Grocery Industry Analysis Paper

Introduction

The industry that I selected is US Grocery Store Industry (NAICS: 445110). US Grocery Store is part of the retail industry which is highly saturated with firms. Because it is so saturated, retail companies have fierce competition. Competition can be based on price, service, quality/cache, variety/selection and other factors (REF). The US Grocery Store Industry sells food items but can also expand into automotive, home and sporting goods (eg, Meijer). The grocery store industry is not highly profitable. Margins for the majority of items in the store are only about 1 percent which is the lowest in the economy (Johnson, nd). As a result, this industry has seen a lot of consolidation because economies of scale come into play (Johnson, nd).

Industry Rivalry

Industry rivalry in the grocery industry is high because of concentration and product differentiation. Seller concentration refers to the sheer number of companies operating in this industry and this industry has a highly saturated market, as well as, the sellers all offer a similar array of products. While some grocery stores may have a broader offering such as Meijer which sells a wider

Grocery stores have many suppliers that span across geographies (local to national) and type (wholesalers to local farmers). Most suppliers are large wholesalers and because of their sheer size can exert pressure on the industry. When it comes to specialty grocery stores, this may become more of a concern because there is a more limited supply of truly organic and natural non-GMO foods. Specialty grocery stores could combat this through diversifying their suppliers which would, in turn, dilute the bargaining power of suppliers. Not having a particular item (eg, grapes) for a recipe may cause a consumer to go to the next grocery store without hesitation so it is important for grocery industry to have a good relationship with their