Out-of-stocks are more than just a nuisance to retailers’ inventory management operations. They are perhaps the single most important factor when it comes to the customer’s shopping experience that ultimately impacts their bottom lines. Regardless of a store’s merchandising, promotions or omnichannel efforts, if shoppers are unable to find a desired product or brand, more often than not, they’ll leave to find it elsewhere.
Despite this daunting fact, the out-of-stock rate for years has hovered at an average of 8%, according a report by Food Marketing Institute (FMI) and Grocery Manufacturers Association (GMA) titled Solving the Out-Of-Stock Problem. Worse, out-of-stocks for promoted items often exceed 10%, which means retailers are essentially guaranteed revenue loss of 8% to 10% or more in an industry that’s already rife with challenges. Yet, many seem to have concluded that this rate is an inevitable aspect of grocery business operations because of its complexity and consistency. “But the problem is not going to be able to be swept under the rug anymore, because it’s becoming more and more exposed online,” says Jason Wirl, director of solutions consulting at inventory optimization software provider Itasca Retail Information Systems, based in West Des Moines, Iowa.
Shock to the System
With the ever-growing threat of Amazon, retailers are increasingly expanding their online offerings to keep up with consumers’ newfound expectations for accurate and expedient grocery delivery. “Amazon is top of the line in all grocers’ minds,” says Eric Smith, president of global consulting firm Supply Chain Optimization LLC based in Lake Forest, Calif. “They know that they need to change the way they’re doing things.” Walmart Inc., for instance, recently announced plans to expand its online grocery delivery service to 100 markets this year, with eyes on offering delivery to more than 40% of U.S. households, while Smart & Final Stores Inc. in April launched a new delivery app in partnership with Instacart.
Offering online grocery delivery for many retailers is an obvious next step to survive the Amazon-driven battle for convenience. But implementing these services can cause more harm than good for retailers without real-time in-store inventory management, says James Tenser, principal with retail consulting firm VSN Strategies, based in Tucson, Ariz. “When a shopper orders online or on mobile, they see a catalog of items theoretically carried in the store,” he says. “But they don’t see any visibility to the actual goods that are available in the moment,” which often results in order complications such as item substitutions, delayed delivery or cancelled orders—or, ultimately, an unsatisfactory customer shopping experience.
In as few as five to seven years, 70% of consumers will be purchasing groceries online, according to research from FMI and Nielsen, with an estimated $100 billion annual spend expected to occur as soon as 2022. As such, retailers have neither the time nor the affordability for complications in order fulfillment, on both in-store and digital levels. Shoppers cite product availability as one of the top three reasons for choosing where they shop, according to research by FMI and GMA. Yet on any given shopping trip, one out of every 12 items on the shopper’s list, and one out of every 10 promoted items, is unavailable on the store’s shelf, which causes consequences beyond lost revenue and shopper dissatisfaction. Data from the Solving the Out-Of-Stock Problem report revealed a “three strikes and you’re out” pattern among consumers:
- Strike 1: On the first occurrence of an out of stock, the shopper will substitute the desired item 70% of the time.
- Strike 2: On the second occurrence, the shopper may substitute the item, not make a purchase or go to another store.
- Strike 3: The third occurrence results in the shopper going to another store 70% of the time, meaning even greater loss of future revenue.
Still, most retailers have been slow to adopt inventory optimization solutions due to failed experiences with related software in the past. “As many say, ‘The well has been poisoned,’” says Smith, who in the mid-1990s spearheaded Hy-Vee Inc.’s deployment of a computer-generated ordering (CGO) forecasting and replenishment system, which remains central to the company’s operating systems today.
At the time, Smith says, CGO was gaining traction but left many retailers frustrated with unsuccessful implementation, in part due to discrepancies between the store-level and retail-level forecasts. “I concluded, ‘Why is the store creating one forecast and then the warehouse creating another forecast?” he says. “Rather than a store ordering one day ahead with one-day lead time, and a buyer at the warehouse ordering three days ahead with a three-day lead time, why doesn’t the store just order what they need four days ahead since they have a forecasting system?” Doing so resulted in a 60% decrease in Hy-Vee’s inventory and often, 100% sale rates for many vendors, Smith says. “It was absolutely successful.”
Debunking Inventory Optimization
Pains from the past have left many retailers feeling intimidated by inventory optimization, which can seem complex and overwhelming. But as their scars continue to fade, and pressure to improve the shopping experience intensifies, a necessary shift in retailers’ traditional inventory mindset is beginning to unfold—and today, the technology is there to support it.
