A look at Food Retailing
More than 240,000 finns
are classified as food
retailers. Their scope,
however, is ever changing.
Technology, competition, overall
economic trends, interest in stimulating
consumer demand, and changing
consumer preferences affect how they
conduct business. Recent company
consolidations, buy-outs by food
wholesalers, geographic shifts, and
mergers have resulted in fewer and
larger finns. Twenty food retailers
held a 37.6 percent share of the total
national grocery store sales in 1985.
The trend toward fewer but larger
supennarket stores is predicted to
continue. Smaller stores are being
replaced by superstores with 35,000
to 55,000 square feet and with hybrid
combination stores of 45,000 to
200,000 feet. The larger stores can
offer a wider variety of merchandise
and often can order directly from the
manufacturer.
Guide E·1 26
SUPERMARKETS AND THEIR CUSTOMERS S upennarkets have changed their
orientation to consumers in the
past twenty years. They used to
be selling agents for manufacturers.
Now, retailers consider themselves
purchasing agents for consumers.
Finns work hard at understanding their
customers within a community. They
use customer comment cards, focus
groups, and advisory panels.
There are marked differences in the
style of supennarketing available to a
given consumer, depending on where
you live and how widely you are
willing to shop. Some communities
offer only one or two choices of supennarkets
plus a comer convenience
store or two. In some central city
areas, such as New York City, foodshopping
choices for a resident who
does not own a car may be limited to
one rather small supennarket and
several fresh fruit and vegetable
markets, which also carry a limited
assortment of other grocery items. In
large suburban areas, a resident with a
car may be able to shop for food at as
many as nine to thirteen different
stores. Retailers may site a store in a
given location expecting their customers
to come from an area as wide
as 25 to 30 miles away.
You will also notice differences
among stores that are part of the same
supennarket company or chain. Retailers,
in their attempt to segment
markets and understand customers in
a specific community, often tailor each
store according to its location. These
differences can be in response to local
competition, the cost of doing business
at a particular site, and community
variations such as culture, ethnicity,
and household income levels.
THE LURE OF THE SUPERMARKET
S upennarkets have been built on
high volume, self-service, and
the lure of economy for shoppers.
In the 1930s, when supennarkets
were being established, grocers
took a bold step asking shoppers to
select their own merchandise. This
approach was tried as early as 1916
but did not have much success. During
the Depression, economy-minded
shoppers made supennarkets a winner
with their 25 percent or higher
savings on groceries as compared to
the other stores of the time.
Besides increasing in size since then,
stores have greatly changed their
emphasis. Retailers know that time
has become as important to shoppers
as saving money. Newer stores emphasize
one-stop shoppi ng and may
be a combination grocery store, pharmacy,
photo-finishing shop, fast-food
restaurant, gounnet store, bakery, and
generJI merchandise-hardware,
household supplies-store. Many
stores allow you to access your bank
account through electron ics. On the
West Coast, retai lers are experiment-
ing with home delivery services and
drive-in shopping. NO·FRILLS SAVINGS: WAREHOUSE STORES
The supennarkets of today are attempting
to combine economy and
large volume with service and convenience.
Many stores are open
twenty-four hours a day. Some chains
allow senior citizens discounts when
they shop on a particular day and also
provide a courtesy bus to transport
them to and from the store. There are
even su permarkets that sponsor "happenings,"
which range from singles
Ia nd gounnet night to theme weeks, to krep tlrei' ,""ome~' ""nrion.
In some communities, where the population is large and the local interest in
saving is strong, warehouse stores and membership wholesale clubs offer
no-frills savings on some grocery items. Clubs are open to group and
individual members who pay a fee to buy products at wholesale prices. Many
small businesses take advantage of the low prices at membership clubs to buy
items such as cleaning and paper supplies. There is no guarantee that you will
find a particular item on a particular day. Most clubs stock 4,000 to 6,000 items.
About 40 to 60 percent is groceries; the remainder is general merchandise
usually including linens, electronics, and household and office furniture. Both
wholesale clubs and warehouse food stores share a no-frills approach to merchandising.
Decor is basic institutional warehouse. You probably won't hear
soothing music, and few services are provided to customers-they usually have
to bag and carry their own purchases. These alternatives to supennarkets, if
available, are certainly worth a comparison. You could stock up on nonperishable
grocery items once a month or less and save a lot.
