Supermarket chains suffering in wealthy countries

Supermarkets in numerous wealthy countries are having a hard time competing with the wide range of choices offered to consumers:

As they scramble to maintain market share, the big four British grocers can take comfort from the fact that at least they are not alone. The global supermarket industry has its share of epic competitive scraps, too. In Europe alone, the discounters that have wrought havoc for Tesco, Morrisons, Asda and Sainsbury’s have an even more powerful grip on the industry. While Aldi and Lidl control around 8% of the UK market, according to figures from market research group Kantar the share controlled by discounters in France is 10% and in Germany – home of Aldi and Lidl – it is 37%. In the UK, two-thirds of the market is controlled by four players; this is the same as in Germany, while in France 56% of the market is controlled by the top four and in Spain just under 50%. A look at these markets, plus some of the biggest outside Europe, shows that every territory poses challenges for big grocers…

As in the UK, discounters and supermarkets in Germany are faced with shoppers who are less and less willing to drive out of town for their weekly shop, and more likely to do small, frequent trips in urban areas. In recent years, the trend has led to a revival in big cities like Hamburg and Berlin of the traditional Tante Emma Läden or corner shops, which have been able to be much more flexible in reacting to trends or food scandals than their bigger rivals…

Between the discount stores, supermarkets and hypermarkets there is a constant battle going on to woo the increasingly cash-strapped consumer. “Supermarkets are really the only sector [in Italy] where competition has worked out,” said Liliana Cantone of Italian consumer association Altroconsumo. “The players are doing their best to offer lower prices, and consumers can really benefit from this.”…

The market is far from impenetrable, however. Walmart, the only “everyday low pricing” operator in Japan, has forced domestic rivals to keep their prices low where it operates stores. Costco, with 20 stores nationwide, has proved a success, offering prices comparable to those found in the US. Tesco’s foray into Japan was frustrated, in part, by consumer idiosyncrasies.

Sounds like some contradictory forces at work. On one hand, increased globalization means food can travel all over the world. It might seem that such a global market would be controlled by some major players in the grocery industry who could use their size to their advantage. Yet, that same globalization allows other players to get into the game and gives consumers more low-priced options, usually something seen as a good in free-market economies. Throw in debates about subsidizing food production, getting healthy food to places that need it, and genetically modified food and you have a retail sector that is experiencing a lot of flux.

Just one quick thought: I’ve been in supermarkets in England, France, and Japan and they all seem more similar to each other than to the American version. Even not looking at Walmart or other big box stores with groceries, the American supermarket is an amazing size with tremendous variety. In contrast, stores in the other countries are smaller, something that may be cultural as well as economic due to higher rent and land prices.

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