When times get tough, even Walmart's (WMT) "everyday low prices" aren't all that alluring to shoppers -- except in one segment of its business: food.
For its core customers, like everyone else, food is a budget item that can only be reduced, never eliminated -- and for them, it's a major one. Walmart's CEO recently confirmed that, for its customers, "food is consistently the top monthly expense outside of housing and vehicle payments."
So it's little wonder Walmart is seeing so much growth in groceries -- and why it continues to add food to its general merchandise stores.
One-Stop Shops on the Rise
It's no secret that Walmart has a huge presence in the grocery business. It became the nation's largest grocer a decade ago, killing 25 of the 29 supermarket chains that went bankrupt along the way.
But Walmart isn't alone in devoting more floor space to selling food. Many other bargain retailers are making similar shifts. Dollar Tree (DLTR) is adding more food items and installing new freezers and refrigerators to a growing number of its stores. And Target (TGT) is similarly adding a "broader food assortment," according to its CEO.
But, due to Walmart's ability to charge significantly less than its supermarket competitors, Walmart and its discount brethren have the opportunity to completely kill the "Big Three" supermarket chains -- Kroger (KR), SuperValu (SVU), and Safeway (SWY) -- and change the grocery industry as we know it.
We're already seeing big changes in the way people buy their groceries:
SuperValu has seen a decline in same-store sales (a good measure of foot traffic) for three years running.
And Safeway's same-store sales rose a paltry 1.6% in the recent quarter.
Kroger is holding strong, with same-store sales increases of around 5% over the past several quarters. But as we've seen in the past, if SuperValu and Safeway start to lose ground, it only quickens Walmart's move to the top, spelling more trouble for Kroger.
Consolidation in the grocery industry is a good thing for Walmart.
What It Means for Shoppers
It's conceivable that within a decade, most of us will be more likely to grocery shop at a Walmart, Target, or Dollar Tree than at the supermarkets we visit now.
The positive side is that this will probably mean lower prices on the food portion of our household budgets.
But there are also some negatives. For example, Walmart has done notoriously poorly at finding smart strategies for fresh seafood and meat. They don't offer as many product choices as major supermarket chains. And their produce isn't always as fresh as their competitors'.
However, if Walmart and its discount brethren want to become the leading grocery stores of the future, you can bet they'll figure out ways to cheaply remedy those shortcomings. And that will and add put more savings back in your pocket.
At Walmart Stores, 'Bizzaro World' Episodes Unfold
Walmart Rolls Into Battle Against the 'Big Three' Grocery Chains
Store staff called the police, and the man was charged with two felonies: attempting to obtain property under false pretenses, and presenting a phony document as a legitimate form of payment.
A shopper looking for a new wallet at a Walmart store in Falmouth, Mass., discovered 10 human teeth in the zipper compartment of the billfold he was about to buy. One of the adult teeth had a filling, according to police. Save for its toothy contents, the wallet appeared new, complete with merchandise tags.
In one of the more creative attempts at shoplifting, an 18-year-old man outfitted in a cow suit swiped 26 gallons of milk from a Walmart in Garrisonville, Va. The man was seen crawling as he exited the store in an effort to emulate an ambling bovine.
The cow impersonator was at least generous with his dairy loot: Witnesses told the sheriff's deputies that he was handing out the stolen milk jugs to passersby outside the store. Law enforcement officials later caught the milk thief at a nearby McDonald's.
A man was glued to his seat -- literary, in the men's bathroom at a Walmart store in Elkton, Md. In what appeared to be an April Fool's prank that went way too far, the 48-year-old victim got stuck to a toilet seat smeared with glue and couldn't get up.
The man called for help and emergency workers tried in vain to unstick the man. Eventually, they gave up and unbolted the seat from the toilet, then took the man to the hospital with it still attached to him. There, the seat was removed from his ... er, seat. The man was said to have suffered only minor injuries to his derriere.
To conclude with an episode that is equal parts strange and sweet, Wayne and Susan Brandenburg first met at a Walmart in Brunswick County, North Carolina, when Susan was a cashier and Wayne was a shopper.
This article was written by Motley Fool analyst Adam J. Wiederman, who owns no shares of the companies mentioned above. The Motley Fool owns shares of SuperValu. Motley Fool newsletter services have recommended buying calls on SuperValu and creating a bull call spread position in Walmart Stores.