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Traditional American supermarkets are being eaten alive

AP Photo/Al Behrman
A business model that’s under assault.
By Matt Phillips
Published Last updated This article is more than 2 years old.

The grocery store business has never been easy, given its traditionally thin margins.

But the last decade has seen a fundamental transformation of the food business as giant discounters such as Wal-Mart and Target cut into food sales. According to a recent note published by equity analysts at Credit Suisse, discounters controlled 22.7% of the US retail food business in 2013, up from 16.9% in 2003. That market share came directly from traditional supermarkets, which saw their market share slip from 30.7% to 26.7% over the same time period.


But discounters aren’t the only entities taking a bite out of traditional supermarkets. High-quality retailers such as Whole Foods and Trader Joe’s have been nibbling away at the business too, driving their share of retail grocery sales up from 1.1% in 2003 to 2.8% in 2013. At the other end of the income spectrum, “dollar stores,” which have have attracted poorer customers, saw their market share rise from 1.4% to 2.5% over the same period, according to Credit Suisse.

What’s interesting is that as the groceries war plays out, it’s increasingly blurring the distinctions between the different store formats. While Wal-Mart and Target have announced plans to add more organic offerings, for example, Whole Foods is flirting with the idea of non-organic fare and lower prices.

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