Discounters pushing into supermarket turf

ATLANTA — The days when getting groceries required a trip to a supermarket dedicated solely to rows of food and a butcher have long been a thing of the past.

But today not only are big box discounters such as Walmart and Target adding food to their regular line up of baby clothes and garden tools, smaller retailers like Dollar General and convenience store operator RaceTrac operate grocery businesses or are adding more supermarket-like goods to their shelves.

Dollar General expects to open 40 new grocery stores nationally this year under the company’s Dollar General Market marquee.


Recently online retail giant Amazon announced it would be delivering food in select Los Angeles neighborhoods, the second city in the company’s toe-dip into the grocery business. (Seattle is the first.)

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Why so much attention to groceries?

Retailers see groceries as a way to add convenience for hurried and time-strapped Americans who like the idea of getting tires for their car and steaks for a weekend barbecue all in one place, say the chains’ operators and food industry analysts.

“If you can help consumers save money or time or both, those seem to be winning formulas,’’ said Darren Seifer, food and beverage industry analyst for NPD Group, a New York-based consumer research firm.

The numbers show the trend. Sales at traditional supermarkets grew 4.4 percent in 2011, according to a study by Willard Bishop on the Future of Food Retailing. Nontraditional grocers saw sales jump that year by 5.9 percent.


In fact, Walmart reported that consumables are 55 percent of its business.

That’s not to say there aren’t drawbacks. The grocery business is notoriously volatile because of price swings and supply pressures. Profit margins are generally about 1 percent.

But then, everyone has to eat. Unlike shopping for a pair of shoes or a Blu-ray, consumers purchase food at least two to three times a week, if not more.

“It’s a low-margin business, but with a high volume,’’ Richard Galanti, a spokesman for warehouse retailer Costco.

It won’t be easy to unseat supermarkets, however. They have larger, more diverse selections of food and employ staff, such as butchers or pastry chefs, who can answer questions for customers, provide specific cuts of meat, or fill customized cake orders.


And consumers trust supermarkets more when it comes to fresh products such as meat, vegetables, and fruits, the analysts said.

Walmart said last week that it planned to get produce to its store faster and with better quality. The company said it would purchase fruits and vegetables directly from growers and do independent weekly checks at stores.