A recent article in Supermarket News by Scott Moses has some astounding facts and figures about the rise of non-traditional, alternative grocers in the U.S. I encourage you to check it out here. In the meantime, here is a bullet point list of some of the very interesting and telling points that Scott makes.
- There are now 26,000 traditional supermarkets in the U.S., roughly 900 fewer than 10 years ago.
- There are now 65,000 alternative grocers in the U.S., and they comprise more grocery sales than traditional supermarkets and are the primary grocery shopping outlet for 61% of customers, up from 19% about 20 years ago.
- According to the Food Industry Association, the average consumer now shops for groceries every week at five banners, in four different grocery channels (e.g. supermarkets, supercenters, drugstores, discount/dollar grocers, club stores and various specialty grocers).
- Walmart is America’s leading grocer, with 25% national market share and as much U.S. grocery sales as Kroger (#2), Albertsons (#4) and Ahold Delhaize (#5) combined.
- The average U.S. Costco (ranked #3) generates about $242 million in revenue, roughly 56% of which are the same groceries sold in supermarkets, just in larger pack sizes. That’s $135 million worth of groceries per store, or $2.5 million per week, which is six times the average of a traditional grocery store (and three times the amount of a high-performing traditional grocery store).
- The vast majority of sales at Dollar General and Family Dollar / Dollar Tree are the same groceries sold in supermarkets, just in smaller pack sizes. These chains have a $41 billion combined estimated grocery business (and growing!), which together would be ranked as the 9th largest traditional supermarket.
- Many non-traditional grocers like Walmart, Target, Costco, Aldi, dollar stores, etc. have driven up their market share with lower prices and operational investments facilitated by scale efficiencies, including lower cost of goods. This has caused traditional supermarkets to lower their prices in order to retain as much share as possible, which in turn has caused the vast majority of them to lose a significant percentage of their annual EBITDA. Furthermore, the decline in EBITDA has impacted the smaller grocers’ ability to operate profitably and has led to many bankruptcies.
- Amazon has a market valuation (at the time of last month’s article) over $1.6 trillion, which is far more than all publicly traded traditional and alternative grocers, combined! So, its low cost of capital and high equity valuation give it a nearly limitless ability to compete with all grocers, particularly supermarkets.
- Amazon has 200 million Prime subscribers, whose membership generates $24 billion in cash (before they sell anything). When Amazon spends $1 billion per quarter on next-day delivery, it only costs them 6 basis points of their market value. Whether next-day delivery is profitable for them or not, it barely moves the needle for them but changes the game and raises the bar – and the cost of customer acquisition and retention – for everyone else.
- Amazon’s $18 billion increase in EBIDTA in the past year alone (to over $55 billion) is half of Walmart’s total EBIDTA and double Costco’s.
- Online grocery sales doubled in 2020 to over 10% of U.S. grocery sales and is projected to more than double again by 2025 to 22% of sales. Those sales are mostly coming from supermarkets.