Retailers have long maintained the practice of managing inventory via a pull-based system in which the store orders independently from the warehouse and supplier, often in bulk to carry “safety stock” in an effort to prevent stockouts, as well as beef up shelves for display purposes. But safety stock often lingers unsold in retailers’ backrooms, affecting profitability, and adds additional costs of labor for staff members to manage backroom inventory. Plus, this practice discounts the shopper’s in-store experience, where consumers decide what to purchase based not only on their predetermined shopping lists but also based on what they see in-store. “If it’s not available, they can’t buy it,” says Tenser. “There are some things that are really important to have in your assortment, and they need to be available when people need it.”
Picture this:A shopper is prepared to splurge for an impressive holiday dinner, such as a loin of beef. With a popular recipe in mind, that shopper is also seeking a dry mustard powder that’s often sold in conjunction with that piece of beef. If the $3.50 jar of mustard powder is unavailable during that shopping trip, the shopper may have second thoughts about purchasing the $54 piece of meat, Tenser says.
Inventory optimization is designed to match inventory supply to expected consumer demand to prevent this very problem, which affects both the shopper’s experience and the retailer’s profitability. The days of “stack it high, watch it fly” are over; new technology from companies such as Itasca enables retailers to generate forecasts based on historical POS information to order inventory via a demand-based system in which the forecasts between the store, warehouse and supplier are all connected. “It’s not just about eliminating out-of-stocks, although that’s one of the main benefits of the system,” says Wirl. “As we go forward, we see that one of the biggest benefits is a lowering of inventory.”
From basic product management through promotional planning and execution, Itasca’s Magic software provides a real-time perpetual inventory, advanced consumer demand forecasts and sophisticated ordering algorithms designed to improve retailers’ service level, inventory turns and handling costs while reducing inventory-related labor requirements. By adopting inventory optimization software, Itasca’s retail clients, including Wegmans, Raley’s, Carlie C’s and Price Chopper, have experienced benefits such as same-store sales increases of 2% to 3%, reduced out-of-stock rates to less than 1%, reduced inventory by 10% to 20% and reduced shrink by 25%, according to the company.
“We have been successful in reducing out-of-stocks and reducing shrink as well,” says Mack McLamb, owner of Dunn, N.C.-based Carlie C’s IGA. “We have already had to abandon one automated ordering project that we had invested thousands of dollars in. But we see the next-generation inventory management is not to get you ahead of the competition, but just really to remain competitive.”
Hands-Off Approach to Perpetual Inventory
Perhaps retailers’ biggest barrier to adopting inventory optimization software is their inevitable change in approach to placing orders. Retailers have traditionally ordered inventory manually, based generally on a gut feeling. And with most stores averaging 35,000 SKUs or more, that leaves a huge opportunity for error. “Human intervention is not that trustworthy here,” says Tenser. “When you study the problem, you learn that 95% of those decisions, of those 35,000 items, come down to a binary choice.” As such, retailers must adopt a more systemic process to streamline the order process and increase efficiency.
“The most significant shift for us was to go from being reactive to being proactive around inventory,” says McLamb. “On a day-to-day basis, the majority of our inventory was ordered after it was sold. We now manage the inventory much more effectively.” With Itasca Magic, associates in-store are provided with a handheld device to mark out-of-stocks immediately in the application, which then automatically generates the inventory order, eliminating human judgement and error from the ordering process.
Daisy Intelligence, based in Concord, Ontario, offers a similar solution that utilizes artificial intelligence to consider all effects that make inventory optimization a challenge, such as the changing relationship between products, promotions, seasonality and forward-buying effects. “Retailers today are challenged to manage inventory with forecasts having errors ranging from 40% to 60% plus,” says Daisy CEO Gary Saarenvirta. For a discount retailer with approximately $1 billion in annual revenue, Daisy was able to increase forecast accuracy on promotional products by week to less than 15%, compared to the industry average of a 38% promotional forecast error, Saarenvirta says. The company also delivered regular inventory forecasting at the product store day level, improving accuracy from 60% error to less than 30% error and enabling the retailer to maintain less safety stock and reduce capital tied up in inventory.
One of the benefits of adopting inventory optimization software that is often overlooked is the improvement of the shopper’s experience, says Gary Hawkins, CEO at Center for Advancing Retail & Technology (CART). Kroger and Dunnhumby, for instance, created customer segments that provided a lens through which to view their business, analyzing the products and brands shoppers prefer in order to determine product assortment and inventory on a store-by-store basis. “If the retailer is able to get the product assortment right and then the inventory right, chances are that the product the customer is going in the store looking for is actually going to be on the shelf and not out of stock,” Hawkins says.
