The Competitive Landscape of the Grocery Industry

The grocery industry has many characterizations to help clarify its competitive landscape. The industry concentration is low as of now but appears to be seeking a potential rise. Competition has had a huge increase in this industry along with the increasing trends of the industry. Finally, globalization trends seem to be heading positively at a steady pace. All of these factors come into play when describing the competitive landscape of the grocery industry.

The industry concentration is used to measure the extent to which the top four players dominate an industry.  IBISWorld quotes that they, “expect that the top four players in this industry will account for 38.3% of market share in 2012.” This signifies a low concentration level because select companies are attempting to control the industry on their own. Even though the shares are not equally distributed, there is still small growth that is occurring in the concentration. Players are winning market shares during an economic downturn which means that even though the economy is supposedly going down the drain and people are spending less money they are still selling market share. IBISWorld states that over the past five years, market share had increased and that the forecast shows that it will continue to rise in the next five years to come.

Aside from the industry concentration, a great competitive landscaping factor of the grocery industry is its increase in competition and trends. Grocery stores, such as Whole Foods, are constantly engaged in a war of pricing their goods better than any other. The level of internal rivalry is fierce and becoming fiercer because the supermarkets are introducing new trends, such as organic foods, that have little differentiation. This allows any players to enter the market and compete with even the biggest companies, such as Whole Foods. Stores also differentiate themselves for competitive purposes by supplying a range of quality products. The stores who can extend their reach for goods, with more variety and can permit a better grasp for people with both high and low-income households, will be the most successful. Lastly, the promotions given in stores eminently attract customers searching for deals on goods. These tactics are used constantly by stores everywhere to compete effectively against any store.

Globalization is an additional category of competitive landscape. For the most part, US-owned establishments earn their revenue from domestic operations. However, IBISWorld states, “American companies have increasingly been expanding their operations beyond US borders.” One quick example of this would be Safeway and how it owns 49% of a food and variety store operation in Mexico. The more stores that can go abroad, the better they allow themselves for opportunities for success. This is because they are expanding and growing internationally, which tolerates for possibly more revenue and even bigger opportunities.

http://clients1.ibisworld.com.proxyau.wrlc.org/reports/us/industry/competitivelandscape.aspx?entid=1040