BIG AND BOLD HYPERMARKETS The hypennarket is based on the designs and operations of very large stores
that have been operating in Europe for some time. It combines a full supermarket
with a discount general merchandise store. It is BIG. One store that
opened in the Southwest covers 222,000 square feet. Hypennarkets depend on
high volume and so must be located in geographic areas with many potential
customers. Their attraction for shoppers is that everything is under one roof and
at exceptionaJly low prices. There are questions as to whether the size of the
store may keep customers away. But companies considering hypennarkets in i the future believe that these stores appeal to consumers looking for low prices
I and variety who are not satisfied with more upscale and service-oriented
, supennarkets. The number of hypennarkets increased from 60 to 80 between
1984 and 1986.
I ____________________________________________ __
I CONSUMER AFFAIRS
! consumer affairs departments represent consumers' interests to the finn
I
and support their customer base. These departments are asked to translate
customers ' needs and demands into improved business practices. Activities
in consumer affairs have greatly expanded since the early 1970s, when
these departments usuaJly only monitored issues, handled consumers' inquiries
and complaints, and reported to management about customers. Now the departments
are involved in education by offering point-of-purchase infonnation,
developing booklets for consumers, and conducting or sponsoring classes.
The consumer affairs director may have overall responsibility for quality assurance"
which means working with many different departments of the supennarket
company. They set up and maintain systems to respond to consumers' inquiries
and complaints that both service customers and affect how the business
is run. Consumer affairs staff may also have such broad responsibilities as community
involvement and fund-raising, training store personnel, planning and
scheduling store demonstrations and other special events, and appearing in the
media as spokespeople.
THE CONVENIENCE
CONNECTION What do you do at eleven
o'clock at night when you
remember you are out of
milk? How about when you are on a
car trip and you want to stop for a
snack and a newspaper? A convenience
store may be the solution-and
it won't be hard to find.
The number of convenience stores
continues to increase and totaled over
47,000 in 1986. These retailers carry
a limited assortment offood as weJl as
other merchandise, and some seJl gasoline.
Recent intense competition
among convenience stores has resulted
in price wars and the expansion of
services such as video rentals and an
increased variety of take-out foods to
attract more customers.
c
COMING TO TERMS WITH SUPERMARKET FORMATS
CONVENTIONAL STORE
.. Self-service
.. Highest percent of food versus nonfood items
.. Sizes range from 3,000 to 30,000 square feet
COMBINATION FOOD AND DRUGSTORE
.. More product variety
.. Nonfood items 25 to 35 percent of sales
.. Nonprescription drugs and general merchandise
.. Prescription drugs
.. Sizes range from 35,000 to 45,000 square feet
SUPERSTORE
.. Some prescription drugs
.. Generic and specialty product areas
.. Some self-serve bulk foods
.. Average size 35,000 square feet; some are as large as 90,000 square
feet
LIMITED ASSORTMENT STORE
.. Limited number of product brands
.. Stock the most popular sized products
.. Less than 10,000 square feet
WAREHOUSE STORE
.. Strong price appeal
.. Primarily food, some health and beauty aids, but low emphasis on
general merchandise
.. Sizes range from 12,000 to 35,000 square feet. Superwarehouse stores
range from 50,000 to 140,000 square feet.
RESOURCES
"The Food Industry: Changing with
the Times." National Food Review,
S ulletin NFR -35, Economic Research
Service, U.S. Department of Agriculture,
Washington, D.C., Fall 1986.
Gallo, Anthony, et al. Food Markering
Review, 1987. Agricultural Economic
Report no. 590, Economic
Research Service, U.S. Department
of Agriculture, Washington, D.C.,
August 1988.
Note: Information in this guide
has been reviewed by Priscilla
Grijalva, Extension Food & Nutrition
Specialist and reprinted with
permission from Cornell
Cooperative Extension Service.
Published and distributed in furtherance of the Acts of Congress of May 8 and June 30, 1914, by the Cooperative Extension Service of New Mexioo
State University, Robert L. Gilliland, associate dean and director, and the U.S. Department of Agriculture, oooperating. New Mexioo State University is
an equal opportunity employer. All programs are available to everyone regardless of race, oolor, rel igion, sex, age, handicap or national origin.
March 1990 las Cruces, NM
1M
NMSU Cooperative Extension Service and Agricultural Experiment Station Publications