Optimizing Online Orders
Implementing real-time in-store inventory management software enables retailers to efficiently integrate online ordering by connecting store-level perpetual inventory data with the e-commerce website or mobile app, as evidenced by Walmart.
Rather than ordering from a virtual product catalog that doesn’t reflect that availability of items in-store, shoppers can virtually select the store that will fulfill the delivery and view accurate real-time inventory to provide the same shopping experience as if they were physically in the store. “A bad digital experience reflects badly on the brand as a whole,” says Tenser of VSN Strategies. “If you don’t have a store-level perpetual inventory, which is one of the essential elements of an ordering optimization solution, then you don’t really have information to pull into the digital site.”
However, fulfilling online orders can be harmful to a retailer’s operation, creating out-of-stock issues and complications on the floor between an online customer’s personal shopper and an in-store customer competing for the same product. As such, some experts predict the notion of “dark stores,” which are growing in Europe, to soon begin developing in the U.S. “At some point, it’s going to make sense for [retailers] to close a store and use that dark store to do all the fulfillment for e-commerce orders instead of impacting the stores that are open for customers,” he says. “That e-commerce business has to be factored into the optimization work.”
- INDULGE. Shoppers seek permission to “give in” to the guilt. They know they can’t be good all of the time and really don’t want to be. Where can retailers and CPG companies capture consumers inside the store to make them stop and savor?
- DELIGHT. Sometimes shopping becomes mundane. There is too much noise. There are no surprises. What can retailers and CPG companies do to make consumers feel a sense of happiness? What can they do to reach and delight online shoppers? New flavors? New packaging? An exciting retail display? “Find something that breaks the rules,” Balliet suggested.
- SCORE. Help shoppers feel they are sticking it to the Man and beating the system. Give them a sense that they have won or that they found a great deal. Make it fun to follow an impulse.
- RECHARGE. Shopping is a task and it can be hard work. Sometimes the consumer needs a break to boost energy or improve his or her mood. As an example, Balliet suggested selling Cliff bars at the front end.
- REMIND. Many consumers write a shopping list before going to the store. But what happens when they forget something on the list or even forget to put something on it? This is where retailers, CPG companies and category managers can come to the rescue, suggesting impulse items. “But when you can’t fall on the safety net of the front end, how can you remind customers about what they forgot?” Balliet asked.
- INSPIRE. Savvy merchandisers can make consumers stop short during their shopping trip. They may try to cause customers to stop in front of a product or category that they might not normally visit. How do they do this? By inspiring shoppers with a mental picture of what they could do with this product. “It’s about what you want rather than what you need,” Balliet noted. “Amplify that want.”
- GESTURE. Even when parents take an authoritarian approach toward their children while shopping, there can be times when they have to sweeten the deal by compromising or finding a distraction. When a parent sees a meltdown about to happen, the primary goal is to prevent a tantrum and the accompanying stress. A retailer who can suggest a smart way for parents to manage a challenging situation with their kids will win their gratitude.
- INCENT. Hershey’s consumer research revealed that shoppers appreciate ideas that suggest simple, easy ways to express kindness and caring. They want to feel like a hero to their family and friends. Customers appreciate the opportunity for an impulse purchase that offers a small yet touching way to connect with their loved ones. “We need to come up with different conceptual plans for what happens when the front end goes away,” Balliet said.
Shopping struggles: These 11 retailers may not survive 2018
As traditional retail continues to die, some malls are changing with the times by bringing in fitness-focused business. USA TODAY
The retail apocalypse isn’t over yet.
The retail apocalypse is entering its ninth year.
Many North American retailers were wiped out in the “retail apocalypse” which started in 2010. Amazon (NASDAQ:AMZN) and Walmart’s (NYSE:WMT) growth, the rise of fast fashion retailers, reserved spending habits after the Great Recession, and dying malls crushed countless retailers.
Some retailers survived the downturn by closing stores and expanding their e-commerce presence, but others weren’t as lucky. Let’s examine eleven retailers which could struggle to remain relevant this year.
Sears Holdings (NASDAQ:SHLD) is the poster child of the retail apocalypse. The parent company of Sears and Kmart lost over 95% of its market value over the past decade as mall traffic dried up and it lost customers to e-tailers and superstores.
CEO Eddie Lampert, who took over the top job in 2013, couldn’t counter those industry shifts. Lampert closed stores, sold its Craftsman brand, and spun off its real estate holdings and other brands. Those moves softened Sears’ earnings declines, but its revenues kept declining.
