Independent retailers giving up market share
Chain stores are grabbing more share of the retail food market, but a new U.S. Department of Agriculture economic study says independent grocers still play an important role in the economy.
In a 32-page report titled “Independent Grocery Stores in the Changing Landscape of the U.S. Food Retail Industry,” authors Clare Cho and Richard Volpe from the USDA’s Economic Research Service said independent retail operations (retailers whose owners operate fewer than four outlets) grew in number over the last decade in counties with a growing population and a growing percentage of blacks.
The study found that independent grocery stores generated $70 billion in sales in 2015, or 11% of all U.S. grocery sales. That was down from about 14% of all grocery sales in 2007, according to the report.
By store count, independent grocery stores made up at least half of all food retailers in 44% of U.S. counties. The dollar share of the retail food market was lower in comparison; the report said only 19% of U.S. counties had at least 50% of retail food sales from independent retailers.
The total number of grocery stores in the U.S. has increased by 7% (from 47,000 in 2005 to 51,000 in 2015) and the USDA report said chain store growth has easily beat the growth pace of the independent retailers.
From 2005 to 2015, the study found the market share of independent stores had declined in 41% of U.S. counties.
Losing ground
Large format independent retailers have suffered declines.
“The decline in large-format independent stores began with the Great Recession and peaked between 2014 and 2015, suggesting that this independent grocery store format continues to face difficulties,” the report said.
The USDA report said mergers and acquisitions in the retail sector in the late 1990s and again after 2010 have boosted the concentration of retail grocery sales in the U.S. Total annual sales among the four grocery retailers with the highest sales increased by 20% from 1996 to 2013.
The top four retailers accounted for almost 40% of retail food sales in 2013.
In 2015, the USDA found independent stores were mostly composed of “superettes” (58%) and supermarkets (33%). Superettes are smaller grocery stores with annual sales between $1 million and $2 million, and supermarkets are defined as stores with at least $2 million in annual sales.
In terms of format, chain stores were dominated by supermarkets (67%) and supercenters (15%), according to the report.
Independent retailer outlook
It is unclear how the overall food retail sector will be affected if the share of independent stores continues to decline.
“Market concentration could increase further, particularly if mergers and acquisitions among chain stores continue,” the authors said.
That could mean food access issues become a greater concern, according to the report.
Online ordering and delivering of groceries could increase access to healthy foods in rural areas, though growth in such services could hurt brick and mortar stores.
“Overall shopping behavior may also change if grocery delivery services continue to expand, which may force grocery stores to offer more products or specialize in certain areas, particularly among independent stores,” the report said.
