An annual report on "The Future of Retailing" from Barrington, Ill.-based consulting firm Willard Bishop predicts significant changes in the retail landscape over the next five years, as consumers continue to eschew traditional grocery formats in favor of non-traditional alternatives.

In 2008, the report said, traditional grocery formats saw their combined food dollar sales increase 4.3 percent to $463.6 billion, although market share fell 0.6 points to 48.3 percent. Although supermarkets — by far the largest of the five traditional grocery outlets — still own the lion's share of the food business, their share fell to 42.1 percent last year "as more consumers looking for lower prices and savings during last year's economic slowdown turned to limited assortment stores, supercenters and wholesale clubs."

Of the four remaining traditional grocery formats, both limited assortment and super warehouse stores posted double digit sales gains in 2008, boosting their market shares, while fresh format stores enjoyed a "respectable" 6.6 percent increase, suggesting that, despite the economic downturn, "many shoppers have maintained their interest in healthful, natural and organic offerings," the report said. Other small grocery stores — e.g., "small corner grocery stores" — saw only a slight increase in dollar sales last year and continued to lose share.

Convenience stores also saw their share of overall food sales decrease last year, slicing almost a whole point off their market share, now 14.3 percent. According to the report, "Consumers appear to be tightening their belts and may be cutting back on their grab-and-go store visits for immediately consumable/indulgent items."

Food sales in the non-traditional grocery channel jumped 10.1 percent in 2008 to $350.4 billion, boosting its market share 1.4 points to 36.4 percent. Thanks in part to a 9.6 percent increase in store count last year, supercenters led the way with an 11.9 percent sales gain that added almost a full point to that format's market share, now at 15.9 percent.

Wholesale clubs also fared well in 2008 as sales expanded 11 percent to $79.5 billion, pushing market share to 8.3 percent, the report said. Dollar stores performed almost as well, posting a 9.1 percent increase in food dollar sales (to $16.9 billion), though market share remained relatively flat at 1.8 percent. But mass outlets experienced only a 1.6 percent gain, keeping that format's market share steady at 4.7 percent.

The report did yield one surprise: a 10.2 percent increase in food sales at drugstores ($50.5 billion), bringing their share of the total to 5.3 percent.

"Drugstores' recent focus on selling traditional grocery categories, along with an enhanced emphasis on private label offerings, has established a strong position for this format in the retail food business," the report said.

For the most part, it continued, food sales trends observed in 2008 will continue as more and more consumers in search of a bargain move from traditional to non-traditional grocery formats. Although limited assortment and super warehouse stores are expected to maintain their momentum, posting annual increases between 8.0 percent and 10.0 percent over the next five years, supermarket growth is likely to slow to just 0.3 percent. Among non-traditional formats, supercenters will continue their torrid growth; dollar stores, drugstores and wholesale clubs also will continue to expand, though at a more modest pace; and mass merchants will experience large losses as more conventional mass outlets are converted to supercenters, the report predicted.

"By 2013," the report said, "the market share for traditional grocery will decrease almost 5 points to 43.5 percent, while share for non-traditional grocery will increase by a similar amount to 41.0 percent. At this rate," it added, "we expect non-traditional grocery will surpass traditional grocery by 2014."

For more information or to download a copy of the report, go to www.willardbishop.com.