A lot has been written about Amazon versus Walmart.
The crux of the argument is that the rise of online shopping, particularly at Amazon, has bruised Walmart’s dominance in the retail industry.
But Walmart’s struggles might not be entirely about online shopping.
In a recent note to clients, Stifel analysts shared a chart showing that when it comes to grocery shopping, supercenters like Walmart aren’t losing out to any type of store in particular. Rather, these supercenters are being hurt by consumers’ preference for not having a single store to do all of their grocery shopping.
As Stifel’s Taylor G. LaBarr explains in greater depth:
The idea of a “one stop shop” is giving way to more local convenience. In [the chart below] the largest inflection is not Supercenters versus Supermarkets — it’s the rising number of consumers who report having no primary grocery store at all, instead shopping at a variety of locations to meet various needs. We believe consumers at all demographic levels will continue to shift to smaller but more frequent trips, with an increased focused on product quality, nutrition, and healthy (local) supply chain.
There are several potential things that can be contributing to this trend.
For starters, Stifel’s team notes that more Americans are living in cities and more folks are “net-downsizing” for the first time in decades. In both cases, it’s more difficult to store bulk pantry foods in smaller homes/apartments than in bigger ones.
Additionally, people across income levels have generally shifted to eating healthier, observes Stifel. Arguably, the desire to eat healthier could encourage shoppers to seek out the healthier options at various stores, rather than deferring to a one-size-fits-all supercenter.
Moreover, “while many millennials may not be as proficient in the kitchen as their parents,” continues LaBarr, they “are much more likely than prior generations to find inspiration from a new recipe, or plan a unique meal.”
Consequently, millennials don’t stock-up on the same four items for the whole winter as previous generations may have.
Instead, their grocery shopping is more spontaneous, and they are more likely to go to a number of stores to get what they need than a one-stop-supercenter.
And as for what this means for the industry, Stifel declares that, “specialisation is back.”
As LaBarr writes:
With consumers now making frequent small trips to fulfil a variety of specific demand (based on unique inspiration), there is little to prevent them from visiting the best store for each individual need. Weekly shopping may consist of a Saturday trip to Walmart for paper towels and bulk cereal, followed by a Sunday stroll through the local farmers market for produce, a Wednesday visit to the discount grocery for easy weeknight dinners, and finish with a Friday trip to Fresh Market for a dinner party that weekend.
Although this could be bad news for the likes of Walmart, it is great news for the smaller bodegas and specialty stores.
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