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AP Photo/Al Behrman
A business model that’s under assault.

Traditional American supermarkets are being eaten alive

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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