And in keeping with what we have been reporting, this year significantly more shoppers claimed to have switched brands to curb
costs (61% vs. 49%).
All those cost-cutting, price-conscious measures have meant that supermarkets have had to cut their own prices to the bone over the last year to keep up. And many, like Kroger, are emphasizing customer service, an advantage they have over dollar stores. "Our latest findings on grocery shopping indicate how very discerning today's shoppers are – about their venue preferences as well as brand choices," said Jonathan Asher, EVP at PRS.
"Retailers must understand their competitive strengths and capitalize on them, while also making the necessary adjustments to their offerings to seize opportunities for a larger slice of the pie as shoppers are more open to new shopping possibilities than they have
been since the 1950's with the advent of large, supermarket chains."