Food retailers are caught in a perfect economic storm, as discounters, online and digital competition, and flat-lining customer demand simultaneously assail their industry. As food retailers confront these challenges, they must make new investments to stay competitive.
The experience of food retailers in the UK emphasizes the importance of responding adroitly to changes in the market. For several years, major UK food retailers had successfully kept discounters at bay, but two factors weakened their position. First, Tesco started raising prices, driving away some customers; second, when the financial crisis struck in the late 2000s, consumers’ wallets were constrained and discounters’ prices grew more appealing. Incumbents were slow to react to these changes, giving discounters five years to grow.
In the US, food retailers need to act as soon as the cost virus infects their market. Whether in the form of hard discounters or other sources of competition, it is critical to watch for early warning signs and take swift action.
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