More grocery chains affected by the Amazon juggernaut
Monday, February 26, 2018
The latest news in the grocery business is not good. A recent Bloomberg report revealed that supermarket chains Winn-Dixie and Tops are preparing for bankruptcy filings.
The grocery business is facing cutthroat competition and ever-shrinking margins, both detrimental to their survival. This is a war in which the giant stores with deep resources have a chance to win, while others with unsustainable debt loads crumple under pressure.
Big-box retailers like Walmart, Kroger and Costco have proven their agility and innovative strategies in the face of the Amazon onslaught. Walmart has stepped up its game even further by acquiring Jet.com and keeping abreast in the online grocery business.
But the smaller chains have floundered, and mounting pressures in the grocery retail industry have caused ripple effects.
Bi-Lo LLC, Winn-Dixie's parent company, will be filing for bankruptcy in early March. When the report first came out, speculations about New York-based Tops Friendly Markets were rife. The majority thought it will be seeking court protection from creditors and try to make a comeback some say. Since then, Tops has gone ahead and filed for bankruptcy, blaming Amazon and other low-cost retail rivals.
Both brands have been reeling under mountains of debt. The industry's intense competition and falling food prices made things tougher. It's not as if they could raise prices to offset their burdens. On the contrary, they had to stay even more competitive to hold on to their customer bases.
The aggressive push by Amazon is bad enough, but now with U.S. government cutting food stamp subsidies, they hit an all-time low. Food stamp users consisted of about 10 percent of Tops' customers.
With more government reductions in the works, older chains have no choice but to revamp or consolidate their operations. This, combined with fast-changing customer needs and taste, has made it difficult for smaller chains to keep up.
Free grocery delivery, roadside pick-up and instant checkouts are Amazon experiments that cater to the new generation of buyers. Amazon has anticipated consumer demands and stayed ahead of the trends. Others must keep up or face the ultimate risk of going out of business. There is no room for stagnation.
The fact that both Tops and Winn-Dixie contained pharmacies is an added worry for the industry. Amazon shaking up the grocery business was trouble enough, but when it announced entry into the pharmacy industry, the markets were visibly shaking.
The "Amazon effect" has impacted all areas of retail, as big names like JCPenney, Macy's, Sears, CVS and Kohls have struggled to keep up. The result is hundreds of store closures in the past years and more to come.
Now, smaller grocery stores are at risk, with little hope for survival.
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