2007 Supermarket Panel Report

The Food Industry Center established the Supermarket Panel in 1998 as the basis for an ongoing study of the supermarket industry. Since 2000, the core of the Panel has been a random sample of stores drawn from the approximately 32,000 supermarkets in the U.S. that accept food stamps. The purpose of collecting data on supermarket operations and performance is to: • Provide timely, useful information for the industry through benchmark reports and annual summaries, trends on key indices of technology adoption, competitive positions and performance. • Be a ready source of data for research on current and emerging issues – to be able to track the changes in operation and its impacts on performance over time. This report provides a detailed summary of results from the 2007 Supermarket Panel, an in-depth survey of 270 stores that represents a cross-section of the supermarket industry. Earlier survey years are 2000, 2001, 2002 and 2003. Business Practices • More than two thirds of the stores have participated in earlier Panel Surveys; 39 stores have been in the Panel since 2000. • Median sales statistics show economies of scale in the size of the group that the stores belong to. The largest annual growth in sales was for stores in group size 50-750. The largest group size stores have the largest sales per labor hour and per transaction. • Hard discount stores had negative sales growth; supercenters had none. The largest percentage sales growth was for conventional stores and superstores. • Many independent stores are still not adopting information technology that allows them to electronically communicate with suppliers. Self-distributing stores are 3 times as likely to use scan-based trading and 2.3 times as likely to use vendor-managed inventory as wholesaler-distributed stores. • The most common form of marketing was newspaper ads with coupons; websites were a strong second. • Superior scores in management practices are associated with superior financial performance. Services Offered • A larger portion of single stores offer the more labor-intensive services such as home delivery, telephone/fax ordering and custom cut meats. • Superstores offer the most services and are more likely to carry organic products and gasoline. Eleven percent of all stores offer gasoline, up from 8 percent in 2002. • Organic meat and poultry is more likely to be found in stores in larger-store groups than at independents. Organic produce is more likely to be offered in superstores, super wholesale stores and supercenters. • Offering a high level of service is correlated with higher performance measures, especially sales per square foot and annual percentage sales growth. Human Resources • Super warehouse stores have a higher portion of stores with high levels of training for personnel than stores with other formats. • Being in the highest quartile of the human resource index is correlated with having a union labor force and having higher sales per square foot, per labor hour and per transaction. It was not associated with greater profit or growth. • One-third of the stores in the 2007 Panel are unionized. These stores tended to be large, belong to large store groups, be self-distributing, have a high adoption of information technology, and be in urban areas. • Unionized stores have higher payroll expenses, higher sales per labor hour, higher annual sales growth, and higher labor turnover than non-unionized stores. Food Handling, Environmental and Quality Control • There is little difference in food safety/handling scores, but there is a slight increase as stores belong to larger groups. Larger groups do better with training and sanitation audits. • Stores in large group sizes score better on environmental practices, especially training. • Quality assurance and disaster recovery plans were strongest in stores in the largest groups, especially super warehouse stores and supercenter stores. They are notably stronger in the use of customer satisfaction surveys and disaster recovery plans. Supercenter Competition • Supercenter stores are not significantly different from other stores in groups larger than 50 for most characteristics except size and in claims of being a price leader. Comparisons Over Time • The adoption of electronic invoices received from warehouses among wholesaler supplied stores increased 175 percent between 2001 and 2007. • Adoption of Vendor Managed Inventory is slowly rising but is lower than other information technologies. The highest rate of adoption is for stores in the largest store group with a 48% adoption in 2007. • Service offerings over time have stayed steady except for self-scanning which more than doubled for stores in groups of more than 50 and a switch from fax to internet ordering for those who offer it. • Top stores, those with above median scores for three performance measures (weekly sales per square foot, sales per labor hour and annual sales growth) also have higher scores on management practices in 2007, in contrast to earlier Panels. • Comparing stores in the Panel in 2002 and 2007 found 72 percent unchanged in ownership or closure. Of those that changed ownership, financial performance improved by almost every measure, they became variety leaders, and they improved food handling practices. • Stores in larger groups were more likely to change ownership while stores in smaller groups were more likely to close. • Change in ownership between 2002 and 2007 reveal no significant change increases in productivity growth after the change