Lampert’s latest “turnaround” plans — which include a partnership with Amazon and mini-Kmarts inside Sears stores — aren’t impressing investors. Wall Street expects Sears’ revenue to tumble 26% to $12.4 billion this year, and for its earnings to remain deep in the red. That’s a bleak situation for a company that finished last quarter with $3.5 billion in long-term debt.
Sears Hometown and Outlet Stores
Sears spun off Sears Hometown and Outlet Stores (NASDAQ:SHOS) in 2012. Its four banners sell home appliances, lawn and garden equipment, mattresses, apparel, sporting goods, and tools.
Unfortunately, the new company fared just as poorly as the original Sears. Sears was once a top destination for appliance buyers, but it was surpassed by Home Depot and Lowe’s over the past five years.
The company’s stock lost 95% of its value over that timeframe, due to a consistent streak of revenue declines and losses. Its comparable store sales plunged 10.5% last quarter as it desperately shuttered stores to stay afloat. It closed 21 stores during the quarter, and plans to close up to 100 of its Hometown stores during the current quarter. That’s a desperate move for a retailer that only has 882 locations left.
J.C. Penney (NYSE:JCP) was battered by the same headwinds that blew Sears off course. A disastrous “turnaround” effort by former CEO Ron Johnson between 2011 and 2013 — which alienated the retailer’s core customers with inconsistent discounts — exacerbated that pain. But for a while, it seemed like J.C. Penney would avoid Sears’ fate.
Marvin Ellison, who took over as CEO in 2014, expanded the retailer’s business with furniture, appliances, athletic apparel, and more women’s apparel. The company’s sales growth stabilized, and it didn’t aggressively shutter stores like Sears. Unfortunately, those efforts hit a brick wall during the first quarter.
After three quarters of positive sales growth, its sales growth turned negativeagain with a 4% drop. Its comps rose just 0.2%, and it posted an adjusted net loss of $69 million. Ellison blamed supply chain issues, markdowns for apparel, and adverse weather conditions for the weak numbers. But Ellison abruptly resigned after the report, leading investors to believe that J.C. Penney’s turnaround was falling short of expectations.
Barnes & Noble
Barnes & Noble (NYSE:BKS) is still the largest brick-and-mortar bookseller in the United States. However, direct competition from Amazon wiped out 65% of its market cap over the past three years. Barnes & Noble closed stores, expanded its digital business with its Nook reader, and spun off its education unit as Barnes & Noble Education (NYSE:BNED) in 2015.
These moves helped it tread water, but they didn’t counter its long-term threats. As a result, Barnes & Noble’s revenue tumbled for 15 straight quarters, and its bottom line remains in the red. Its comps dropped 4.1% last quarter, with a 4% decline in retail sales and a 22% drop in NOOK sales. Analysts expect its sales to slip 2% this year.
In early July, the company announced that it had fired CEO Demos Parneros for “violations of the company’s policies” without disclosing any additional details. That news, along with Amazon’s plans to render the retailer obsolete, casts a dark cloud over its future.
Office Depot (NASDAQ:ODP) is another company being rendered obsolete by Amazon and other e-tailers. It tried to counter the competition by merging with its rival Office Max in 2013, but combining two losers didn’t make a winner. Staples tried to buy Office Depot in 2015, but the merger was abandoned in 2016 due to antitrust concerns.
Office Depot’s stock lost more than 70% of its value over the past three years. It broke a multi-year streak of sales declines with 6% sales growth during the first quarter, but that growth was padded by its acquisition of CompuCom, a provider of IT managed services, infrastructure solutions, and consulting services.
Meanwhile, its retail comps stumbled 8.4%, its operating margin contracted and its adjusted EPS was cut in half. It generated $170 million in free cash flow for the quarter, but it’s still shouldering $1 billion in long-term debt. Analysts expect Office Depot’s revenue to rise 6% this year, thanks to CompuCom, but for its earnings to tumble 31%.
For decades, customers bought vitamins and nutritional supplements at GNC’s (NYSE:GNC) brick-and-mortar stores. However, the rise of superstores, warehouse retailers, and e-tailers started rendering GNC’s business obsolete. In recent years, several lawsuits which questioned the efficacy of its ingredients also tarnished the brand’s reputation.
As a result, GNC’s stock tumbled more than 90% over the past three years. Its revenue declined for nine straight quarters, and analysts anticipate a 5% drop this year. Its earnings, which face pricing pressure from its competitors, are expected to plunge 66%.
