Friday, May 27, 2016

Competition in the Grocery Industry



After finishing the book excerpt, Competitor Analysis: Understanding Your Opponents, I immediately related this to the grocery industry.  The industry has evolved over the past several decades from a relatively static industry to dynamic industry.  There are no longer two or three large grocery retail giants in each market.  The grocery market now has more competition than ever with large chains competing with boutique gourmet style chains, health conscious organic focused chains, and the recent emergence of online retailers such as Amazon Pantry.

Positioning in the grocery industry is now more important than ever.  Retailers must understand who their customers are (including their values and social agendas), what type of diet they consume, and how they like to shop.  Consumers now have many choices that effect where they want to do their grocery shopping. 

In the Pittsburgh market we have three main market segments that all target a difference audience.  First we have the big name retailers such as Giant Eagle, Shop & Save, and Target.  Next are the organic, health conscious retailers, such as Whole Foods, Trader Joe’s, and Fresh Market.  Finally you have the discount stores such as Aldi and Good Sense.

The large chain retailers are trying to overtake the smaller boutique style store by offering similar product lines as an alternative to their main store brand products.  The Market District is a great example of this.  In the long term this tactic is only going to hurt their brand because smaller boutique stores cater to a completely different audience.  This audience shops at the smaller stores for convenience, health, and social agendas.  Giant Eagle is simply not positioned to compete. 

A German company, Albrecht Discounts, owns both Trader Joe’s and Aldi.  This business strategy is very successful and can be attributed to the creation of two independent brands operating under two umbrella stores.  One store caters to discount shoppers while the other caters to health conscious consumers.  This is an example of a model that really works, unlike what Giant Eagle has done.  By identifying with two complete separate brands, they engage loyal consumers who come back week after week.

Competitive pricing and quality products are no longer the only way to get ahead of the competition.  The emergence of online grocers such as Amazon pantry and grocery delivery services will force the grocery market to continue to evolve.  Retailers will continue to fight for market share and smart positioning will be the key to staying ahead of the competition.





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