At the start of the year we highlighted the five key trends we would be watching in the US this year. As the retailers now move into the critical holiday season, we look at how these trends have been brought to life this year.
1. Considered consolidation
While the fragmented nature of the sector lends itself to consolidation, this year we have seen a number of major deals. The tone was set at the start of the year with Albertsons and Safeway completing their merger, creating a retailing powerhouse. From there on in, we have seen agreements announced between Ahold and Delhaize, Walgreens Boots Alliance and Rite Aid, and Kroger and Roundy’s. The sector has also seen a number of retailers file for bankruptcy or exit altogether, including A&P, Haggen and Fresh & Easy.
2. Shrinking formats
The push towards smaller store formats in the US has been on the agenda for a number of years, but in 2015 there has been significantly more activity led by major retailers. Ahold, Delhaize and Target have been among the operators launching or rolling-out new store concepts of 20,000 sq ft or less. Lidl’s planned entry into the market has also placed greater focus on the effectiveness of smaller formats, while the launch of ‘365 by Whole Foods Market’ next year is eagerly anticipated.
3. Digital delivery
Grocery ecommerce has seen an unprecedented level of activity this year. Walmart has pushed ahead with an accelerated roll-out plan, Kroger has expanded its test beyond Cincinnati, and an increasing number of retailers have partnered with Instacart to build a presence in the channel at pace. Other companies have also come into the grocery sector, including Postmates and Shipt, enabling companies such as 7-Eleven and Publix to launch their online propositions.
4. Fresher Health
Retailers with a strong focus on fresh foods and health and wellness continue to grow their store estates. Although Whole Foods Market has faced challenging trading conditions this year, it has added almost 40 new stores. Sprouts Farmers Market will have opened just under 30 new stores by the end of the year, and Fresh Thyme Farmers Market, a relatively new entrant, is already up to 28 stores. We expect to see significantly more stores open in this area, while mainstream retailers will make category and private brand investments to capitalise on the growth opportunities.
5. Re-energised giants
This year we predicted significantly improved performances from Walmart and Target in the US. Walmart recently delivered its fifth consecutive quarter of positive comp sales growth as the retailer builds a stronger platform for the future of the business through initiatives and investments focused on the in-store experience, people and technology. Target is also a business in transition, putting significant effort behind its multichannel initiatives and re-setting expectations for shoppers in-store. With a number of testes underway, a new food offer will launch in 2016. All of these initiatives are already delivering sold results for the retailer, and it should continue to build momentum in the business moving forward.
What’s moving up the agenda?
As we look ahead to 2016, we expect to see many of these trends continue to be present in the market. Consolidation will continue, and with a number of deals among major operators yet to be completed, the pressure on smaller operators will continue to grow.
One of the key trends we expect to come to the fore over the next 12 months, building on the investments which retailers have been making in fresh and natural foods, and health and wellness, is the growing role of the grocery store in healthcare. This trend will show itself not only in terms of the products which are sold in-store, but also in terms of store layouts and the services offered, particularly as healthcare becomes even more digitised.
Looking to learn more about the US market? Our Retail Safaris are a great way to see some of these trends come to life and leading operators in action.
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