Although national scale supermarket conglomerates are

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Although national-scale supermarket conglomerates are the most threatened by the popularity of limited assortment stores and supercenters, many other industry operators are struggling to stay relevant. In an attempt to compete with Trader Joe’s and Aldi, premium grocer Whole Foods, announced plans to open a line of stores aimed towards millennials. These stores would be small in size and offer exclusively private label items. Large national chains are also following this trend. Ahold, a Dutch based operator with storefronts in New England and the Mid-Atlantic, is introducing a line of limited assortment Industry OutlookOver the next five years, the Supermarkets and Grocery Stores industry is expected to benefit from the strengthening US economy. As per capita disposable income rises, shoppers will be willing to purchase more premium level, value-added products at retail stores. In addition to growing demand for premium goods, operators will benefit from more slowly growing input costs, as commodity markets steady compared with the cost spikes present in the previous five-year period. However, due to intensifying competition from alternative retailers, such as dollar stores and wholesale clubs, industry operators will struggle to compete. Overall, IBISWorld projects industry revenue to grow at an average annual rate of 0.8% to $612.6 billion in the five years to 2020, including a 0.7% increase in 2016.Low profit margins will force many smaller industry players out of business
Supermarkets & Grocery Stores in the USOctober 2015 10Industry PerformanceIndustry trendscontinuedstores under the brand name bfresh. Over the next five years, IBISWorld expects that more supermarkets will follow this trend in order to appeal to a growing millennial demographic.While some major operators will open new limited assortment and fresh format stores over the next five years, others will choose to simply enhance their current locations and product offerings. Traditional super markets are increasingly adding amenities like home grocery delivery, movie rental services, ATM’s, dining areas and beer and wine bars. For these companies, enhancing their current stores is much more cost effective than opening up a new one, especially in such a saturated market.Profit and participationMerger and acquisition activity is expected to continue as large operators seek to benefit from economies of scale and expand their geographic reach. Due to increased competition and high market saturation, enterprise growth is anticipated to be sluggish over the next five years. The number of industry enterprises is forecast to rise at an average annual rate of only 0.4% to 43,206 during the five years to 2020. Similarly, industry employment is expected to rise just 0.6% per year on average to 2.6 million over the period.

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