Economic and Marketing Information
FOR INDIANA   FARMERS
Prepared by the Agricultural Staff of Purdue University, Lafayette, Indiana
Food Retailing in the Future
May  31,   1963
by W. D. Gorman, Agricultural Economics
Today's food retailing has experienced rapid and
drastic changes. And, it appears that these changes are
picking up momentum. What implications do these
changes in retailing have on the producer of food products?
The food retailing industry has problems. It is feeling
the profit squeeze. For instance, the average life expectancy of the modern large supermarket is now about 5
to 7 years. Stores that are not remodeled after 5 to 7
years are likely to be forced out of business.
Most of the profits deriving from the self-service supermarket—the latest major innovation in the industry—
are being dissipated by increased competition and rising
costs. Food retailing is aptly characterized as a fiercely
competitive industry—both in terms of price competition
and non price competition.
Over Expansion
Indiana's food retail industry, like most other states,
is suffering from the problem of "overstoring" or over
expansion of food retail facilities. The square footage of
retail store selling area is increasing more rapidly than
the increasing population. Competition appears to be
successfully holding down retail margins or markup.
However, nothing appears to be stemming the tide of
added floor space or selling area. "Over storing" almost
invariably results in a high rate of store failures.
With continuing rising costs, particularly for fixtures,
building, and labor, accompanied by the increasing struggle to obtain greater volume per square foot of selling
area in an attempt to offset these costs, the stage appears
set for a sustained period of cut throat competition in the
retail food industry. The time may also be ripe for the
appearance of a new food retailing innovation.
Food retailing during the latter nineteenth century and
the early twentieth century was characterized by the
corner grocery store and the larger country general store.
Chain  Stores
The first big change from the small independent grocery
store was the innovation of the chain store. Through more
efficient buying methods and a reduction in the number
of services provided (notably consumer credit) chains
were able to offer food products at lower prices.
The next significant change in food retailing was the
self-service supermarket. This is essentially the retailing
system today. The self-service supermarket resulted in
considerable labor saving for the retail grocer. He no
longer had to fill individual grocery orders, his customers
did it for him.
Major innovations and increased competition in food
retailing during the past 50 years resulted in lower gross
markups by the retailer, and thereby relatively lower
prices to consumers. New technological developments and
changes in services provided have enabled the retailer to
operate on a lower margin. Inherent in these developments has been the reduction of the amount of labor needed in retail food stores. There is no indication that this
trend of less and less labor has leveled off or reversed.
Food stores of the future will approach the ultimate of
no employees on the premises.
Food retail stores of the future will most likely have
no sales people or other work personnel available in the
store, with the possible exception of a service clerk to
answer questions and a machine maintenance engineer.
Such an era of unattended stores might be called "robot
retailing."
Considering the latest technology, pilot projects and
ideas in this area, it appears that unattended retailing
may take on several forms in the future. Two forms that
appear likely are: The automatic-vending machine and
the electronic data processing system.
Automatic Vending
Vending machines are already a common item. The
automatic vending industry estimated that $2.5 billion
of merchandise was sold through automatic devices in
1962. By the end of 1965, it is estimated that it will
reach the $5 billion mark.
There are at least four major developments that give
strong indications that the automatic vendor will be
one of the major factors in food retailing in the future: