Economic Perspective: Supermarket Wars

MIKE WALDEN:

“Today’s program looks at supermarket wars. Recently, the Triangle region of North Carolina was shocked to learn that the supermarket store Kroger was closing all of its stores. The retailers said that it did this because they really couldn’t make a go of these stores in the Triangle region which is very surprising because this is a very fast growing region.”

“Now they are converting half of their stores to Harris Teeter, but they’re putting up the other half for sale. So the big question is, “What’s happening?” Is this some knock against the Triangle, or is this something particular to Kroger? I really think this is particular to Kroger, and I think it’s an example of how the supermarket industry is in a great deal of flux (or as economists call it disruption).”

“For example, half of food expenditures are now made in restaurants. So supermarkets have to compete against that. Many families don’t have traditional meals like they used to have. We now have both food and prepared meals as delivery options to households, and then we have deep discount retailers beginning to enter the U.S. market.”

“Then to crown all of this we have Amazon. Amazon’s purchase of Whole Foods, and the uncertainty about how that’s going to impact the supermarket sector. I think what happened with Kroger is they didn’t just make the impact. They didn’t make the earnings in the South. They’re a traditional Midwestern and Northern supermarket chain.”

“They really didn’t make the impact here in the South, and they said, “Hey, we’re just going to pack up and leave. We’re going to concentrate on those markets where we are more popular.” I don’t think this says anything about the Triangle region negatively, or about the South negatively. I think it’s all a result of the supermarket wars.”