Amidst an unstable economy, and uncertainty as to what this year will bring, traditional U.S. supermarkets are looking at strategies to increase consumption and improve consumer experience, Supermarket News reports. 

Analysts are anticipating a challenging first quarter, caused by high costs of labor and uncertain consumer purchasing power which could “pressure operator margins”, according to Scott Mushkin, founder, and managing partner, R5 Capital.

“From our vantage point right now, it’s looking pretty difficult, at least peering into the first quarter,” he says.

Mushkin cites the increasing competition from Aldi, Amazon, Costco, and especially Walmart, which has improved its fresh offerings, is in the midst of a major remodeling effort, and also has an attractive membership program with its Walmart+ subscription platform.

“I think as you look at the competition, the 800-pound gorilla, the 1,600-pound gorilla, the 2,400-pound gorilla is Walmart, Walmart, Walmart.  They are gaining a tremendous amount of share. We talked about industry unit volumes being down 3%, but Walmart is up about 1%, according to our research, and this has been the case for a long time now — at least 18 months. That’s shifting a lot of share to the guys in Bentonville, [Ark.], and it’s to the detriment of traditional supermarkets.” he says.

Opportunities

Deborah Weinswig, founder and CEO of Coresight Research, found some reasons to be optimistic about traditional food retail, including opportunities around health and wellness, retailer media networks, and more personalized e-commerce relationships.

“I think that 2024 is a year of unprecedented opportunity for this sector,” she says.

At the same time, she cited the growing challenges that retailers face around shrink and organized retail crime.

“That is one of the greatest challenges I see in ’24 — certainly more than ’23,” she says.

Keith Daniels, managing partner, Carl Marks Advisors, said he sees the market as being ripe for mergers and acquisitions to fuel growth and streamline costs, both on the retailer and supplier side.

“As these companies look for the ability to take share, and reduce infrastructure costs, I think we’re going to continue to see that activity, particularly as revenues are starting to decline,” he says. “Companies are looking for opportunities for additional revenue growth.”

He said he expects that the pending merger of Kroger and Albertsons will likely eventually be approved by regulators in 2024, which could spur some of the competitors to consolidate as well.

“I think to compete with that, you’re going to see more pressure on the regional players,” says Daniels. “I think you will see the merger activity continue, and transactions in general.”

Regional and independent operators that don’t grow through mergers and acquisitions will continue to seek to differentiate themselves by providing in-store experiences such as prepared foods, more efficient checkouts, and focusing on on-trend product opportunities.

To read the full Q&A by Supermarket News, visit the following link.