New York, NY – The Supermarkets and Grocery Stores industry has suffered from declines in the quantity and quality of purchases over the past five years. According to IBISWorld Industry Analyst Jeffrey Cohen, “During the recession, high unemployment and low household disposable income drove consumers to reduce spending on premium-brand products.” Instead, they increased spending on generic brands and discounted items, harming supermarkets and grocery store sales. As the economy began to recover and household disposable income slightly increased, consumers slowly returned to prerecession habits, treating themselves to more expensive restaurant meals and decreasing the number of grocery shopping trips. Consequently, revenue declined in 2011 and 2012. Overall, industry revenue fell at an annualized rate of 0.4% to $522.5 billion, including a 1.7% decrease in 2014.
Competition from supercenters and warehouse clubs, especially Walmart and Costco, increased throughout the five years to 2014 because of their low prices and extensive product ranges. Profit margins steadily declined over the past five years due to the low mark-up prices attached to groceries in supermarkets. While economic recovery provided grocery stores with the ability to raise prices, high operating costs continued to shrink profit margins. As a result of shrinking profit margins and increasing competition from supercenters, the number of enterprises fell at an annualized rate of 1.1% to 35,761 during the five years to 2014.
Throughout the next five years, IBISWorld expects demand to slightly increase, generating a steady stream of revenue for grocery stores and supermarkets. “As the economy recovers and household disposable income further expands, consumers will increase purchases of premium brands and private-label brands, increasing the average transaction sizes for grocery stores,” says Cohen. Also, competition from big-box retailers like Walmart is anticipated to intensify over the next five years as these stores increase their grocery product offerings and lure customers away from traditional grocery stores. Consequently, IBISWorld forecasts that industry growth will slightly increase during the five years to 2019.
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