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The Honolulu Advertiser

Posted on: Tuesday, March 4, 2003

Traditional grocers losing ground to supercenters

By Theresa Howard
USA Today

Wal-Mart's push into the $700 billion grocery business is changing the way Americans shop. Its supercenters and club stores are cutting the number of trips per year shoppers make to traditional supermarket chains.

An ACNielsen study out today shows that since 1999 consumer visits per year to supermarkets are down 12 percent, while visits to supercenters are up 40 percent. Supercenters are not only stealing traffic, but they are also getting more dollars out of each visit.

"Supercenters are doing a great job generating more trips (to) the store and getting $12 more per basket than traditional grocers," says Todd Hale, senior vice president at ACNielsen, which tracks consumer spending and habits.

Driving the trend, as in other retail categories, are consumers looking to save money. But many say a grocery and general merchandise store in one also saves time. "In a nutshell, it's price, but it's also a very convenient format," says Wal-Mart spokesman Tom Williams. "Shoppers can get a lot of things in one stop."

To counter, Hale says, supermarkets need to work harder on price, but they also need to play to their strengths, such as perishables and ready-to-eat foods. "Each grocer has to figure out what they want to be and who they want to compete against."

Last month, Safeway, the nation's No. 3 traditional supermarket chain, posted a $1 billion loss for the fourth quarter of 2002. Kroger, the No. 1 chain, has not reported its fourth-quarter results but in December posted a 6.6 percent decline in net third-quarter earnings. Also in December, No. 2 Albertson's met revised earnings expectations for its third quarter with an 11 percent rise.

One analyst predicts supermarkets' share of the grocery business will drop to 34 percent by 2011 from its current 53 percent, with the bulk lost to Wal-Mart. "The Wal-Mart impact is only going to become more intense," says Mark Miller, with William Blair & Co.

One reason is that, while supermarkets are in 100 percent of U.S. markets, supercenters are found in just 63 percent. Wal-Mart plans to add 200 supercenters this year — including the first one in California — to its current 1,258.

Wal-Mart operates five stores in Hawai'i.