The US grocery retail market is changing as both local and overseas operators attempt to tailor their offer to meet different consumer needs, away from the ‘one size fits all’ approach. The development of convenience stores is in its infancy and looks promising and all indications point to private label developing further.

Market size and structure

IGD estimates the size of the US grocery retail market to be $834 billion – around 28% of the total retail market by value. Owing to the physical scale of the US, the American grocery market is fragmented with many regional players and different types of channels for food. However, the grocery sector is dominated by global player, Wal-Mart, which has around a 23% share of the US grocery market (excluding cash-and-carry operations) – almost three times more than its nearest rival.

Changing formats

Grocery retailers in the US have traditionally focused on opening large hypermarket/super centre formats, offering shoppers extensive ranges of food and non-food items. However, with shifting consumer lifestyles and socio-demographics, US retailers are now realising that this ‘one size fits all’ model does not always meet everyone’s needs.

As a result, retailers are starting to experiment with smaller-format stores in highly populated locations, appealing to the convenience shopper. At the forefront of this trend is UK retailer Tesco, which opened its first Fresh & Easy Neighbourhood Market store in November 2007 in California, the most populated US state. Tesco plans to open a further 50 stores by February 2008 and a total of 200 stores by February 2009.

Wal-Mart and Wholefoods have since followed suit as well as the Japanese convenience operator FamilyMart in Southern California.

A positive future for private label

Private label development lags behind Western European markets but US grocery retailers are starting to focus on developing ranges that meet the needs of specific consumer groups. Trends indicate that private label ranges will become more significant in the future.