GNC believes that expanding into overseas markets like China, improving its loyalty program, and partnering with Amazon might get its business back on track. Unfortunately, it’s doubtful that these moves can help the specialty retailer defend its niche against big rivals like Costco.
GNC’s top rival, Vitamin Shoppe (NYSE:VSI), was torpedoed by the same problems that sank GNC. Its sales tumbled for six straight quarters, and analysts expect it to post a 5% sales decline and a net loss for the full year.
Vitamin Shoppe’s stock tumbled more than 80% over the past three years. The company’s current turnaround strategies include an expansion of its e-commerce ecosystem, new delivery services, higher marketing investments, and “retooled” pricing and promotion initiatives.
Unfortunately, those efforts sound generic, expensive, and don’t really counter the growing threat of superstores and Costco. Its ongoing store closures might soften the impact on its margins, but it also weakens its brand presence against GNC. There are persistent rumors about GNC merging with Vitamin Shoppe, but combining two losers won’t make a winner — as we saw with Office Depot.
Privately held Vitamin World, which competes against GNC and Vitamin Shoppe, isn’t faring any better than its rivals. The company filed for bankruptcy last November, and announced plans to close 124 of its stores and sell the remaining 210 locations.
There’s a glimmer of hope that GNC or Vitamin Shoppe might buy the company, but both companies would probably prefer to see this vanquished competitor simply disappear.
Foot Locker (NYSE:FL) was once a top destination for footwear and athletic wear shoppers. But in recent years, leading footwear makers like Nike, Adidas, and Under Armour opened their own brick-and-mortar stores and promoted their own e-commerce platforms. Department stores, superstores, and larger sportswear chains also took a bite out of Foot Locker’s sales.
Foot Locker actually posted year-over-year sales growth over the past two quarters.
But if we exclude the impact of a soft dollar, its sales would have declined last quarter. Foot Locker’s comps also stayed negative for the past two quarters — due to slumping store traffic and weak direct-to-consumer sales.
The company believes that closing stores, securing premium products from leading brands, and fresh e-commerce investments will get its growth back on track. However, its gross margins are stuck in a downward trend, and its so-called partners are becoming its biggest competitors.
Payless ShoeSource filed for bankruptcy last April and subsequently closed about 900 stores worldwide to reduce its store count to about 3,500. Payless’ downfall came in two stages.
First, its core business was crippled by weak mall traffic and competition from larger retailers. Second, private equity firms acquired Payless’ parent company in 2012 for $2 billion and left the chain drowning in debt. Payless’ bankruptcy filing listed liabilities between $1 billion to $10 billion, compared to just $500 million to $1 billion in assets.
Payless entered restructuring agreements to reduce its debt load by about 50%, lower its annual interest costs, and gain access to additional capital. It also secured up to $385 million of debtor-in-possession financing, which gave the company up to $120 million in incremental liquidity during the Chapter 11 process. This means that Payless is on the ropes, but it isn’t going down for the count yet.
Many apparel retailers bounced back this year, but privately-held Charlotte Russe was left out in the cold. The apparel retailer, which targets female shoppers in their teens and twenties, was left behind as fast fashion retailers conquered the market.
To avoid bankruptcy, Charlotte Russe completed an out-of-court restructuring in February. The move reduced its term loan debt from $214 million to $90 million, cut its interest expenses by around 50%, and extended its maturity date by five years. But in return, the lenders received 100% of the company’s equity.
Charlotte Russe plans to reinvest its newfound liquidity into its brick-and-mortar stores and bolster its online presence. S&P Global upgraded its debt after the restructuring, but warned that it still faces “intense competition in the specialty apparel space, lower store traffic, and our expectation for some disruption in supply chain related to the uncertainty around the recent financial restructuring.”
Welcome to the unveiling of Winsight Grocery Business’ annual ranking of the nation’s Top 20 Food Retailers, which plots the industry’s most influential companies in the U.S. grocery space. Based on sales data from Kantar Consulting, a foremost global research, insights and information consultancy, the Top 20 list provides a well-composed snapshot of the top food sellers, 10 of whose roots are tied to pureplay grocery, with the balance of others descending from nongrocery lineage, including mass, drug, club, dollar and convenience.
As a composite, the Top 20 contenders, to greater and lesser degrees, have been busy investing in e-commerce, training, talent and infrastructure to reposition their brands for a new era. When detached as a subset, the 10 grocery contenders on the Top 20 leaderboard—Walmart (1), The Kroger Co. (2), Albertsons Cos. (6), Ahold Delhaize (7), Publix (8), Aldi (11), H-E-B (14), Wakefern Food Corp. (15), Meijer (18) and Southeastern Grocers (20)—represent the vanguard of multicapable retailers conveying relevance and value to several shopper groups simultaneously. A key to the endurance of the leading performers of late was an awakening—even before Amazon went whole-hog into the food fray last year when scooping up Whole Foods Market—that new stores are no longer the sole antidote to growing their businesses. In some cases, shedding stores is proving to be an equally important element in the delicate balancing act of capital investments and measured curtailments.
