David Orgel, editor-in-chief of Supermarket News, suggested in an editorial earlier this week that a number of formats that in the past have been considered comparatively minor threats to traditional grocery store operators on the food side of the business have moved well beyond the nuisance phase to become full blown pains in the _____ (our phrasing, not that of the more eloquent Mr. Orgel).
Specifically, Mr. Orgel mentioned Target and limited-assortment competitors Aldi and Save-A-Lot as rivals requiring close attention.
Target, he rightly pointed out, has made a major commitment to food in recent years with increased space devoted to grocery in the company's mass merchandise stores while at the same time it has ramped up construction of SuperTarget units.
Target's food push, he asserted, raises "concerns for supermarkets because, compared to Wal-Mart, Target's customer base and merchandising approach are much closer to those of grocery stores."
Mr. Orgel's commentary also suggests that in retailing, as in comedy, timing is pretty close to everything. A case in point are limited assortment stores, such as Aldi which happens to be on a fairly aggressive expansion program at a time when a growing number of Americans are looking to find ways to save money.
While limited assortment stores typically cater to those on the bottom rungs of the economic ladder, current economic conditions have opened a window of opportunity for the Aldi's and Save-A-Lot's of the world to expand their franchise with lower-income consumers while attracting middle-income shoppers seeking refuge from the high prices that have hit mainstream grocery outlets.
Supermarkets, Mr. Orgel correctly pointed out, have been successful in remaking their images in recent years to differentiate and establish consumer-accepted niches. One of the biggest challenges, he asserted, is that "grocers could become too comfortable with the current competitive dynamics" and risk losing their gains to Target, Aldi, Save-A-Lot and the ever present Wal-Mart.
Discussion Questions: Do you see supermarkets as being more at risk to competitors such as mass merchandisers and limited assorted stores at this point in time? What competitive response does the current environment demand?