Wal-Mart (NYSE: WMT) Expanding Presence in Grocery Market

The grocery industry is changing, and one of the largest benefactors of that is discount retail giant Wal-Mart (NYSE: WMT) as they are expanding rapidly in the space. Wal-Mart has successfully capitalized on its reach, pitching groceries to their shoppers, and is quickly becoming an important part of the firm’s success. Ten years ago the grocery strategy was a novelty for the firm, but as time passes it is of growing importance.

The nation’s largest retailer adapted to fit the needs of its cash-strapped customers in the midst of a slow economic recovery. Shoppers today are more concerned with buying basics like milk and bread than electronics and apparel, many of which are foreign-made, and the retailer is shifting focus to keep up. This shifting focus is helping keep the customers in the stores longer, and spending more of their income at the retail giant.

“Consumers have been shopping more for ‘needs’ than for ‘wants,’ and that’s why groceries are still the number one thing in their budgets,” said Craig Johnson, president of independent consulting firm Customer Growth Partners. “In return, Wal-Mart has become a needs-oriented store.”

The strategy of selling groceries at Wal-Mart benefits the firm in multiple ways, it gets customers in the store, and gets them spending money – once that hurdle is overcome, it becomes far easier to up sell them into their other departments. “Our research has shown that over the last ten years, the average number of shopping trips a customer makes to Wal-Mart has gone from 12 per year to 52 or more,” Burt Flickinger III, managing director of Strategic Resource Group said. “Since customers spend on average between $50 and $60 in total per trip, that’s an extra $2,000 per customer each year that Wal-Mart is bringing in.”

According to the retailer’s website, it is committed to selling $1 billion in food sourced from a million small- and medium-sized farmers. Bear in mind: That’s $1 billion of $244 billion in annual grocery sales. Sourcing local food is of growing importance to customers, and the scale and reach of Wal-Mart gives them a strategic advantage in the markets that they operate in.

Noticing this success, Target has recently embraced a similar philosophy, and is expanding their grocery offerings. The grocery department is a non-traditional line of revenue for the discount firms, and one that may reshape the industry as a whole. Diversified discount retail stores occupy a growing market segment, and one that may prove highly profitable in the coming years.