Elley Symmes, senior analyst of grocery retail, sales and shopper practice, Americas, for Kantar Consulting, foresees in the not-too-distant future a reranking of the food chain, courtesy of a trifecta of what was once referred to as “alternate channel players” taking over the leaderboard. “Walgreens, Aldi and Amazon will outpace their grocery retailer counterparts, growing sales above the industry average by a minimum of 200 basis points,” she says.
By 2023, Symmes anticipates Walgreens will surpass Kroger as the second largest grocery seller in the U.S., while Amazon.com is forecast to jump from No. 15 to the seventh largest grocery seller. The net result of this is a complicated competitive retail landscape for the traditional supermarket channel, whose incumbents’ success will be tied closely to their abilities to “look at the whole industry—and not just focus on conventional supermarkets as the primary competitor.” Symmes reiterates the message to allied trading partners working with conventional grocery chains, be it vendors, brokers or financial firms, all of which “must also understand this dynamic to best serve [retail food] customers.”
We take a closer look at the nation’s Top 20 Food Retailers, ranked by estimated annual revenue, on the following pages.
Methodology: The primary sources for the data for WGB’s Top 20 Food Retailers is based on Kantar’s proprietary forecasting tools, which are composed of publicly traded retailers’ annual 10-K reports and other public financial data, retailers’ websites, AggData and Kantar’s ShopperScape database, among others. Kantar formally updates all of its forecasts every six months; data for the Top 20 food retailers list herein is based on its most recent round of updates ending June 1, 2018.
Top banners: Walmart, Walmart Supercenters, Neighborhood Markets
HQ: Bentonville, Ark. • Store count: 5,295
Walmart’s new sales momentum is all the more impressive when considering that for the first time in the company’s more than 50-year history, it’s gaining share and winning new sales without adding hundreds of new U.S. stores. Rather, it’s getting its existing stores to work harder, particularly in the area of online grocery pickup, now offered in more than 1,400 U.S. locations. The emphasis on convenience has come in addition to price, not instead of it: Recent analyst reports indicate that the big retailer is again widening its advantages over conventional competitors as it zeroes in on the hard-discount threat on one side, and Amazon on the other.
2 The Kroger Co.
Top banners: Kroger, Ralphs, Harris Teeter
Store count: 2,779
Perhaps taking some lessons from the one company that precedes it on this list, Kroger is in early innings of a strategic reset as it seeks to regain its sales gallop. The $900 million, three-year Restock plan has so far brought new investment in the meal-kit company Home Chef and an ambitious plan to license e-commerce technologies from innovative British retailer Ocado.
3 Walgreens Boots Alliance
Top banners: Walgreens, Duane Reade, Boots
HQ: Deerfield, Ill. • Store count: 8,100
The pharmacy-led health and well-being enterprise operates one of the largest pharmaceutical wholesale and distribution networks in the world. In addition to its standing as one of the globe’s largest purchasers of prescription drugs, the company’s U.S. division includes 8,100 stores in all 50 states. As it continues to expand its grocery offerings stateside, the chain holds a new title as the first drug chain in the U.S. to offer a line of Chef’d meal kits to 30 of its eponymous and Duane Reade stores in Chicago and New York, respectively, as part of a partnership with Smithfield Foods.
Top banners: CVS, Navarro, Longs Drugs • HQ:Woonsocket, R.I. • Store count: 9,800
CVS officials have been talking about the “retailization of healthcare” for some time, and it’s showing when it comes to food. The drug chain has made healthy foods a major element of its front-of-the-store offering, showcased this spring in a radical store redesign.
5 Costco Wholesale Club
HQ: Issaquah, Wash.
Store count: 520 in 44 U.S. states and Puerto Rico
After turning around its yearlong sales slump in early 2017 and seeing improved fortunes with its e-commerce business—which jumped an impressive 37% during its most recent quarter—warehouse club leader Costco has a new spring in its step. Renowned for its employer-of-choice practices, Costco most recently moved to raise its starting minimum wage to $14 an hour, a $1 increase for entry-level positions.
