Over the past 67 years, commercial retail space per capita has increased thirtyfold, according to CoStar Group. While some of this development is explained by the movement away from traditional mom and pop stores towards chains, the increased space has created additional vulnerabilities to retailers’ changing customers. Past retailer strategies consisted of expansion to increase sales growth. Yet, a report released by Barclays Inc. suggests that 38 of the top 50 grocery markets in the U.S. are already too saturated by food retail per capita or are on track to be so by next year. Without major strategical reorganizations, numerous retailers could very easily be facing enfeeblement.
Customers are becoming increasingly tolerant of online choices. Especially in cities online ordering has become increasingly prevalent with 23% of consumers living in a city with a population of 500,000 or more having made an online grocery purchase in the last 90 days, compared to 10% in smaller cities.
Additionally, research has indicated that consumers are growing more unfavorable towards cooking. Cooking has gradually evolved from a daily activity to a niche, occasional, activity. Consumers now spend more money on food in restaurants than they do on groceries, and the biggest 25 food and average companies having lost $18 billion in market share since 2009. Even simple, non-taxing items like cereal are experiencing market losses as people shift their breakfast consumption towards the likes of Dunkin’ Donuts and Starbucks.
Keith Knutsson of Integrale Advisors commented, “While it is difficult to forecast the developments of such a major US market, it would not be the first time that an entrenchment in traditional business methods and failure to adapt lead to the demise of an industry.”
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