Are American Grocery Stores In Danger Of Retail Crisis?

Blurred image of the inside of a grocery store

Businesses across a wide range of industries have been sent into crisis thanks to the ease of online shopping and the convenience of retail stores.

American grocery stores are one of the few businesses that hasn’t suffered at the hand of retail or internet shopping. Bloomberg, however, has predicted that American grocery stores are on the brink of a war against a retail crisis. Are consolidation, bankruptcies, and falling prices in the future?

Bloomberg reveals an invasion is shortly as a German retailer called Lidl could cause a retail crisis for businesses that supply American groceries. Lidl is a retailer known for both its efficient operation and its affordable prices. The retailer is currently planning a U.S. expansion in the next few weeks which could result in the opening of as many as 100 new stores all across the East Coast by the summer of next year.

The produce section of a grocery store

Lidl has 10,000 stores in operation all across Europe and currently has their sights set on Texas as it is one of the most competitive grocery store markets in the United States. Analysts have predicted the German retailer will expand to $9 billion in sales by the year 2023.

Bloomberg notes “the last thing U.S. grocers need is more cutthroat competition” expanding to the United States. For struggling brick-and-mortar retail stores, selling food has always been a safe way to bring in customers. After all, everyone needs food. American grocery stores specifically have also always been somewhat shielded from the online pressure. Though, Amazon does appear to be dedicated to cracking the code by selling fresh food.

“It’s an intimidating time for a lot of these retailers,” said Jennifer Bartashus, an analyst at Bloomberg Intelligence.

There’s no denying times are fairly tough for anyone dipping into the U.S. retail industry. In fact, stores are closing around the United States at a record-breaking pace – just for the year 2017! Most, however, aren’t too surprised as Amazon continues to move in and gobble up one industry after the next. In the past, the grocery industry has always been a safe haven, as only 1 percent of the $1.5 trillion industry has moved to the internet.

The bottom line is simple: people have to eat. So, the need for food and groceries isn’t going anywhere. Retail giants with low prices on food offering the convenience of buying other items as well could cause problems for the American grocery stores that have been safe thus far from the retail crisis.

One of the biggest reasons why American grocery stores are at risk of being dragged into the retail crisis is because you can buy food just about anywhere. You don’t have to take a special trip to the grocery story if you just need a gallon of milk, for example. A person can pick up a gallon of milk at a pharmacy or gas station. You can even get smaller jugs of milk at a dollar store.

Dollar General has opened an additional 900 stores in the last year and ended the year 2016 with more than 13,000 stores in operation. While Dollar General isn’t a grocery store, it generates 75 percent of its sales from consumable items including food. The chain is expected to open another 1,000 stores this year. Then, you have a pharmacy chain – CVS – which operates 8,000 stores and also uses food to boost sales and bring in customers. CVS offers the convenience of picking up your prescription, grabbing a stick of deodorant, and grabbing some snacks for the kids or some side dishes to make with dinner.

CVS and Dollar General are just two examples of why American grocery stores are headed for retail crisis. Will grocery stores be phased out? Will they have to expand to sell more than just food to survive?

A snap shot of the outside of a Kroger store

Grocery stores such as Kroger Co. – which is one of the biggest American grocery store chains – also have a hard time keeping up with the price wars. You have retail stores such as Wal-Mart that offer price matching to guarantee the cheapest prices along with the convenience of buying items other than food making it difficult for companies like Kroger Co. to stay in business. Will American grocery stores be able to compete with the cheap prices of retail stores?

Do you think American grocery stores are in danger of retail crisis?

[Featured Image by luchunyu/ShutterStock]