Supermarkets struggle as consumers head to big-box, specialty stores

Cub Foods shopper
Shopper Lindsay Peterson at Cub Foods in St. Paul, Minn., on January 20, 2011.
MPR Photo/Nikki Tundel

The traditional grocery supermarket model will likely have to change quickly as the average American moves elsewhere to buy groceries.

While some consumers are headed for big-box super retailers like Wal-Mart and Target, others are seeking out higher end and specialty options like Whole Foods, Lund's and food co-ops.

More Americans are buying their groceries today at Wal-Mart than anywhere else. Food makes up 55 percent of the retailer's $200 billion sales per year.

This news isn't good for traditional grocery businesses like Minneapolis' Supervalu. Last month, the company ousted its CEO Craig Herkert and reported dropping first-quarter net income and revenue.

"If you're in the supermarket business, it's a little bit like watching a train wreck in super slow motion. But I think who's going to win are going to be shoppers over time," said Jim Hertel, supermarket consultant and managing partner of Willard Bishop consulting, on The Daily Circuit Wednesday.

It's a story playing out in a lot of different markets across the country, he said.

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"Supervalu supermarkets occupy -- at least many of them do -- what we're increasingly calling the unsustainable middle ground," Hertel said. "They are not the same top quality in terms of the offering of produce and meats perhaps that some specialty stores are, and their prices are not nearly as sharp as Wal-Mart, Target."

The industry is seeing a splintering of the shopper base as some people head for the cheapest and most convenient options and others look for higher quality, sustainable local food.

"I am forced to shop at Wal-Mart because it is the only affordable place for groceries in my town," said Alison Renae Hanlin on Facebook. "I don't mind paying more for better quality food, but the local grocery store sells the same stuff as Wal-Mart at double the price. I prefer Trader Joe's, Super Target and Costco but have to drive 40 minutes to get to those stores."

Phil Lempert, an expert analyst on consumer behavior, marketing trends, new products and the changing retail landscape, also joined the discussion. He said there's a growing movement of people who care about food.

"We have a resurge in interest in food like we probably haven't seen in 50 years," he said. "Now these are not foodies, but these are more food-involved people than we've seen in decades."

On Facebook, Kelly Vruwink said she's willing to pay more for quality.

"Buying whole foods grown more sustainably is expensive, but you can also save a lot by not purchasing processed food-like products," she said. "A local CSA also provides us with wonderful local veggies all summer long at a lesser cost."

Most consumers are shopping through nine different channels for food a month, Lempert said. This requires food retailers to stay competitive as shoppers look for the best service.

"If you don't have service, there's another 10 people behind you as retailers who are happy to give people service," he said. "You want to know more than just what the price of the product is. You don't want foods piled high and sold cheap. We went through that model; it doesn't work."

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