6 Albertsons Cos.
Top banners: Albertsons, Safeway, Jewel-Osco •HQ: Boise • Store count: 2,200
Albertsons is in the midst of a high-speed reinvention. While zooming toward completion of its Safeway integration, it’s hurtling into a merger with Rite Aid in a move that should provide an immediate pop to sales, shoot the company onto the public markets and, officials say, create a “differentiated retailer.” Albertsons is also at work on technology initiatives ranging from artificial-intelligence-powered loyalty to contactless payments and an “infinite aisle” marketplace as it pushes for $1 billion in digital sales.
7 Ahold Delhaize
Top banners: Giant, Stop & Shop, Food Lion
HQ: Carlisle, Pa.
Store count: 2,000
Observers are anxious to see how Ahold Delhaize, buoyed by central cost savings and set free to pursue local merchandising and branding initiatives, can bring new life to its U.S. brands, such as its pioneering Peapod online unit.
Top banners: Publix, Publix GreenWise
HQ: Lakeland, Fla.
Store count: 1,187
Facing increasing competition in its extended Southeast territory and its home state of Florida, where it remains the dominant grocer, Publix is investing $1.53 billion this year on new stores and remodels alongside upgrades to technology and real estate.
9 Target Corp.
HQ: Minneapolis • Store count: 1,829
Posting traffic growth of 3.7% in its most recent first quarter and driving same-store sales growth of 3%, Target nailed its strongest quarterly performance in more than 10 years. Its digital sales are also tracking strong, increasing 28% in Q1, while it continues to focus its cap-ex spending on upgrading its brick-and-mortar stores. As its Restock campaign commences, Target has launched a new Drive Up service (now available in more than 250 stores); it also has rolled out same-day delivery from more than 700 stores, enabled by its recent acquisition of Shipt.
HQ: Batavia, Ill.
Store count: 1,600
Deep into an expansion and remodeling campaign that will bring its store count to 2,500 U.S. locations by the end of 2022, Aldi also offers online grocery ordering via Instacart in the Atlanta, Chicago, Dallas and Los Angeles metro markets. The chain’s low-price and private-brand-heavy model has enabled the discount retailer to become one of the fastest-growing chains in the country.
Top banners: Whole Foods Market, Amazon Go
Store count: 470
Its Amazon Go store is pushing the boundaries of technology in a retail setting and its reputation for service and selection in online shopping is the gold standard, but Amazon is only getting started. Its acquisition of Whole Foods a year ago triggered dozens of similar partnerships between virtual and physical retailers and gave the Seattle-based e-retailer a canvas upon which to build a U.S. physical store base—not to mention an attractive demographic of shoppers to capture behind its powerful Prime loyalty program, which is now offerring discounts in the Whole Foods chain and offer fast delivery through Prime Now.
12 Dollar General
HQ: Goodlettsville, Tenn. • Store count: 14,761
To support its ongoing growth, Dollar General is seeking to add 7,000 new jobs to power its fiscal 2018 growth plan, which includes approximately 900 new stores, 1,000 store remodels and 100 replacement stores. The chain is also expanding its digital platform, including its standing as the first dollar-store chain to move into mobile checkout with a new app, DG Go, which allows users to scan and pay for products directly from their phone and bypass the checkout line altogether. The company posted strong net and same-store sales growth in its most recent 2018 first quarter, including a 9% and 2% increase, respectively.
Top banners: H-E-B, H-E-B Plus, Central Market
HQ: San Antonio
Store count: 340
The ongoing moves at H-E-B reflect the top priority the largest private employer in Texas is placing on its omnichannel offerings, including its recent appointment of Jag Bath to the newly created position of chief digital officer. The move follows a series of strategic investments in technology and partnerships that H-E-B has forged to enhance its digital offerings, including H-E-B to You Delivery and H-E-B Curbside, which is available in more than 100 locations and is on track to reach 200 locations in 2018.
14 Seven & i Holdings Co. Ltd.
Top banners: 7-Eleven
Store count: 9,077
With 7-Eleven Inc. approaching 10,000 convenience stores in the United States, its parent company, Japan’s Seven & i Holdings Co. Ltd., is increasingly banking on the North American division for growth as its Japanese business sees sales slow.
15 Rite Aid
HQ: Camp Hill, Pa. • Store count: 2,500
Soon to be united with Albertsons, Rite Aid is set to bring a new edge to health, plus new private brands and a new CEO, to the combined company.
16 Wakefern Food Corp.
Top banners: ShopRite, Price Rite, The Fresh Grocer
HQ: Keasbey, N.J.
Store count: 207
The $15 billion ShopRite coop continues to grow behind entrepreneurial operators offering unsurpassed local market expertise and crowdpleasing prices.
