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For the first time, the Charlotte market's leading grocer by sales isn't a grocery store at all - at least, not exclusively. It's Walmart.
The addition of several Walmart supercenters in the area, combined with consumers' continued hunt to save money in the recession, combined to give Walmart a 29 percent share of the local grocery market in the third quarter of 2009, the most recent available.
That's up from 25.7 percent a year earlier, and way up from 16.2 percent in 2004.
Harris Teeter, the previous No. 1, ranked second, with 26.5 percent, down from 29 percent in 2008, according to market and consumer research firm the Nielsen Company. Food Lion remained third, with 19.7 percent.
The shift makes Charlotte the latest market to join a tide that has swept across much of the nation's grocery terrain during the last decade, with mainstream supermarkets losing share to discount stores and other nontraditional food sellers. Leading the charge has been Walmart, whose estimated U.S. supermarket sales are about equal to those generated by the next three largest U.S. food retailers, combined.
A new frugality has put higher-end chains on the defensive. Matthews-based Harris Teeter, for instance, wooed shoppers and led in local market share through most of the past decade by bringing upscale stores to affluent, often fast-growing areas in south Charlotte and Union County. But recently, the chain has focused more of its advertising and in-store signage on highlighting low prices and discounts.
Walmart, meanwhile, has been working to repair its image after being battered by criticism over its business practices. And it has continued to increase its presence at a time when many traditional grocers are adding few stores, if any.
Since 2007, Walmart has opened a half-dozen supercenters, which include full supermarkets, in Mecklenburg and surrounding counties. Those new stores enlarge the grocery market, so even if another chain's sales remain constant, their share of the pie would decrease.
Local grocers may change
Walmart's rise means that shoppers likely will see more enticements from other supermarkets as they try to set themselves apart, using new promotions and stressing variety and fresh-food options. For instance, Mauldin, S.C.-based Bi-Lo this month rolled out a new loyalty card that gives regular shoppers a discount on gas.
In the years after it opened its first supercenter in 1988, Walmart struggled to surmount shopper concerns about cleanliness, organization and the quality of its produce and its meat, which is not cut in-store.
However, the company has worked to improve its deli, bakery, meat and produce sections. Those efforts - and the recession - are bringing shoppers into Walmart stores more often, and groceries now make up about half of the retailer's U.S. sales.
The new Walmart across from Concord Mills, which opened in July, is a prime example of the retailer's latest grocery design.
Aisles are wider, the lighting is bright, and color-coded signs guide shoppers around the supermarket. The "action alley," or main path into the store, is free of the familiar stacked pallets of merchandise, and some shelving is shorter to add a more spacious feel. The produce is neatly arranged, and the wine section is expanded, with bottles displayed on rounded islands of shelving.
Customers say they appreciate the improvements, but that price is still the main lure.
"Ever since this Walmart got here, I don't think I've been to a regular grocery store," said Mary Wood, 58, of Davidson, as she perused the pasta aisle of the supercenter on a recent morning.
Before that location opened, Wood shopped largely at Lowes Foods and hadn't considered Walmart. For one thing, it wasn't convenient. But when the new Walmart arrived closer to her home, she was curious enough to give it a try.
Now, she said, she visits once a week and has been surprisingly pleased. She buys plenty of Walmart's store brand, Great Value, and estimates she saves about 40 percent on her grocery bill. That's important, she said, because she's going through a divorce and money is tight.
"It's clean, it's nice, the prices are wonderful," Wood said. "They have the best prices on wine, honest to goodness, really."
Differentiating beyond price
Walmart presents both a challenge and an opportunity for traditional grocery stores, said Jennifer Halterman, a senior consultant for Kantar Retail, an Ohio firm that researches the food industry.
"There's been a lot of emphasis on price in the last year, and a lot of players have been competing on price, but that's a very difficult thing to do against Walmart," she said. "Really, it's about differentiating beyond price, to compete and survive."
Some of the ways to do that include emphasizing the quality of meats and produce and creating new specialty formats that focus on natural products or ethnic groups. Convenience and the overall shopping experience are also major deciding factors, said Mark Lang, a grocery veteran and professor of food marketing at St. Joseph's University in Philadelphia.
"Walmart sells the base level of quality at a good price, but not better foods," he said. "People shop in better stores to get better-quality products, products that are interesting and have a story."
Some shoppers also avoid Walmart because of concerns over its worker pay and benefits, its importation of cheap goods from Asia and its effect on smaller, local businesses.
However, Walmart has been making an effort to change negative perceptions, said Andres Musalem, an assistant professor of marketing at Duke University. "They have acknowledged that their corporate image was not what they wanted it to be," he said.
Walmart's savvy use of technology and efficient distribution network also have helped fuel growth, Musalem said.
Lower-end grocery stores are most at risk from Walmart, Lang said, because they occupy the same position in the marketplace. Middle- and high-end stores need to define value beyond price.
Other chains' strategies
Competing chains say they're working hard to distinguish themselves.
"We've been competitive with Walmart for years," said Bi-Lo CEO Michael Byars, who also has worked in Walmart-dominated markets in Florida and Texas. "We believe we know our customers better."
Though there is cross-shopping, Byars said, Bi-Lo strives to provide a different environment. Since he became CEO a year ago, the company has worked to improve its promotions, selection and store environment, he said.
Harris Teeter wouldn't directly comment on the market share numbers. However, spokeswoman Jennifer Thompson pointed to new, longer-term specials the company has tied to its VIC card. She emphasized its array of seafoods and fresh-cut meats, as well as prepared foods, and customer service. The chain also has been holding double and triple coupon specials.
Salisbury-based Food Lion has recently been working to enhance service and create a friendly shopping environment, and has stressed both convenience and price in its advertising campaigns, spokeswoman Christy Phillips-Brown said.
"We remain intensely focused on preserving our market share in the grocery industry," she said.
The chain is pleased with its local market share and strives every day to win new business, Phillips-Brown said. At the same time, she said that other Nielsen marketing data that the company pays for and uses internally shows a different picture. Based on sales of food, she said, those numbers show that Harris Teeter ranks first in sales and Food Lion is second in the Charlotte metro area.
The publicly available market-share data compiled by Nielsen measures sales of all items sold at grocery stores, and all grocery items sold at supercenters. That's not just food, but includes trash bags, detergents, paper towels and the like. Food Lion has not previously questioned local market share under those numbers.
Regardless, experts said, Walmart's growth may begin to slow. Nationally, the company is running out of spaces to locate its massive flagship supercenters, which are nearly 200,000 square feet, and is likely to focus on locating smaller stores in urban areas in the future.
New competitors also have entering the picture. Target, for instance, plans to retrofit many of its traditional stores to sell more groceries and fresh foods.
And mainstream grocery chains are winning back shoppers by combining strong promotions with traditional advantages such as convenience, according to a Retail Forward research report.
"Those customers see they get better pricing, but go through the experience of shopping at Walmart and decide it's not worth it," St. Joseph professor Lang said. "The game's not over yet."
