Microsession: Disruptions in the Food Retail Landscape

BY JOYCE REINGOLD, Produce Business

Edward McLaughlin, Robert G. Tobin Professor of Marketing, Cornell University

Edward McLaughlin, Robert G. Tobin Professor of Marketing, Cornell University

Amazon’s purchase of Whole Foods was a “historic disruption” in an industry already shifting due to the rise of discounters, Walmart’s continued dominance, and the growth of e-commerce, Ed McLaughlin told industry leaders.

“It’s the marriage no one saw coming, but they both needed it desperately,” McLaughlin said of the Whole Foods acquisition. “It’s no easy road for Amazon. If they change too much, they ruin what everyone loved about Whole Foods. If they don’t change too much, they can’t fix the inefficiencies that are hurting the bottom line,” said McLaughlin, director of the food industry management program, Dyson School of Applied Economics and Management, Cornell SC Johnson College of Business at Cornell University.

Another disruptor: “The consumer shift from up-market stores to value stores that started in 2008 and is continuing,” he said. Players in the value space include:

  • Dollar General: “They have 13,000 stores; they added 1,000 stores this year. That’s three stores every single day of the year.” Many of the stores now sell produce.
  • Aldi: There are 1,600 U.S. stores and the company plans to add 900 more by 2022, said McLaughlin. “If they achieve that, they’ll be the third-largest supermarket chain in the United States in terms of store numbers.”
  • Lidl: “One of the largest supermarket companies in the world,” the chain opened its first U.S. stores in 2017. “Lidl is privately owned, so they can afford to stay here as long as they want, until they get it right… and I think they probably will.”

Walmart is still “the retailer against which all other supermarket companies are positioning themselves,” said McLaughlin. “It continues to pressure suppliers who are now expected to help beat rivals in price by 15 percent 80 percent of the time. And it paid $3.1 billion for Jet.com to compete with Amazon in the e-commerce space.

“By 2025, the share of online grocery spending could reach 20 percent, representing $100 billion in annual consumer sales,” continued McLaughlin. He urged suppliers to look at omnichannel options, “to play in the digital marketplace,” and retailers to develop e-commerce strategies.