The Future of Grocery Retail

The Future of Grocery Retail

Op-Ed: The grocery chain wars prove that the modern supermarket model isn’t sustainable

Editor’s note: this edition of Market Letter is published each week as a PDF. It’s a chance to catch up on the week’s news and analysis while you read.

By James Fallows

For more than a century, America’s grocery retail system was the envy of the world. A system of large chains that ran like clockwork, with one grocery store in every neighborhood, hundreds of farmers’ markets, three or four supermarket chains, big-box stores like Walmart and Costco, and even discount chains like Costco Express.

But in recent years, that system has been under assault. The Great Recession dealt a brutal blow to consumer spending, and the number of American households living in poverty has soared. More troubling still, the Great Recession has also been accompanied by a wave of store closures in the past two years. More than 3,000 supermarkets and other big-box retailers have been closed since 2009, bringing the total number of independent stores to more than 2,500.

These retail casualties are no coincidence. As the Great Recession took hold, more and more Americans began driving less and cooking less, especially in affluent neighborhoods. (Retail food chains account for about a quarter of all private vehicle miles in the United States.) Food deserts proliferated: many neighborhoods that once had good supermarkets, like Silicon Valley, lost their local chains to suburban sprawl. And the big chain supermarkets began to lose customers to smaller, family-owned stores with a greater focus on fresh, local produce.

In the face of these disruptions and trends, the traditional model of massive, family-owned grocers with deep marketing budgets, centralized locations and low prices is no longer sustainable.

The future of grocery retail is in doubt. But it’s not because of the traditional model, which remains, of course, very much alive and well. In fact, the retail industry is undergoing a remarkable transformation.

The industry’s latest innovation: grocers like Aldi, Costco, Trader Joe’s, Whole Foods, Walmart, BJ�

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