17 Dollar Tree
Top banners: Dollar Tree, Family Dollar
HQ: Chesapeake, Va.
Store count: 14,957
It’s death by a million pinpricks—or, more precisely, by about 15,000—for competitors of Dollar Tree. Its namesake single-pricepoint stores continue to see locations and sales grow at a steady pace in part by tailoring offerings to seasons and occasions that resonate with its bargain-minded shoppers. Performance of its acquired Family Dollar stores has been choppy as it seeks a niche in the discount crowd.
18 Alimentation Couche-Tard
Top banners: Circle K, Kangaroo Express
HQ: Laval, Quebec
Store count: 8,346
The leading convenience retailer in Canada and the largest independent c-store operator by U.S. company-operated stores, Couche-Tard recently completed the integration of CST Brands while rebranding its Corner Stores to the Circle K banner and hiring the company’s first chief marketing officer.
Top banners: Meijer, Bridge Street Market (summer 2018)
HQ: Grand Rapids, Mich. • Store count: 235
As it prepares to open six small-format stores in urban settings by 2021, including one on the west side of its home turf in Grand Rapids, the supercenter pioneer is also adding six new flagship stores in Michigan, Indiana, Illinois and Wisconsin this year. It’s also streamlining the checkout experience with the addition of Shop & Scan smartphone app-based scanners.
20 Southeastern Grocers
Top banners: Winn-Dixie, Bi-Lo, Harveys
HQ: Jacksonville, Fla. • Store count: 575
A whirlwind trip through Chapter 11 earlier this year restructured heavy debts and gave the parent of Winn-Dixie, Bi-Lo, Harveys and Fresco Y Mas a 100-store haircut, but it has quickly resumed the pace of remodels and is prepping a new chainwide loyalty program.
Plant-Based Product Claims See Dramatic Rise
Burgeoning consumer interest in health, sustainability and ethics is spurring the popularity of plant-based ingredients and products, according to a report from Innova Market Insights. In fact, Innova, a Dutch knowledge solutions provider for the food and beverage industries, found that plant-based product claims skyrocketed at a compound annual growth rate of 62 percent worldwide from 2013 through 2017, with increases occurring in such areas as plant proteins, active botanicals, sweeteners, herbs and seasonings, and food coloring.
“The dairy alternatives market has been a particular beneficiary of this trend, with the growing availability and promotion of plant-based options to traditional dairy lines, specifically milk beverages, and cultured products such as yogurt, frozen desserts and ice cream,” noted Lu Ann Williams, director of innovation at Arnhem, Netherlands-based Innova.
In keeping with the knowledge that beverages largely spearheaded the dairy alternative category and still dominate it, global sales of dairy alternative drinks are set to reach U.S. $16.3 billion in 2018 and accounted for more than 8 percent of global dairy launches recorded by Innova Market Insights in 2017, up from 7 percent from 2016. Actual global launches have more than doubled over a five-year span.
Spoonable nondairy yogurt has also experienced soaring levels of interest, albeit from a smaller base, with a 48 percent compound annual growth rate for the 2013-17 period taking its share of dairy launches from under 0.5 percent in 2012 to 1.5 percent last year. Innova’s consumer research found that one in three U.S. consumers increased her consumption of plant-based milk/yogurt in the two years preceding the close of 2017.
“In the move to offer something new, we are starting to see an increasing variety of nonsoy plant-based ingredients, including cereals such as rice, oats and barley,” said Williams. “We also noticed an increase in nuts, such as almonds, hazelnuts, cashews, walnuts and macadamias, as well as coconut and more unusual options such as lupin, hemp and flaxseed.”
Interest in plant-based eating has also shaped the meat substitute market, where global sales are poised to grow to U.S. $4.2 billion by 2022. The range of ingredients used for meat substitutes encompasses vegetables and grains, as well as traditional sources like soy and specialty manufactured brands such as Quorn (mycoprotein) and Valess (milk).
A shift toward plant-based diets in general, along with interest in vegan, vegetarian and flexitarian lifestyles and concerns regarding animal welfare, have combined to boost interest in such products, and as a result, new product development has seen an 11 percent compound annual growth rate in 2013-17 period. Innova’s research further showed that four in 10 U.S. consumers upped their consumption of meat substitutes/alternatives in 2017.
Innova will present new data on key consumer trends influencing the industry at the upcoming IFT Food Expo in Chicago on July 16-18.
For more about plant-based products, read the recent blog post about items spotted on the Summer Fancy Food Show floor.