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Retail is Eating Restaurants’ Lunch

Filed under Pricing, Research, Retail
Source: The NPD Group

Source: The NPD Group

Restaurants want to believe that the 1% decline in customer traffic at lunch since 2008 is the result of debt-laden consumers spending less. Maybe. But NPD Group data finds that many of those customers haven’t left the marketplace; they simply opted to go across the street to a Wegmans, Walgreen’s or Walmart to grab lunch.

Since 2008, lunch-daypart customer traffic at retail stores (including grocery/drug stores, discount stores, price clubs, and others) has increased by 29% according to a new NPD report, The Retail Prepared Foods Market: Assessing the Competition. Over that same period, restaurant lunch traffic is down 1%.

NPD identifies the key drivers for retail’s growth in foodservice as availability of healthy options, good variety of foods, light meal availability, one-stop-shopping convenience and, of course, affordability, an attribute QSRs are trying so hard to offer.

Grab-n-go subs and salads at Wegmans

Grab-n-go subs and salads at Wegmans

Retail’s incursion isn’t going to go away. NPD forecasts prepared food purchased at retailers for at-home consumption will increase 10% over the next decade. Restaurant traffic is forecast to see just a 4% growth over that period. Lunch represents just 20% of retail’s prepared foods, but the dinner daypart, which is 35% of the total also is growing. NPD says food purchased at retail for lunch or dinner consumption at home at at work is driving growth.

Said Bonnie Riggs, NPD restaurant industry analyst, “It’s fact that retail prepared foods are taking visits away from restaurants and restaurant visits are not expected to grow much over the next decade, but there is also significant opportunity for foodservice operators to meet consumers’ needs for prepared foods. Learning more about how consumers use retail stores for their foodservice-type meals enable restaurant operators and their supplier partners to understand how to better compete in this area of growing consumer demand.”

Restaurant researcher Technomic says supermarket prepared foods have increased more than 6% annually over the past five years. But mass merchandisers/supercenters have seen even greater growth, exceeding 13% over same time period Restaurant sales haven’t come close to matching that growth during the period.

One Response to Retail is Eating Restaurants’ Lunch

  1. Ron S

    Another factor could be waiting time. Even at fast food outlets, the wait time during lunch hour is usually much longer than at the grocery counter/checkout.